Legal & General Group Plc (LGEN) Earnings Call Transcript & Summary

Good morning, and a warm welcome both to those of you in the room and to those joining online. My name is Michelle Moore, and I'm Group Strategy and Investor Relations Director. Just a few housekeeping points before I hand over to Antonio. Firstly, to those of you in the room, please make sure you've turned your devices to silent. In the event that the fire alarm sounds, colleagues will guide you to the nearest exits and the normal forward-looking statements apply. Our agenda for today is summarized here. Antonio will kick off, setting the scene of the importance of retail for the group before handing to Laura, who will outline why we win in each of these businesses and set out her vision for the future. Jeff will then cover the financials before we open to Q&A. Over to you, Antonio.

Thank you, Michelle, and welcome, everyone. Thank you for being here this morning. So as you know, this is the third of the deep dives that we're doing on our businesses. Last December, Andrew Kail explained why we are the global leader in PRT and how we make money in that business. As you will have seen, Gareth Mee, who's sitting just there next to Andrew, will take over as the CEO of Institutional Retirement in December when Andrew succeeds Jeff as our CFO. This is Jeff's last market presentation, so please be nice to him. In June this year, then Eric Adler, you heard from him on his vision for our asset management business, how we're going to grow the business, which is the largest in the U.K. And then today, Laura Mason is outlining the vision for our retail business as the U.K.'s leading DC and retirement platform. So these three core businesses, each market leaders in their own right are the building blocks for our strategy. Our strategy to be a growing, simpler, better connected L&G that becomes more capital-light over time. So since I last spoke to you in August at our half year results, we have continued to make really good progress executing on our strategy. First, in terms of sharper focus, we have disposed of 15 assets in our Corporate Investments unit, going from close to GBP 2 billion to GBP 500 million in assets currently. The sale of our U.S. protection business to Meiji Yasuda is progressing well. We are going through regulatory approvals and expect to complete either side of the year-end. We're also driving operational improvements across the group, creating capacity to invest for growth. On our second priority, sustainable growth, we are making really good progress in each of our businesses. And in a moment, I will give you a trading update over the next slides. And then finally, the third priority, I said we would return more to shareholders, and that is exactly what we are doing. We are on track to deliver our 3-year group targets and return more than GBP 5 billion to shareholders through a combination of dividends and share buybacks. We've also announced this month that Scott Wheway will take over from Sir John Kingman at our next AGM. As you probably know, John comes to the end of his 9-year tenure. So let me now take you through the progress that we are making this year so far in each of our three businesses. In Institutional Retirement, we have delivered strong volumes higher than last year already at good margins. We have written over GBP 10 billion in the U.K. this year, including two large schemes in the second half of the year, a GBP 1.6 billion transaction with BP and a transaction with another client of over GBP 4 billion. That's the largest deal in the market in 2025. We expect the market this year to be just over GBP 40 billion. So our market share should be around 25% of the whole market. Next year, given the pipeline that we already see currently, we expect the total market to be closer to GBP 50 billion. I'm excited to work with Gareth and the team to continue to lead the PRT market. So turning to Asset Management. In Asset Management, we have increased the pace of delivery against the strategy that Eric outlined back in June. Client wins and internal flows have contributed to strong annualized net new revenue of -- and this is a really important number, GBP 29 million in the first 9 months of the year. I'm really proud of that number. Private market assets under management are now GBP 71 billion, and we are particularly proud of the recent first close of our digital infrastructure funds and the continued flows into our private markets access fund, which now has more than GBP 2 billion assets under management. Our average revenue margin continues to increase now at 9 basis points as we shift to higher-margin products. So as you can see, we are firmly on track to turn around the financial performance of our asset management business. Now turning to retail, the focus of today. We start from a position of strength with over GBP 300 billion of assets under management in U.K. retail wealth market, which I think is something that many people don't really appreciate. We are the largest U.K. DC manager with over GBP 200 billion AUM. That's roughly 1/4 of the market, with over GBP 100 billion of that in our own workplace DC market, and we also have the largest commercial Master Trust in the U.K. Beyond DC, and you can see it on the right-hand side of the slide, we have GBP 100 billion of assets across wholesale, retail annuities, and lifetime mortgages. So that's where we are. So looking forward now, there are major structural tailwinds in the retail market. You can see the four of them there on the left. And we expect U.K. retirement assets to grow from GBP 3.5 trillion to GBP 5.5 trillion over the next decade. So the question is, how are we capturing this growth opportunity? We are the U.K.'s leading DC and retirement platform, serving nearly 13 million customers across retail and institutional retirement. We have 12.4 million customers, which Laura will talk about in retail, and the rest are in our institutional retirement business. We have 20% plus market shares in the key markets where we choose to play in across accumulation and decumulation. And we are crystal clear on what we don't do. We want to go beyond our core strengths and our core customer base, and we won't make expensive acquisitions. Why? Because we can make the most of this opportunity with our existing capabilities. The fair question, which I get from many of you, including just now as we started, is how do we make money in retail? Well, we make money in three ways. First, we have reliable, predictable earnings, primarily from our annuities and protection business, number one. Second, on top of that, we generate fees in asset management. This is a really important statistic. More than 40% of our ANNR target in Asset Management comes from retail, particularly workplace. That was true also in the first 9 months of this year. And then third, we are sowing the seeds for the long-term growth of L&G through our growth in DC and as retail annuities replace PRT volumes. So let me take you through this growth opportunities, starting with DC first. So DC, we expect the market to grow to GBP 1.5 trillion by 2034. Keeping our current market share, which I mentioned is roughly 1/4 of the market, that implies doubling our AUM to GBP 400 billion. And we expect a growing proportion of that GBP 400 billion to be in our own workplace business, which is significant because over 95% of our workplace assets are managed internally, increasing our profitability. And that is why I'm really pleased with the progress that we are making in Workplace. We have had GBP 5 billion of net flows year-to-date, and we are on track to finish the year higher than 2024. We have -- you can see it here, 99% scheme retention, and we've won 35 schemes so far this year. These schemes will be onboarded over the next 18 months, adding GBP 3 billion of new assets to our flows. And then you can see on the bottom, we have another GBP 3 billion of potential opportunities in the pipeline. So that was DC. Now turning to annuities. We are the U.K.'s largest provider across PRT and retail annuities with a market share that's typically between 20% and 25% of the overall market. You can see on the slide that a decade from now, the annual annuity market will grow to GBP 60 billion. You can see that, as the gradual decline in PRT is more than compensated by the growth in retail annuities to GBP 20 billion. You can see that retail annuities go from GBP 8 billion last year to GBP 20 billion by 2034. Therefore, retail annuities will be the long-term successor to PRT, and we are ideally positioned to capture that opportunity. So in summary, I'm really ambitious for our retail business. First, we will grow operating profit by 4% to 6% per annum to 2028 with a reliable release of earnings from annuities and protection. Second, we will grow fee-based earnings, both in retail and asset management. Workplace will be the major driver of that growth with GBP 40 billion to GBP 50 billion of cumulative net flows. And as we scale that business, our operating leverage will improve and the combined workplace profits will triple by 2028. I know many of you have asked us for the profits of Workplace. Jeff will spend quite a lot of time on this later on. And then third, beyond 2028, DC will continue to grow and retail annuities as retail annuities will replace PRT volumes. So I would like now to invite Laura on to the stage to set up the vision behind these numbers and how we are -- and to explain how we are already executing at pace and with conviction. Laura, over to you.

Thank you, Antonio, and good morning, everyone. It's great to be here to talk about the retail business since taking over as CEO at the end of last year. I know L&G well, having been CEO of Institutional Retirement and also led private markets, and it's great to have the opportunity to now lead the retail business. We provide lifetime financial products to over 12 million customers, and I've really enjoyed getting to know the teams in Cardiff and Hove who run operations across all of our retail businesses. I'll be focusing on three key themes today. First, I'll speak to the strength and positioning of our businesses. Secondly, our clear direction in DC and retirement; and finally, on how we are executing with advanced technology at the heart of it. So I'll start by telling you about our businesses, their scale, strengths and why we win. We are in the parts of the retail market that really play to our strengths as a group. First, we deliver outstanding customer service. Second, we excel in distribution. And thirdly, we leverage our group synergies, particularly with our asset manager, which is the largest in the U.K. And finally, scale. We have top 3 market positions in each of our businesses. Now let me go into these four strengths in a bit more detail. We have a deep understanding of our 12.4 million customers, and we have a long history of innovating to meet their changing needs. This customer centricity is core to the strength and longevity of our brand. Our service is excellent. Our average NPS score is currently 54, and we're consistently top of insurance-wide customer indices. We get repeat business from our partners because of this. We have broad distribution coverage that means we're present where our customers are across channels, partners, and platforms. We have strong relationships with the most influential U.K. financial institutions. We sell both retail annuities and protection through the top 5 wealth intermediaries as well as asset management, providing fund solutions to them. Our workplace and corporates channel is a highly efficient customer acquisition engine for us. Once these customers are with us, we're able to engage with them directly and retain them over the long term. Our synergies with the rest of the group offer us significant advantage. We leverage shared capabilities across retail, PRT, and asset management. We are able to optimize capital, unlock efficiencies, and shape opportunities across sectors. As an example, Eric and I appointed Paula Llewellyn as CEO of DC and Workplace earlier this year to coordinate our asset management and retail teams to better address the entire workplace and DC opportunity that we have across the group. So now on to our businesses. We have four core businesses in retail, each in large scaled markets, each with significant top 3 market shares. We have scaled our businesses organically, driven by a focus on what our customers need and by investing in technology to drive our proposition and customer service. Let me tell you about each of them in turn and their long-term growth potential. Starting with Workplace and DC. Across Retail and Asset Management, we have 1/4 of the growing DC market. Our Workplace business has over GBP 100 billion and is the core customer acquisition engine for our lifetime retail strategy. We win customers in Workplace with over GBP 40 billion of net flows since 2020 and retain them over their lifetimes. As Antonio mentioned, we have a 99% scheme retention rate and our pipeline of new scheme wins for next year is the healthiest it has been for a number of years. We also have the U.K.'s largest commercial Master Trust at GBP 39 billion. And we generate strong asset flows for asset management with 95% of our workplace assets managed in-house. We have a young customer book today, which offers us long-term growth potential. We will double our assets over the next decade. Retail annuities is our largest contributor to profit today, and we have a long track record of leading pricing and underwriting capabilities backed by longevity science. We are the #1 in open market annuities, testament to the strength of our proposition and the investments we have made in digital innovation to improve speed and customer experience. We have an efficient operator model combined with institutional retirement that drive scale benefits and the same access to asset sourcing for competitive pricing. We expect significant growth in the market over the next decade as the first wave of DC-only customers start to retire. Next, lifetime mortgages. We have been in the market since 2015 and managed the third largest portfolio in the U.K., funded by PRT and retail annuities. We have a good track record of tech innovation, offering the first digital application journey in 2017 and bespoke pricing in 2024. Housing equity is an increasingly important contributor to customers' retirement planning, and we expect more people to unlock the GBP 3.7 trillion held in housing equity over the coming decades. And last but not least, protection, which is where L&G started 189 years ago. It is a core business for us with reliable profits and valuable diversification benefits with retail protection delivering day 1 capital creation. Our market share has been over 20% on average in retail protection over the last decade. In group protection, we are growing fast, particularly in the SME space using our new technology platform. We are a scale player with deep and wide distribution network and sophisticated underwriting and pricing expertise powered by machine learning. Protection is a stable market in the U.K., but we will pursue emerging growth opportunities, such as the recent demand for whole of life policies in inheritance tax planning. So we have a very strong position today. Now let's turn to our strategic direction and how we will continue to lead in the DC and retirement markets. The U.K. pensions landscape is undergoing a fundamental shift. DC assets are expected to nearly double to GBP 1.5 trillion by 2034, and decumulation flows will grow to GBP 100 billion per annum. This shift has already begun. This is a once-in-a-generation opportunity. The changing regulatory landscape provide tailwinds that play to our strengths. Pension reforms are driving consolidation among schemes with default funds under GBP 25 billion. Our leading Master Trust will be a major beneficiary. There is a significant advice gap for our mass market workplace customers today. The combination of the new FCA targeted support regime and advances in tech will allow us to deliver personalized, data-driven guidance at scale. And finally, with growing interest in productive finance for DC, we offer our private markets access fund, which now stands at over GBP 2 billion. Our strategy to meet these major flows is simple: to own the customer journey from accumulation right through decumulation. Workplace is our core customer acquisition engine. We support customers throughout their lifetime. We will combine digital guidance and targeted support with affordable human advice. This will meet our mass market customers' needs at scale in a part of the market that traditional advice doesn't serve. In decumulation, we offer a full suite of products from annuities, drawdown, blended income and lifetime mortgages. We already have a scaled base of 5.2 million customers in workplace. This is set to grow by 50% in the next decade as we win new schemes. We have a young mass retail book today with our customers at an average age of 42. Over the next decade, we expect around 1.7 million customers to reach retirement age with their pot sizes more than doubling. As the data on this slide shows, today, at retirement, 60% of the market goes into drawdown and only 13% into annuities. Over the next decade, as pot sizes grow and more people have DC-only retirement pots, we expect people's choices to change. We expect an increase in the proportion of people looking for guaranteed income through annuities. Blended solutions that combine drawdown and annuities will also play an increasingly important role in customer retirement options. We are well positioned to capture this shift and have already seen an increase in our workplace retention into drawdown and annuities since 2020. Let me talk you through 2 examples to demonstrate the value of lifetime retention. First, Ruth, who works at the bank and joins us at 45 when she takes a job with an L&G workplace DC pension. Through our digital in-app consolidation tool, we encourage her to consolidate her pots from previous employees. And then as she approaches retirement at 65, we support her as she moves to a drawdown strategy. Second, the example of Frank, working in the hospitality sector and who has been paying into the same L&G workplace pension since he was 20. As he approaches his retirement, he uses our retirement guidance planning service and decides to take out an annuity with us, which he then supplements in later life with a lifetime mortgage. In both cases, retaining Ruth and Frank into their retirement considerably increases lifetime value for both retail and asset management. We see huge potential for the growth of our retail business over the long term as the DC market matures. Up to 2028, we expect retail operating profit to grow at 4% to 6% per annum, with over half of this profit coming from the predictable steady release of our GBP 4 billion store of future profit built up from insurance business already written. Retail workplace profits will grow at a faster rate as we invest for scale and deliver operating leverage. Asset management fees from our retail business will grow at more than 15% in the same period as our asset flows scale. The full extent of this DC and annuities opportunity will emerge through profit over the longer term. And as our workplace and annuity assets grow, a greater proportion of our profit will come from fee-based earnings. So we have strong foundations, clear direction, and we're executing with pace to deliver on our targets. The major strategic building blocks are already in place, and we are closing the remaining gaps. We have engaged early with the FCA on target support, and we have a blended annuity drawdown product that we will launch next year to meet growing demand for more innovative default retirement solutions. Our greatest focus continues to be on technology as it is critical to our success as we scale. Technology is a key part of our retail strategy and has been over the past decade, whether this is building in-house or through partnering. Let me take you through some of the newer technologies we are using to remain ahead in this changing landscape. We are using best-in-class marketing technology together with AI and behavioral science to create a personalized experience for our customers in real time. Each time a customer logs in, we are able to tailor their service and communications instantaneously. Our engagement engine is active across all our channels, and we are seeing increasing flows through our #1 rated pensions app. We regularly roll out new features and now have integrated open banking and ISA journeys and can do pot consolidation and one-off contributions through the app. Through our tailored approach, we have seen digital consolidation increase by 60% and proactive nudges have led to a 30% increase in customers taking further action in our guidance journeys. Our hybrid engagement model sets us up well to meet the at-retirement needs of our many mass market and mass affluent customers. A significant proportion of these customers fall into the advice gap, and we are building an integrated model that combines free digital guidance and targeted support with low-cost human advice. We have rolled out retirement guiding planning through our app already, and we'll be supplementing the at-retirement journey with targeted support to help customers make better retirement decisions. We already offer in-house solutions for customers seeking traditional advice and continue to explore how best to support those with more complex needs. We are innovating in decumulation too. Our new blended income solution, L&G Guided Income, adapts to our members' needs throughout their retirement. It draws on our expertise in annuities, longevity and investment management and is a great example of why we've combined our DC retail and asset management teams under one leadership. And finally, technology is also a driver of efficiencies. Since 2020, we've delivered over GBP 85 million in cost savings by unlocking operational efficiencies through digital self-service, robotics, and generative AI. Last week, we announced our new collaboration with Microsoft. We will use the power of Agentic AI to analyze the next best actions for customers, improve real-time interaction, and carry out back-office processes. This will improve customer experience and also ensure we scale efficiently. This is one of several initiatives expected to deliver an additional GBP 130 million in operational benefits over the next 5 years. So to summarize, we start from a position of strength. We are well positioned for the huge growth in DC and retirement. We have a clear strategic direction. We have the building blocks we need and structural tailwinds in our favor. And finally, on technology, we will ensure we can scale efficiently to meet the future market opportunity. I'll now hand over to Jeff to talk in more detail about the sustainable, predictable returns that this delivers.

Thank you, Laura, and good morning, everyone. Retail is a financially attractive business for us. Firstly, our mature annuities and protection businesses generate high-quality earnings, capital and cash that are predictable and diversified. Second, we foresee long-term growth as we scale in Workplace and deliver retail-wide operating leverage. And finally, retail unlocks further value for the group, most clearly through the reliable and growing inflows for Asset Management from both Workplace and annuities. Let me take you through each of these in turn. Retail is a strong contributor to the group's overall performance, delivering operating profit of GBP 430 million and operational surplus generation of GBP 315 million in 2024. Retail operating profit today is driven largely by our more mature annuity and protection businesses. Accounting profits are spread out, leading to steady releases over decades from our GBP 4 billion store of future profit. As a result, 60% to 70% of our 2028 earnings are already written and underpin our earnings growth target. For both retail and Asset Management, Workplace profits will add significant growth in the medium term as assets scale. Today, we have announced our new retail profit target out to 2028, resetting our position following the sale of our U.S. protection business. This target will be delivered by continued growth from our mature businesses where profits are deferred and by scaling Workplace and optimizing returns from our growing annuity asset portfolio. Growth continues and will accelerate beyond 2028 as the market opportunity scales and as we retain more customers from Workplace into annuities. As we have said, a major contributor to operating profit growth is Workplace, and we set that out on this slide. We take a combined view of profitability across asset management and retail. Our average revenue margin today is close to 30 basis points. This converts to a 7 basis points operating margin or GBP 60 million of total Workplace DC profits generated in 2024 across the whole group. We expect this profit to triple by 2028 and around half of these incremental future profits to come through in retail. You see why I'm talking slowly. Earnings growth will come principally from net new flows with the majority from contributions as well as new scheme wins. Scale benefits will emerge through operating leverage, and we expect our total cost-to-income ratio to fall from around 75% to below 50% over the next decade. This means our operating margin is set to double over the same period. As we have said before, we broadly breakeven on this business in retail before investment spend. We will continue to invest for growth, and we anticipate spending around GBP 30 million per annum on average as we focus on engaging and retaining our members to capture lifetime value and delivering increased efficiencies through new technologies. Let's turn to the future growth in annuities now. New business successes contribute to our store of future profit, which will release steadily into earnings over time. As our annuity asset portfolio grows, we will see additional in-year profits emerge, benefiting from the greater capacity for back book optimization in the same way as PRT. Additionally, as the annuity portfolio grows, it will contribute to new revenues in asset management. We have already outlined our strong position in the open market for annuities. And over time, as more workplace members reach retirement, we will also sell increasing volumes to our existing customers. Indicatively, if we write GBP 2 billion of annuities per annum, we'll be adding 10% on average per year. Net of payments out, we expect an average portfolio growth of around 6% per annum, delivering the benefits outlined above. Looking longer term, we expect our total U.K. annuity portfolio to grow at 5% to 6% per annum out to 2044. Retail annuity assets will make up a greater share of the total in later years as PRT assets stabilize and the retail annuity market grows from GBP 8 billion of annual flows to GBP 20 billion by 2034. At a 20% market share, this would imply around GBP 4 billion in new annuity business, and we would expect this to increase further out to 2044. We have set out the dynamics of the products and the growth potential, but they are also resilient due to the diversification offered. At higher interest rates, annuities become more attractive. And if rates were to fall, we would see a pickup in our lifetime mortgage business and more significantly, value uplifts in our asset management fixed income assets. We also expect annuity volumes to decouple from interest rates over the medium term as demand for guaranteed income in retirement increases. We have a natural longevity and mortality hedge between our annuities business and our protection business. And for capital, our day 1 capital-generative businesses like Workplace and Retail Protection offset upfront capital strain in annuities and Group Protection. This offset is expected to increase significantly as our Workplace business scales. Like other parts of our model, there are significant synergies between retail and asset management. Retail is already a key contributor to asset management earnings with around 15% of revenues in 2024 coming from retail assets. As Workplace and annuity flows increase, we expect retail to contribute over 40% towards Asset Management's cumulative ANNR target. And then if we look further out, given the growth and the relative contribution to earnings, by 2034, we could see the combined profit mix from retail business hit close to 40% fee-based earnings, a significant shift from below 15% in 2024. This complementary growth in asset management will support our strategic ambition to shift to more fee-based earnings over time. I will now pass back to Antonio for closing remarks.

Thank you, Jeff. So you've now heard our retail is central to our ambition to be a growing, simpler, better connected L&G and actually, as Jeff just said, particularly to become more capital-light over time. We have market-leading businesses across workplace, annuities, protection and lifetime mortgages, as you heard from Laura. And we have all the building blocks in place to capitalize on the retail asset flows that we expect over the next decade and beyond. We will continue to acquire customers in an efficient way through workplace and then serve them through their lifetimes. You saw the Ruth example earlier through accumulation and decumulation solutions. And as we do that, we will deliver strong returns in the process. Retail operating profit will grow at 4% to 6% per annum to 2028. We will then generate additional profits in asset management with retail accounting for more than 40% of our ANNR asset management target. We will grow in workplace with GBP 40 billion to GBP 50 billion of net flows by 2028, and we will triple our combined workplace profits by 2028. And then beyond 2028, DC and retail annuities will continue to grow, and our profit growth will accelerate with greater operating leverage. So I'd like now to invite Laura back on to the stage to take your questions with me and Jeff. As always, please state your name and company. And if you can, please limit yourself to three questions.

I normally start over there on the right. So maybe -- and I'll come to Larisa after. She raised her hand first, but then I'm just being structured here.

It's Abid Hussain from Panmure Liberum. I think I've got 2 or 3 questions. So thank you for the presentation. The first one is on the tech stack. So I think you now have a single view of your customer base. But just wondering, does the customer have a single view of all the products that they have with you? And then if so, is there an opportunity to then upsell or cross-sell? And are you doing -- are you tracking that? And just any color on how that might be progressing? And then just secondly on margin, I just wanted to check my math, if I've understood everything correctly. So on workplace savings, I think you're saying you're generating 7 bps of margin at the moment. And then are you suggesting that goes to something like 10 bps by 2028 and then doubles to 14 bps by 2034 in 10 years. And then I just want to understand if you've benchmarked any of those numbers with your peers or with other sort of noninsurance competitors? And how does that sort of stack up with others? And then I guess similarly, your cost to serve is coming down substantially from 75% cost-to-income ratio to around 50%. Just -- is that just through the use of AI. So what's driving that? Any more color on that, please?

Great. Thank you, Abid. So Laura, you should take the tech stack question and actually also how the technical AI more generally is generating scale. Maybe just before we go there on margin, Jeff, you can add. But -- well, that's -- the 7 and 14 basis points is exactly what we said. We said 7 basis points today that's Chart 48 that Jeff spoke really slowly around, so you could give you all that. And we wanted to give you full transparency, right? So we're saying on the GBP 60 million that we make today, all of that money is made in asset management, the current GBP 60 million. So when you think of the circa 30 basis points of average revenue margin, you apply a 75% cost-to-income, 1/4 of that is the 7 basis points. So that's the current position. And the number that we gave you is 10 years down the road, that should be 14 basis that's correct, the 7 to 14. And then we have given -- I've given you the 2028 view because those are our profit targets out to 2028, where we triple our profits from GBP 60 million to GBP 180 million. And then Jeff said specifically, if you hear that of the increase, half of that is in retail. So I've have given you all the numbers. So of the GBP 180 million, we're saying that GBP 60 million will come in retail and GBP 120 million in Asset Management. So I think, literally, we've given you all the numbers, we couldn't have been more explicit. We've spent a lot of time on that? But anything else on that?

Spot on, you are listening.

There you go. Last time we do this together. No, but actually -- and I think it's a serious point actually. Jeff and I spent a lot of time thinking how can you model this in a way that shows the excitement that we have for this business. And it's true that today, we break even before investment costs in retail. But you can see the upside in both businesses, including in retail. Laura, tech stack and then linking to the cost-to-income. Just maybe one thing to say on cost to income, the cost-to-income today is 75%. That is also our cost-to-income in Asset Management. right? So as you know, we're also trying to decrease the cost to income in asset management below 70%. So when you look at the big numbers, the 75% also makes sense because it's what we have overall. Laura?

Yes. No. So you're totally right. We do have a single customer view internally. One of the things we announced last week through our Microsoft collaboration was ensuring our customer service agents are able to access that data seamlessly, which they're not actually at the moment, but they will be able to very soon. And on your second point of that question, no, people can't, from the outside, see all of their product, L&G products, in one place at the moment. In the short term, we are really focused on our sort of lifetime strategy. So our focus is on embedding the app, embedding digital guidance, which is already there with targeted support and then making it seamless journey through accumulation and decumulation. On the road map, we do also have combining protection into that as well, but that's almost the second priority in terms of really embedding our lifetime strategy that we've talked about today in the app. And then on your second question, I mean, there are 2 parts to it really. First, obviously, scale, which we've talked about today, the market is scaling. We're really well positioned to benefit from that scale. And the second point is efficiencies. And we -- really, we've got a very clear plan based on what we've already done. So we talked about the GBP 85 billion that we achieved. And that is a combination of a number of things that you would expect. So continuing to ensure all of our customer journeys are digitized where it's appropriate and sort of where they want it, ensuring that our teams in Cardiff and Hove are only doing the jobs that really they should be doing. And as you sort of alluded to AI, we've done a lot actually already in some of the simpler AIs. One of the things we announced last week, again, was sort of being able to embed agentic AI. And Antonio told me, I should tell you all this, but I do actually have a PhD in the early days of artificial intelligence. We did call it machine learning in those days because it was quite a long time ago. But I think the thing that we are really excited about is the fact that these types of technologies and techniques are now sort of available off the shelf in a way that we can embed with our current systems, but I think, importantly, at a price point that actually makes it worthwhile to do. So it is those combination of things.

Great. And you did ask one thing which we didn't answer, which is yes, the 30 basis points is comparable to competitors in terms of the average revenue margin. And yes, we have looked at the operating leverage that we get going forward. and I've talked about GBP 400 billion of DC money, if we double it over the -- so we should have more scale and we should have more operational leverage than other competitors. Great. William, I'm not sure if you wanted a question or if I got to -- yes. Great.

I'm William Hawkins from KBW. The 12 million customers, where do you see the most attractive segments in terms of customer lifetime value? And where do you think you may have to do the most work to get the optimization of lifetime value over time. So yes, I'm just getting a feel for where you maybe see that the most intrinsically attractive pot size and that kind of thing and where you can do work to make money regardless. And then secondly, sorry, because you've been really helpful on the numbers, but the baseline 2024 operating profits, the GBP 430 million and GBP 315 million in CapGen. Can you tell us the split between the 4 segments we've been talking about, please?

Yes. So on the first, Laura, should answer. But clearly, you see the split of pages on this presentation. We spend a lot of time on workplace because we see the lifetime value of workplace customers being a big part of how we -- that's why we spend so much time on Workplace, right? So disproportionately, our profits are more in Retail Annuities, Protection and then Workplace. But going forward, we've spent a lot of our strategic vision on Workplace because that's where we see a lot of the value. Do you want to elaborate on that? And then I'm not sure, Jeff, if we have more split on the actual numbers.

We do and we don't. As in, there's only really 3 things in there, and we've told you the Workplace doesn't make any money in Retail. And so -- and in fact, it's a negative when you put the investment. And to be clear, that GBP 30 million is in operating profit. We're not hiding things below the line on that. And we've said that most of it's in annuities. There are other disclosures that the team can take you through to build out now why you get the GBP 300 million, how it compares to the GBP 430 million, but it make much more sense for them to do that and point you towards how it goes in the models.

And we said that Annuities is bigger than Protection. So we've given you almost all the -- we said Annuity is the biggest contributor, then Protection and then Workplace. Laura, do you want to talk a bit about the lifetime...

Yes. No. And in terms of the most attractive customers, really, we are looking -- our customer book is very representative of the U.K. population. We see a massive opportunity to serve the parts of the market that are today sort of in the advice gap. We see huge tailwinds in terms of pension reform, which is now starting to allow us to interact directly with those customers through target to support and really provide something that isn't there today. So we're really focused on that sort of middle band of customers. And hence, our focus really in the short term of being building out the digital capability that allows us to interact with those customers. And we've seen some really, I mean, significant statistics in terms of those that are going through that digital journey already. And actually, we've seen that those that do are 4x more likely to take an annuity with us. So that really is our sort of key focus in the shorter term.

And I kept on referring back to, I think, Ruth and Frank. But they are actually -- the reason why -- so if you look at some of the logos I put on my slide upfront, we have Tesco, the largest DC client in the U.K. We have EY. We have Accenture. It's those types of clients. That's why we did the Ruth and Frank examples, which we cover the entire spectrum of U.K. society. But we see over -- either a customer joins us at 20, as we just said with Frank or with Ruth at 45 because she consolidates and changes jobs into a bank that happens to be our client in Workplace. We see a lot of opportunity across all of that. And at this point, that 90 plus percent of all of those customers we can serve today with all -- we won't serve all of them, but we can serve the vast majority of them because they're the mass-mass affluent representation of the U.K. Thank you, William. Larissa?

Larissa Van Deventer from Barclays. Three questions, I'll stick to. The first one, you mentioned GBP 130 million in operational efficiencies over the next 5 years. Is that a net number? And does that include the Microsoft platform, if I can add a sub point, which I know is half cheating. If it does include the Microsoft platform, could you give us a sense of the cost investment versus the benefit and how that's derived please? Second question, very straightforward. You mentioned that retail annuities sell better when rates are high and that you expect that to be replaced by lifetime mortgages as rates come down. Could you give us a sense of the margin difference between those 2 product lines? Or are they roughly interchangeable? And then the last one, you mentioned that you expect Workplace, DC assets to double and then annual Retail Annuity volumes to triple over the next decade. And then you mentioned that you expect your DC operating margins to double. All of these are double digits, why is your target only 4 to 6? Or how should we think about the potential upside?

Yes. Jeff, you should definitely take that. Maybe I'll say a couple of words, and Laura should add on the first point on costs. First all of that -- and actually, it relates to your first and third question. All of these numbers are within -- for the 2028, all of retail numbers are in the 4% to 6%. So Jeff mentioned this just now that we don't have. So the cost of Microsoft and everything we're doing -- what we're investing in Workplace and then the cost, all of that is in the 4% to 6%. So we don't have sort of the below the line point. So that's important to make that point. And just on the slide that Jeff talked about interest rates, the point wasn't so much that there is a replacement within those 2 products. The point was we as a company, when interest rates are high as we've seen last year. Last year, we wrote an abnormal high number of retail annuities because one, our market share was high, but the market was very high because interest rates were high. As interest rates come down, that's negative for retail annuities, but a positive for lifetime mortgages. We weren't implying that one product replaces the other. But Jeff also mentioned that there's a structural trend that for us is much more profitable, which is this going from GBP 8 billion of retail annuities last year in the market to GBP 20 billion by 2034, that's almost regardless of interest rates because we just see many more of those DC customers coming into retirement, and we now see that people want that blended solution or indeed just an annuity. And so almost regardless of the interest rate environment, we see this structural tailwind of retail annuities is increasing. Jeff, do you want to mention anything on that profitability or then the final numbers on squaring.

Profitability -- I mean some of that is because -- some of that double-digit triple -- some of it that's a decade as opposed to [indiscernible] 2028. We have said of that GBP 400 million-plus base of operating profit, we're adding, let's call it, GBP 60 million to Workplace. So that is significant growth. But of course, the majority still by the time you get to the end is the mature businesses, the Protection and the Annuities, which is going to be lower growth plus the back book optimization driving some of that. So it's really after that, which is why we had lots of graphs of big arrows and things going quickly after 2028 is where the operational leverage coming into that scale happening around Workplace.

And the way of store of future value, the CSM, kind of unwinds a lot of that, particularly in retail annuities, doesn't emerge as a massive growth within the first 3 years. You wanted to add on that, Laura?

Yes. I was just going to say on your GBP 130 million question, yes, the Microsoft is in there. And in terms of the spend, again, all of it is in the numbers. But in terms of, your slightly cheeky question, I mean, I think I can tell you that the spend -- the initial phase of the Microsoft is in sort of single digits, and we expect a 2-year payback period actually because of what it can do.

Thomas Bateman from Mediobanca. I must say I was on the same kind of lines as Larissa on the last question in terms of why is the guidance not higher? If anything, you've taken the guidance down from 6% to 8% to 4% to 6%. And I was just a little bit surprised by that given the U.S. protection isn't that big a contributor. So -- and maybe just an extra point on that. For example, the workplace AUM just more than doubling in 10 years. I'd hope my own pension doubles in 10 years, but you've got all these structural tailwinds. So I feel like there's conservatism in those numbers. Why is it not higher? Second question is on drawdown. I guess we don't hear too much about your drawdown offering. Could you tell us kind of what sort of sales you're seeing there or if any kind of product innovation is needed? And then the final one, and I think on your example with Frank, you talked about your retirement guidance planning services. Could you just walk us through what that means, what you can offer and how that changes for targeted support, please?

Yes. Great. I think that's squarely for you, Laura. In terms of the numbers, maybe Jeff, you can talk about again, about the 4% to 6%. And again, there is a time frame logic. We're talking about up to 2028. And then Tom, a lot of the other numbers, we're looking at are the sort of 10-year -- the 10-year projections. So let me start there, and then we'll come to Laura.

Yes. So there is that key point. As I said, I mean, a lot of the doubling, et cetera, is there. And don't forget that 100% of the profits at the moment are coming from annuities and protection, and those are today relatively mature. It takes a long time for that. It's further out that you'll see the protection -- sorry, the Annuity growth in the portfolio coming through as the volumes increase as more and more people come to retirement. Our book is still only average age of 42 for Workplace. And so -- but obviously, we have a visibility that beyond 28, you'll have a huge amount of people starting to come to retirement. And that's when you see the real acceleration. In the short term, the Annuities and the Protection is acting more like a mature market and then it accelerates. We get the upside from back book optimization. We get some growth in sort of continued success and underlying growth in that and then the increase from Workplace that's coming through. So that's the target. Why it compares to what we had is and the U.S. Protection made very little in '23. Hence, if you go back and revert to a normal result for them, they were still having COVID impacts, et cetera, coming through, they were already on a much higher growth trajectory. And we said that was actually a high-growth business that was doing well that we got paid very well for us. So that was an element of the base for the U.S. in 2023 was a very low number. I think they made GBP 23 million or something. So whereas in the past, they've made GBP 100 million. And so that's quite a difference as well on the percentage-wise.

Yes. There was a lot of growth in that business, and that's what we took out of that. Just one thing on the numbers because you said, why isn't -- why are they not more ambitious. First thing, every single number that you've seen from a market perspective is an industry source number. So we're not here making up numbers and things are going to be big. So we haven't been a bit like what I've done with asset management. I'm trying to be realistic and hopefully, over time, we beat your expectations rather than just put big numbers on the slide. So what we are -- we're looking when I talk about GBP 400 billion is literally just keeping our market share of what the DC market is going to be. So we go from GBP 200 million to GBP 400 million. Of course, there's upside if we do better. But I've been, I think, real -- well, not conservative, realistic on what -- and as we continue to deliver, yes, we'll -- you see those arrows on those slides, which are beyond 2025. I'll be in front of you in 2 years' time kind of updating my targets for the next 3 years. Laura, do you want to talk about drawdown as one. And second Frank, thank you for name checking Frank, Tom, and then the sort of retirement guidance and how do that.

So drawdown. At the moment, our drawdown product is very focused on our current Workplace customers. Hence, to your point, sort of not -- sort of being out there in the market. And to your point, yes, we are doing quite a lot of innovation, which is very easy for us to do because it is done all seamlessly with our retail and investment management business. So the 2 things we're looking at the moment, which you would probably expect is, how do we sort of ensure we have a product that's sort of drawdown in stages rather than just at once. And the second is the underlying investments in that product. So innovating as part of our overall default accumulation solutions, which we'll be putting together as part of target support. And then in terms of, Frank, just at the moment, what we're offering is our retirement guideline solution, which is in our app. And as we said, has had very successful take-up with people taking action after it. Probably the nuance between what we've got now and when Target support comes in is at the moment through our guidance, which we are very happy to give you a demonstration of you can give very factual information to people about what certain products mean. When under targeted support, we'll be able to make sort of suggestions to people. As we said, we've had very early engagement with the FCA on that, and we're quite well set up, not only just because of what we've done already in the sort of guidance, but also in terms of our customer segmentation, we've done quite a lot of work in making sure that the suggestions we make will be appropriate for the people we make them to. And then the final -- the final point of your question about what else we have. We do actually have human advice, which we -- all of those customers can access following going through any guidance that offers retirement advice, protection advice, and we're shortly going to be offering investment advice too.

Great. Thank you going -- coming this way to Andy.

It's Andy Sinclair from Bank of America. First, just, I suppose, just building on what you're talking about there about Workplace pensions, if the targets are in line with market growth, it sounds like this is a consolidating market with some of the legislation that's coming through. What is the pace -- the opportunity to really benefit from that consolidation? Do you think you'll be one of the winners? How do you stack up versus the other Workplace pension providers essentially? Second was on protection. I know you reinsure a lot of mortality risk on the protection book today. As the annuity side of the business grows, what's the thoughts on retaining some of that mortality risk as a diversifier or is the reinsurance pricing just so good that's not worth it? And third was just to understand a little bit more about the app. You mentioned pot consolidation. How much consolidation do you actually get on the app today? And what's the scope to increase that level of consolidation of pensions onto the app?

Great. Thank you, Andy. So on -- maybe, Jeff, you can take the protection, mortality point. And then on Workplace and the app, maybe Laura, you can address that. So do you want to start with Jeff.

Yes. No, I mean, the way you summarize this, right. I mean we retain most of the mortality from sort of catastrophe concentration risk on the group protection, of course, which is very helpful for diversification. And of course, we don't reinsure almost any of the individual annuities today. All of this will be under review as the scale of the different things matter more in the balance sheet. But to your point on protection reinsurance itself, we do see -- the market sees very attractive reinsurance terms still. But we have been challenging ourselves and actually doing more and more work on understanding the mortality and what you need to believe, what we should be believing for those age groups because we're obviously very good at retirement age and 50 plus, let's say, for deferreds. But the people you're selling Protection to what does that look like. And each time we go through a reinsurance tender, we challenge ourselves, should we be start retaining 10%, 20% of this because there are big capital benefits versus the reinsurance. So we will continue to keep that. And as you say, the bigger the retained longevity is getting and the more that we're writing individual annuities more of an offset, the more that will come into our thinking. But yes, it's -- it is definitely work in progress.

And just so Laura should answer on app and Workplace. But just on Workplace for a second. We are assuming, just to correct something I said earlier, we are looking at the market, right, in terms of having GBP 400 billion. But I did say right at the upfront that we expect a bigger proportion of that GBP 400 billion to be in our own Workplace business. So at the moment, we have GBP 200 billion of assets in D.C., of which GBP 100 billion roughly, just over GBP 100 million, within our one own Workplace. I said that we want a bigger proportion of the overall, let's call it, GBP 400 billion, Andy, in 10 years' time to be within our workplace, which means that we're winning more in Workplace. And if you look at 35 deals that we've won this year, so the 35 schemes. Laura, it's fair to say that our percentage of -- so our win rate has been much higher than our natural market share. So I can see my team nodding. So it's true. So we have won a lot of big and small schemes this year ahead -- substantially ahead of our own market share. So don't take my conservatism earlier to say that we don't want to win market share and absolutely we -- and our numbers the GBP 40 billion to GBP 50 billion net flows imply that we're winning market share.

I mean a couple of points to add to that. I mean I'm sure you're aware of some of the pensions reforms pushed to scale. So providers have to have a default fund of GBP 25 billion. Our Master Trust is already up GBP 39 billion and is the largest commercial Master Trust in the U.K. I think there are a couple of other things as well. The pension reform are good for scale players like this, but for smaller players, there will be increased governance, et cetera, which we're already set up to do. And then the other thing for us is our brilliant access to sort of clients through DB who also have DC schemes, some of which we manage the investment side of their DC books now, but we do expect to sort of consolidate into our Workplace business. So I think there's quite a few factors on why we're so well set up to scale. And then consolidation, yes, that's a really good one. We have set up digital consolidation. One of the things I touched upon briefly earlier is now we've set up a system that uses some of the marketing technology that we had on the slide that allows us that when customers log in to instantaneously work out whether we are able -- whether they are able to consolidate and actually flash up the right messages digitally to sort of give them the link to where to go to consolidate. And this number isn't verified. But I think over the last 2 or 3 months, we've seen a 25% increase in that consolidation using this technology. But I think, again, we're quite excited by it because we have only really just started doing this at scale. So definitely more to -- for us to do that.

And there's a customer behavior as well. More and more people are consolidating their pots, which wasn't happening 3, 4 years ago. So that is -- that's a tailwind for us as well. So the two Andrews, but the Andrew here in the front. And then we'll come to you, Andrew, yes.

Andrew Crean from Autonomous. Could you talk about the split of the revenue margin in Workplace 30 basis points? And where you see that revenue margin going over time? Could you split the GBP 4 billion of in-force profits between Protection and Annuities? And you haven't talked at all really about what you expect Protection profits to do over the next few years, flat line or grow? And then just to nail this thing, right at the beginning, Antonio, you talked about not doing M&A to build out retail. Does that basically mean you're not in the market to buy retail platform?

So I'll start there, Andrew. So I did -- to be specific, I said, we're not doing expensive M&A beyond our core strengths. So I think.

Big M&A, then.

We're not doing big, expensive M&A. And look at everything I've said over the last 2 years to all of you guys, I believe in an organic strategy to grow the business. We have all the right capabilities, but you've seen it in the case of Asset Management, where logical we're doing small bolt-ons. I think we'll be, as Laura said, a natural consolidator, but we wouldn't discard buying something that sort of adds to scale. I was just pointing out to -- I'm not going to go out of our core strengths, and that's not something that I'm planning that -- I just wanted to make that clear. And therefore, we don't have plans to buy a retail platform to answer your question directly. On the other 2, Jeff, I appreciate that we've given a lot of detail on Slide 48, [indiscernible] slide. But are we -- because you asked for that several times.

Well, interestingly, I read Andrew's note this morning. And he broadly knows the answer to the first one. He was right because we've told you before the Asset Management split fee rates for -- and you took an average. So you're broadly right on that in terms of the split. It obviously varies by schemes. There's bespoke arrangements that people have. The big driver, of course, for our average revenue. And to your second part of the question is the increase of the PMAF over that driving is increase in the revenue rate as a total for us. And so -- and I know Laura would love to say as would the team, we're also winning some where we're not the cheapest. So that goes against a lot of fee margin pressure. So we've put sensible assumptions in there, but with offset both the operational leverage, but also the private markets fund growing to offset some of that.

And just on that. So if you look at -- each time I open my mouth to talk to the market, the private market excess fund has grown, it's only GBP 2 billion yet. So if you think of this mix effect of having the private markets excess fund, which has better returns for customers and better profitability for us, that's only GBP 2 billion of the GBP 100 billion that we have in Workplace at the moment. And a lot of those -- because the way this works is the employers themselves, they have to make those decisions, some of these decisions are in 3-year cycles. So think about the upside of that coming through. And yes, the market is very competitive. There's margin pressure as well. But what we would hope is that one compensates for the other, i.e., we become a profitable as margin pressure continues to exist. So we've given you the current assumption, which is circa 30 basis points. And we hope to keep as close or increases where we can. And there is a spread, as Jeff said, there is -- there are many clients we don't want -- from a competitive perspective, don't want to give too much away, there's a spread of clients that are below and above that. So there's also an element of sensitivity around that.

And I think CSM store of future profits type split, I think that's what you were saying -- between protection and with profits.

Workplace.

We did that yesterday. The Protection and Annuities Are split in the IFRS 17 disclosures. And then obviously, you need to take out the U.S. So easier for us to show you what's there in terms of what's disclosed, but I will say, and this is not because Andrew is a more generous man than me. But at the year-end, you will definitely have all protection and all annuities and you'll be able to take out the protection piece from that because the U.S. won't be in there anymore. So all the pieces will be there by then. But we can talk you through what's available now.

I can point to the current disclosure, but the logic is as when we come to March, we'll have a split between what's Protection and Annuities.

Yes. And it's not disproportional obviously to the total annuities and the PLT, et cetera. You talked about the Protection and where we expect the margins to go. Yes, it's a market that grows with mortgages, with cost of living and everything else. And actually, that combined with the fact that it wasn't making very much. Three years ago, we were all very open about that, including our competitors. And the margins are improving on that business, means you do get the small contribution to earnings, but it's big mature books. So it's definitely on the lower end of the 4% to 6% than the higher end of it and not something that we see the huge acceleration that we do around Annuities and Workplace.

Thank you. Thank you, Andrew. I'll come to Andrew Baker. And then I have a question online, but then I will come to the rest of the people in the room. Andrew?

Andrew Baker, Goldman Sachs. So I guess I'm just trying to think through some of the longer-term risks, whether there's upside or downside to the Workplace AUM projections at the market level. I guess the first one just taxes. Just curious, I guess, very near term, any risks into November. And I guess, longer term, do you see potential tax changes as a headwind, tailwind? Any thoughts there would be helpful. And secondly, on the same sort of topic. If I look at the U.S. market, the 401(k) market over there, it feels like over the last decade or so, you've seen quite a few recordkeeping providers, so workplace providers get in trouble of having too many of their own funds in the lineup. Clearly, that's not an issue in the U.K. at the moment. Again, do you think longer term, is that on your radar as a risk at all? And then, I guess, thirdly, you've given us the Asset Management DC margins, so the 13 to 23 bps you just talked about. What would those -- would those margins be different for DC only. And then we don't have a flow -- I know this is more of an Asset Management question, but we don't have a flow target DC only. It feels like it's going to be lower than the 40 to 50. But are we talking sort of the -- certainly, GBP 40 billion to GBP 50 billion Workplace flows target that we have, but we don't have a DC...

I know what do you mean for the other bits that's only asset management.

It feels like it's below, but are you able to give us a sense of sort of the flows you're expecting there?

Great. Thank you, Andrew. It's quite a lot there. So I think in terms of tax changes, Laura, can you address that? And maybe you can address any other thoughts in terms of, I guess, regulation or changes. I think you're thinking particularly the 26th of November budget, but more generally kind of any headwinds there or tailwinds? And then I think, Laura, can you also address the sort of us having the largest asset manager and therefore, having a lot of the funds there. And then the margin point. Yes, I can address maybe the margin and Jeff, you can mention this as well. We don't disclose that. So we don't disclose the -- but -- it really depends on the question we were answering earlier. So if you have a scheme, so if we think about the big numbers, we have GBP 200 billion of DC money, GBP 100 billion is our own Workplace. Clearly, our Retail business pays our Asset Management business that fee. You could argue that it's similar on the other side when we are working with another workplace provider where we are the asset manager, but it really depends on what assets are within those schemes. So again, if you have, as we want to have more of a private market access fund logic, the profitability of that will be higher. But by and large, you can assume it's similar. But we don't disclose that. Also there, we start to get into sort of not so much a competitive issue, but we have lots of clients in spread of different fees. And so we wouldn't want to be too precise. But yes, if you want to model it that way, it's kind of roughly similar. In terms of the flows, we don't have flows, Jeff, but what we did do is the ANNR, right? So in many ways, the ANNR for me is -- so the annualized net new revenue of those flows for me is more important than necessarily the actual flows themselves, and that would contribute to the, let's call it, truly third-party money that's coming into asset management, right? Because we've said this morning that over 40% of the ANNR comes from the retail business, primarily Workplace, but also Retail Annuities. That is not within that number, right? So if those are DC customers that come directly into our Asset Management business that would just be the normal external flows. There's no reason to think that they would be lower. I did say that I want to have more of the flows coming to our Workplace business, so that implies a bit of that. But the market is very healthy. We are one of the biggest players in DC as an asset manager, and we want to continue to strengthen that as well.

But it can be quite ironic in the rare occasions, we lose a Workplace scheme. Quite often, we get the money back in our asset manager. And so there is a net-net in some of this as well.

Good collateral about it. I have to say this every time I get up here normally is for PRT, so Laura, do you want to talk about tax changes and then 401(k) logic?

I mean, tax is an interesting one for us. I think in the short term, we expect to see very little direct impact given we have a younger book. What we have seen interestingly, which has been a bit of an interesting tailwind for us in terms of inheritance tax, which I know isn't quite what you're asking, but we have seen an uptick in both people taking up whole of life policies in protection and also annuities given the changes there. So that has been a small tailwind for us, actually. And then on the [indiscernible], that's, again, a very relevant one. So some of the things that are coming through in pensions reform is ensuring that funds are able to show value for money, so it will be very sort of transparent. So that will be sort of regardless whether they are in-house funds or external. And of course, I think the other thing is the governance around the Master Trust that -- actually the master trustees have to show that actually the end customers and members are getting the best value. So I think there's almost sort of regulatory governance in place to avoid what's happened in the U.S.

Before I go to either, I guess, Emily or Darryl or anybody there, just online, there's a question that you can't see, so I'll read it. Leading retail investment platforms like HL or Hargreaves -- and AJ Bell would love to offer deferred annuities, which are commonplace in the U.S. to allow the clients to manage their life expectancy tail risk. Do you see an opportunity here? And if not, why not? Absolutely, definitely, actually, you, Laura, should answer because you mentioned these are a lot of our own clients, and we distribute a lot through them as well.

Yes. No. And we are interesting that you asked this because we are actually exploring what we could do in this space, given our institutional retirement business and the retail annuity and how we can combine that and actually, there's some work going on with our teams and one of the retail investment platforms at the moment.

Yes. And we'll tell you more once -- like this is a huge opportunity in the market because as we said we see this for our own workplace customers, we certainly would want to offer that more generally and only 7% of our own annuities at the moment. Is that correct? Yes, in the slide, to our own workplace clients. So the vast majority of what we do in annuities is in the open market. We are the #1 in terms of the open market, retail annuities market, which means that we are incredibly competitive. Obviously, we will distribute it through any platform that would want to do it.

Yes. And sorry, the point here is we are -- obviously are already doing immediate annuities. This is asking about the deferred, which we are. It is becoming a question that people are asking.

Yes. Sorry, to be clear, the 7% is low because we simply don't have many people retiring from our workplace because we are not selling...

The average age 42, and actually, you saw that in the slide that Laura showed that we expect in the market that 13% number that we're talking about to increase and more people, particularly in our book actually, if you think of that our book is more mass and mass affluent, we expect more of those customers to actually choose annuities. And so that will naturally increase, absolutely, Jeff. Other questions here in the middle. No. Here on the left, yes, we're going to get a -- there's one more online, but I'll come to Andrew and Tom, you get a second round of 3 questions. Andrew?

Just a point of clarification. The higher end of the 6% to 9% EPS growth, which you've targeted, is that against 19.2p, which is the EPS in '24 ex U.S. Protection of the 20p that you actually said? And then secondly, you were talking about GBP 30 million per annum of spend on Workplace out to 2028 per annum. Is that something which is a declining balance? Or should we -- is it basically a standard GBP 30 million a year of investment over the next decade?.

No, good questions. We have said, but it's definitely worth clarifying. So for the '25 target, the one we talk about it in our press release is based off 2024 base less the U.S., so the 19.2 because we haven't yet done the -- we haven't even closed the deal. And so -- but we're excluding the earnings. The cumulative target of 6% to 9% will include the U.S. business because we will have the benefit in the EPS of doing the buyback and we'll have closed the deal, so we can't take the best of both. So we'll start that one from the high end number.

From 20p.

Yes, exactly. Yes. That's right. But the 2025 number -- well, you saw the half year number that we were. And we think we'll be at the high end of 6% to 9%.

Yes, The GBP 30 million, it's broadly flat. I wanted to get down at the end, obviously, but it is broadly an average that's there or thereabouts. I mean it's -- we'll go through rigor on justifying it towards the end and what we're getting in terms of payback. I think one thing to say on it is we do allocate it to Workplace. I mean, it broadly appears in another line in operating profit. But if we're developing the app, it benefits -- it benefits -- in asset management's, it benefits in the annuity business, but it is allocated to Workplace because predominantly, that's where the development is done even in time, it will help Protection. And there's a lot of other customer-related benefits, which, again, are really for everyone. But the Workplace is the big customer acquisition engine and the big driver of growth. And so we're putting that investment spend there.

I'll come to Tom, but there's another question online first from Mandeep, who couldn't be here physically. So could you tell us how much funded re was used in writing at GBP 10.2 billion of PRT in the U.K. Jeff and I would like to start.

Yes. So we won't tell you the full answer because, especially on some of the bigger ones on the slides, we're still negotiating. And so we were either undermine our negotiating position or we haven't decided how good the rates are and how attractive it is. So when we land on the number. But what I can say is it definitely won't be outside the type of guidance we've given. So we haven't suddenly jumped to doing 50% funded re. I think it will be around that guidance of the sort of 20%, 25% as a maximum, if you like, as I say, we're still negotiating. It could be less, but we certainly won't go outside that and haven't -- so there's a big retention there, which means it's contributing nicely to store of future profits, et cetera.

Yes. And we still are on the 23rd of October. So we will give you the full numbers for that at the full year results in March. It's actually worth saying, if you pick this up from my comments that I said that we've done GBP 10.2 billion. So a lot of the deals that we're now working on our pipeline for 2026. So I said, I expect the market to be just over GBP 40 billion for this year and for us to have a 20%, 25% market share. So I'm actually saying the GBP 10.2 billion is roughly what we will do for the year because a lot of what we're doing right now is into 2026. So just in case you didn't pick up that. And what I said is like we're expecting a 25% market share on GBP 40 billion market, which will be very positive for us. We feel very good about 2025. Tom?

Just a couple of quick ones. Are retail annuities higher margin than institutional annuities. And second question, given you're talking -- you talked so much about the lifetime value of workplace. Have you considered -- there are obviously specialists that consolidate pots really well. And I get the impression of hearing about your consolidation efforts in your app is kind of -- this is probably a really bit of elementary, whereas some of the peers...

I wouldn't describe it like that on a capital markets.

But I feel like there are specialists that do a bit. Are those type of businesses attractive to you?

Yes. This is the Ruth question. You've used both of our examples. So Ruth came at 45 and consolidated. Actually, I think our capability is very good. Actually, what I said earlier, we're not yet seeing as much consolidation as we believe will come into the market. But that's not a capability issue. I wouldn't rule that out, but it's not a capability that we're actively looking to acquire because we believe we can build it. Laura, do you want to address that?

No, I think the only thing I would add as well is, I mean some of those are charging quite a lot of money for the privilege. So I think we're going to -- we will continue to do it organically as we have and give customers a fair deal.

Yes. And retail annuities margins?

Yes. I mean the answer is they're very different dynamics. And so that's partly why we don't reinsure what we mentioned. So we deploy relatively more capital. The strain we've said is more like sort of 4%, 5% on there, which is good because we're deploying capital, making pounds. So some metrics will be better, some metric will be worse. They do need to meet our IRR hurdles. But currently, that's probably lower relative on an individual annuity for IRR because you deploy more capital, but it's still meeting our hurdle. We're deploying very, very little capital on the PRT business is making higher IRR and making a lot more pounds on the individual annuities. But we still have the same optionality. We're actually putting some of the gilts, but not quite as much into the individual annuities. It's different duration, et cetera. So it all goes through the same filter, but we then look at as a portfolio, we're optimizing operating profit, IRR, et cetera, but make sure that it covers a hurdle across it. But we do publish it in the same way, the IFRS margins, et cetera.

Yes. I have 3 questions online from Dom. I've missed the detail of Dom's question. So here we are. One, you indicate 5% to 6% growth in annuity assets. Does the pivot towards retail imply higher growth in new business CSM and b, higher growth in strain, given you typically retain more longevity risk on retail. I'll give that one to you, Jeff. Second, do you make more economic profit per GBP 1 of assets in drawdown versus use -- versus used to buy an annuity versus an annuity, taking into account the cost of capital. And three, what percentage of workplace flows and ANNR into private assets are being captured in your own asset management division versus being directed to external asset managers. Maybe I'll take that one, and then Jeff, can you answer the other two. So on that, on the third one. So we have said -- and actually, this links a bit to the question earlier. Was it Andy or I forget now who asked the question. The U.S. -- maybe the U.S. point of how much of our own flows are coming into our own asset manager. As we said in June, when we did a deep dive in Asset Management, we have all the capabilities that we want to have within Asset Management. And that's why we're such a big DC asset management providers for DC because we can give good value for money in terms of index and tracking solutions. And then we can add areas like the private market access fund. Within the private market access fund, so the GBP 2 billion, some of the assets we are focusing on ourselves, clearly real estate, areas of private credit, areas of infrastructure. We've just launched our digital infrastructure fund. So you'd expect our own private markets access fund to be investing in those opportunities, the affordable housing that I've talked a lot about, including this Monday stuff we're doing across the U.K. But in the big part, more than 50% of that part of the AUM is then in asset classes where we don't have necessarily a competitive advantage. I said that we don't want to expand into private equity that want to -- so when the private market access fund does look at external fund managers, we still get the fees on the private markets access fund itself, but some of those assets are basically the best managers in the world in terms of, I don't know, U.S. private credit, clearly, we're not doing it ourselves. So we use an external manager as an example. Jeff, the other 2?

Yes, there's quite a lot. I could go on for hours, I think. But the -- so I think on strain and growth there, it's still a long way out that you're talking about any sort of material number. I mean, if we're writing GBP 4 billion annuities at 5% strain, it's still only GBP 200 million, and that's quite a long way out. And whereas if we're writing GBP 1 billion at 1% strain -- GBP 10 billion, I mean, at 1% strain, that's still already GBP 100 million. So it's -- you're not talking big differences here and quite a way out. We will obviously, over time, look at what's the options around reinsurance, what's the trade-off of capital deployment versus not as that scales and reinsurers will get more attracted to it as the market grows. CSM is an interesting point. Short term, you've seen it in our numbers. It grows at a slower pace. But clearly, as that annuity volumes grow, you will definitely see a big CSM growth. The other bit to reiterate, which we've talked about on PLT is with the asset growth, you get more -- the sort of the profit growth follows there for the investment margin piece because it's not just the back book optimization, but the expected investment margin element grows because you've just got the margins flowing out of the assets back in annuity. So those grow -- that grows at least in line with the asset portfolio, even if the CSM was flat, you would get the growth coming through there. And so it's not all about CSM because investment margin grows anyway. On the last one, it's the difference in asset management and insurance. So you can take that.

Drawdown versus an annuity.

Absolutely, we make our cost of capital on the annuity business. It's the same conversation about deploying capital to make pounds. You need a lot more scale in asset management to make the same amount of pounds, but it's very attractive business because it's very capital light. So it's the balance of the 2. It's the same question, I would say. And we're very happy to have both and especially as the drawdown of the mixed products will feed into more lifetime annuities over time, more guaranteed income. So it naturally makes sense.

And to some extent, it's not our choice, right? We showed that chart that says 60% of people are choosing drawdown, 30% of people are choosing annuities. We will serve them in either capacity or in the blended solutions. So it's not -- I mean, it's somewhat an academic question. Whatever the customers want to do, we will serve them in the best possible way. And it's actually good to have the mix of both insurance and asset management profits. Any other questions online, looking at the team here or any other questions, Abid? Yes. Abid is over there. Sorry, keep on saying that I should point to people.

I'll probably speak loudly without the mic, but sorry, it's Abid again from Panmure Liberum. Just a follow-up. I'm just trying to understand the dynamics of the competitive landscape in Workplace. So I suspect when you turn up the pitches, you have the traditional insurers like Aviva, Standard Life, et cetera, all turn up to those. But who's turning up from the platform providers or the nontraditional providers? Do you see Hargreaves, AJ Bell turning up to these pitches? I'm just wondering, for the workplace, specifically, just because -- given the opportunity, the growth opportunity there, are they becoming more keener to participate in that? And then how does that dynamic work if you have a relationship with, I think I saw Hargreaves elsewhere across the business?

Yes. Great. Thank you. Laura, on the 35 deals that we won this year, kind of where have we come across.

Yes. You can check with Paula, who's sitting behind you, but I think afterwards. But I do think the names that we are seeing at those pitches are mostly traditional insurers and the players that you allude to are playing at sort of smaller scale and sort of more specialists.

Yes. And that may well change, but the market is very competitive. But actually, I think 2 things that reassure me, our win rate this year and opportunity to congratulate Paula and the team on has been a great performance in 2025, actually reassures me that we are really top of the game in terms of winning the schemes. And second, as Laura said, the GBP 3 billion of pipeline that we're seeing is the strongest that we've seen in years. So it's a healthy market right now. I have one more online. Could you share a little more on the sources of growth in the Workplace DC forecasts? How much from scheme wins versus, say, the government pension reforms on mega funds consolidation debt you mentioned? Apologies if it's in the presentation, and I missed in case -- in each case, ignored. -- no, I've already read it now. So Clive, thank you. So Laura, I should have read it before.

So I mean -- so I mean it is a combination. We expect to continue winning new schemes as we have. I think the bit that's probably worth pulling out on the reforms is really on the consolidation point and the move of having to have scale, which many current providers and own schemes don't as well as the uptick in governance that will be expected from everyone that we already have in place. So I think it will be a combination of both of those. And I think the biggest thing to say is that still the biggest driver is contributions in the market.

We have GBP 800 million of contributions every month. I think maybe that's a good point to leave you on if there's no more questions because there is a massive tailwind in this business. It's very competitive, as we've just said, in terms of winning schemes. The 99% retention rate don't take that for granted, meaning we -- there's a lot of work that goes into retaining 99% of our schemes. But then there is the ongoing contributions that at the moment are GBP 800 million per month, and that goes to GBP 1 billion. So do the math kind of that comes to GBP 12 billion per year. So thank you very much for coming today, and thank you for your questions. I think it's important that this completes the sort of third of our deep dives into each one of our businesses. You have now heard from Andrew. You've heard from Eric and from Laura about the growth potential that we see across the group and how we are well placed and how are we delivering this growing -- the growing part, the simpler and the better connected L&G that becomes more capital light over time, particularly in retail, we probably got the sense from the 3 of us. We have an exciting vision for the future of our retail business. I believe we have all the building blocks to capitalize on it. We talked a bit about acquisitions. I believe that organically, we can make the most of the major flows that we expect over the next decade, and we have the business model, as you've also heard from Jeff to deliver the long-term profits for L&G. But on that note, before I let you all go, I'd like to thank Jeff for his 9 years with L&G. I was counting this morning with him. It's probably close to 30 results and market presentations, including a riveting IFRS 17 [indiscernible] a couple of years ago. So I just want to thank Jeff. I didn't show them on the script earlier. So I look forward to seeing you again at our full year results, if not sooner. Thank you.