Legal and General's (L&G) independent governance committee (IGC) has said the provider "used scale" to keep transaction costs low for funds in its workplace pensions business over 2018.
The IGC gave a score of 4.5 out of six for its costs and charges - which was in the ‘very good' category - the IGC's annual report for 2018 said. A score of six was classed as ‘perfect', while zero was noted to be ‘completely unacceptable'.
The IGC examined L&G's transaction costs, in most cases, for the 12 months ending 30 September 2018, using the Financial Conduct Authority's (FCA) slippage costs method. For L&G's three default funds - L&G Cash 3, L&G Multi-Asset (PMC) 3 and L&G Over 15-Year Gilts Index - transaction costs ranged from -0.04% to 0.01%.
Meanwhile, the IGC said it was pleased that L&G lowered the charges paid by many members of its schemes. Only six of the hundreds of funds available to members under the WorkSave Pension Plan - its group personal pension scheme - charged more than 1% per year, none of which were a default fund.
L&G charged a maximum annual management charge of 0.5% for all of its default funds, and had no annual fund charge in 2018 - lower than the 0.75% charge cap set by the government.
The IGC said it was "satisfied" that almost all members were paying the same or lower fund management charges.
The IGC analysed one-year, three-year and five-year annualised investment performance for its default funds, which all performed over or around the benchmark. For example, its L&G Cash 3 fund performed 50 basis points (bps) over the benchmark of 0.0% for one-year performance, and had an additional return of 40bps over five years against a -0.1% benchmark.
The only two funds that performed slightly below the benchmark were just 10bps under, at 8.2% for five-year returns, and 5.2% for three-year returns.
The IGC gave its default strategy for its workplace pensions business a mark of five out of six, noting it was satisfied that its standard default strategies give members a "good balance between risk and return". Furthermore, it gave investment choice and returns assessments five out of six.
Chairman Dermot Courtier said L&G had made "good progress" over 2018.
He added: "This year we have found that engaging directly with members and employers has again been of incredible value. Listening closely has helped shape our approach; it informs us of what value for money really means for our members and we have further plans to build and expand on this over the coming year.
"Notwithstanding that there is still work to be done in some areas, we feel confident that this momentum, supported by on-going open and direct dialogue between the IGC and L&G, will continue through 2019 and beyond."
The overall assessment of the IGC revealed that L&G had improved the value for money it provided its members in 2018, with a wider choice of default funds and a better service for members when they sought to access their pension.
L&G Investment Management head of defined contribution Emma Douglas said L&G "appreciates the independent, objective and constructive views of the IGC and the challenges it sets".
She added: "Working together with the IGC, we can continue to improve the member and employer experience at a time when further auto-enrolment (AE) contribution increases are putting pensions very much in the spotlight."
Total minimum contributions will rise from a total of 5% to 8% on 6 April, with 5% minimum employee contributions.
The IGC report came as L&G's two master trusts were authorised by The Pensions Regulator earlier this week.
It is expected that further information will be required in future reports as the FCA consults on further disclosure of costs and charges, with another consultation on environmental, social and governance reporting expected later this year.
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