2021

FCA REMUNERATION & SFDR DISCLOSURES AT 31 DECEMBER 2021

This report has been prepared to supplement the Directors' Remuneration Report contained in the Legal

• General ("L&G") 2021 Annual Report and complies with the requirements of the Capital Requirements
  Directive IV ("CRD IV"), the FCA's Handbook for investment Firms ("IFPRU") and for banks, building societies and investment firms ("BIPRU") and the relevant regulatory requirements of the EU Sustainable Finance Disclosure Regulation (SFDR)

As an insurance company, not all of L&G's activities are subject to the FCA Remuneration Code. The following L&G businesses have been identified as Code firms:

IFPRU Firms

• Legal & General (Portfolio Management Services) Limited (PMS);

BIPRU firms

• Legal & General Investment Management Limited (LGIM) - L&G's asset management subsidiary;
• Legal & General Investment Management International (LGIMI);

Firms subject to the disclosure requirements of SFDR

• LGIM Managers (Europe) Limited

Code Staff

The Remuneration Committee has identified 126 Code Staff with responsibilities relating to the BIPRU and IFPRU firms ending 31 December 2021.

Code Staff criteria

The following groups of employees have been identified within the code firms as meeting the FCA's criteria for Code Staff:

• Certain members of the Group Board and Executive Committee;
• Employees performing a Senior Management Function in relation to the code firms within L&G Group; and
• Key control function roles.

Role of the Remuneration Committee

The Remuneration Committee operates under a formal terms of reference which are reviewed regularly to monitor the Group's compliance with the principles of the Remuneration Code and any other regulatory regime to which the Group or any of its subsidiaries are subject

The Remuneration Committee determines and approves the remuneration policy of the Group's most senior executives and the principles and parameters of the remuneration policy for employees who are considered Code Staff pursuant to the Remuneration Code.

The Committee also determines the framework of the remuneration policy for all other employees in the Group.

The Committee is responsible for approving the budget for group-wide base pay increases and the cost of all bonus plans. All share plans operated by the Group are monitored by the Committee.

The Remuneration Committee is supported by the Reward Steering Committee (RSC), which helps review the implementation of the remuneration policy and set the framework within which incentive

arrangements are normally reviewed and implemented, with a view to supporting business strategy, whilst acting within the Group's risk appetite. The RSC also monitors the practical application of the remuneration policy to Code Staff.

No individual is included in decisions regarding his or her own remuneration.

Decision-making process for determining remuneration policy

The Committee determines the remuneration policy of the Group having regard to the views of the Group's shareholders and other stakeholders, the risk appetite of the Group, alignment to the Group's long term strategic goals and the requirement that a significant proportion of remuneration should be structured so as to link rewards to corporate and individual performance and designed to promote the long-term success of the Group.

A number of regulatory regimes impact L&G, all of which are taken into account in the remuneration policy. In particular, the policy is consistent with the way L&G integrates risks, including sustainability risks under applicable regulation.

The Committee has due regard to market competitiveness, internal relativities, individual and corporate performance when setting and reviewing remuneration. The Committee also has regard to the principles of good corporate governance, including but not limited to the UK Corporate Governance Code, the Remuneration Code and guidelines laid down by the investor community.

The Committee undertakes a regular review of the adequacy and effectiveness of the remuneration policy to seek to ensure it is fully aligned with the group's long-term objectives.

The Committee receives a number of reports to assist it in its oversight of remuneration policy, for example, on risk and financial performance across the group. In considering remuneration proposals, the Committee considers a report from the Group Chief Risk Officer which assesses the performance of the Group from a risk appetite perspective across a range of measures including:

• Capital and earnings risks;
• Prudential risk limits and tolerances;
• Operational risk and internal control;
• Conduct risk; and
• Sustainability risks.

The Committee reserves appropriate discretions to adjust payments having regard to responsible and effective risk management.

The Committee receives regular updates on regulatory developments and general remuneration issues, as well as market and benchmarking data from its remuneration advisors to support its decisions.

During 2021 the Committee met five times. Its terms of reference are available on the Group's website (www.legalandgeneral.com)

More information on L&G's remuneration principles can be found in the Directors' Remuneration Report in the 2021 Annual Report & Accounts also available on the Group's website.

Members of the Remuneration Committee

During the year ending 31 December 2021, the L&G Remuneration Committee included the following independent non-executive directors:

• Lesley Knox (member from September 2016, appointed Chair on 1 October 2016)
• Philip Broadley (member from May 2017)
• Henrietta Baldock (member from October 2018)
• George Lewis (member from October 2021)
• Ric Lewis (member from June 2020)

Independent Consultants to the Remuneration Committee

PWC was the independent advisor to the Remuneration Committee during 2021

PWC are signatories to the Remuneration Consultants' Group Code of Conduct in relation to Executive Remuneration Consulting in the UK.

Link between pay and performance

Remuneration at L&G is made up of fixed pay (base base pay, retirement and other benefits) and performance-related pay (consisting of annual bonuses, deferred awards and long-term incentives). Performance related pay is designed to reflect success against a range of performance measures and targets taking into account the businesses performance. Performance related pay accounts for a considerable proportion of total remuneration for the majority of Code Staff.

Annual bonuses

Annual bonuses are designed to reward financial and non-financial performance that supports the business strategy, taking into account the Group's risk appetite and personal contribution in the business context that it was delivered. Targets are specific, measurable, set at the beginning of the year and communicated to employees.

For Code Staff in the control functions (Internal Audit, Regulatory Compliance and Risk), separate performance measures have been designed which exclude any direct linkage to financial performance.

Individual performance assessment is supported by a structured performance management framework. In reviewing an individual's performance against their objectives, the individual's approach to risk management (including the integration of sustainability risks) is considered when determining the overall level of bonus payout. The bonus policy allows for zero bonus payments to be made when appropriate.

Deferred bonus

Under the Group-wide deferral arrangements a significant proportion of the annual bonus for senior employees is deferred into Group shares over a three year period. The purpose of the deferral plan is to promote the sustainable long-term performance of the Group and to align the interests of our senior management with our shareholders.

Deferred awards for senior employees may be subject to forfeiture if the performance which led to a bonus being paid is found to be incorrect or in the event of personal misconduct. Annual incentive awards (including any deferred element) are subject to malus and clawback for material risk takers.

Long-term incentives

The Group provides long-term incentives which link reward with the long-term success and growth in value of L&G. Long-term incentive awards for most staff are conditional on the satisfaction of total shareholder retu("TSR") and Earnings Per Share (EPS) growth. In addition vesting of awards is subject to an assessment of performance against Solvency II objectives and progress against long term ESG objectives. These measures are intended to ensure an alignment between reward and the interests of shareholders and provides a degree of risk management (TSR reflects both underlying financial performance and the market's assessment of the quality and sustainability of those earnings).

The Committee may also exercise its discretion to scale back the vesting of awards if it was felt that the Group's financial performance did not justify the level of vesting (the Committee may not increase the award).

Awards under the Group long-term incentive plan are subject to malus and clawback provisions.

Design and structure of remuneration

Base pay and fees

All Code Staff receive either a base pay (employees) or fees (non-executive directors) to reflect their experience, skills, competencies and contribution to the Group relative to the market for comparable roles. L&G Group seeks to ensure that fixed remuneration is sufficient while generally seeking to pay around a mid-market range.

Benefits

Code Staff receive benefits in line with other employees that includes pension, staff discounts and may include car allowance and private medical insurance. Non-executive directors who are listed as Code staff do not receive any benefits.

Annual bonuses

All executive Code Staff are eligible to receive an annual bonus. Non-executive Directors who are Code Staff are not eligible to receive an annual bonus.

Performance is central to the determination of any annual bonus payouts. Performance assessment is based on objectives that, where appropriate, are linked to Group or divisional key performance indicators or individual strategic or personal targets.

Overall expenditure on annual bonuses is reviewed by the Remuneration Committee at the end of each year taking into account the performance of the business.

Deferred bonus

The majority of Code Staff are required to defer a portion of their annual bonus into shares in the Group. Executive directors defer 50% of any bonus awarded for three years via the Share Bonus Plan ("SBP").

Group long-term incentives

The Group provides employees in senior roles (executive level and selected senior management) the opportunity to receive annual awards of long-term incentives. The Performance Share Plan ("PSP") permits awards of conditional shares to employees who hold key roles. The Remuneration Committee reviews the quantum of awards made each year to ensure that it is in line with the market. The maximum annual award possible in 2021 was 300% of base pay, with a normal policy level for Executive Directors of 250% of base pay. When making awards, the Remuneration Committee also considers wider factors such as company performance in determining whether to grant at this normal policy level.

The performance measures and weightings applicable to the awards since 2018, assessed over a three year performance period, are as follows:

• 25% based on TSR performance relative to the FTSE 100
• 25% based on TSR performance relative to a bespoke comparator group of companies
• 50% based on EPS growth.

For executive committee members awards are released two years after the end of the performance period and for other plan participants awards are released in three equal tranches following the third, fourth and fifth anniversaries of the start of the performance period.

Performance against TSR conditions are independently reviewed by the independent adviser to the Remuneration Committee.

The Committee reviews the measures prior to each award.

Risk adjustment

Care is taken into account to manage the risk aspects of remuneration policy. For 2021, the Remuneration Committee considered the Group's performance against risk objectives and regulatory compliance in determining the bonus out-turn. To support these considerations the Chief Risk Officer prepared a report on the risk profile of the Group over the year to be reviewed by both the Risk and Remuneration Committees. The report assessed performance against a range of risk factors including:

• Capital and earnings risks;
• Prudential risk limits and tolerances;
• Operational risk and internal control;
• Conduct risk; and
• Sustainability risks.

Quantitative Remuneration Disclosure

126 individuals held Code Staff positions during 2021; however each individual did not necessarily hold the position for the full year. The numbers shown below are calculated based on total remuneration paid in the year for each individual that was a Code Staff during 2021 (even if they were Code Staff for only part of the year).