Directors' Report on Remuneration

Dear Shareholder,
I am pleased to present the Remuneration Committee’s report on directors’ remuneration for 2006, the forthcoming financial year, and subject to ongoing review, subsequent years.

A resolution to vote for the Directors’ remuneration report will be put to the Annual General Meeting (AGM). I hope that you will support this resolution.

Sir David Walker
Chairman of the Remuneration Committee

Directors’ Report on Remuneration

The report of the Remuneration Committee has been prepared in accordance with the requirements of Schedule 7A to the Companies Act 1985 (as amended by the Directors’ Remuneration Report Regulations 2002). It also describes the Group’s compliance with the Combined Code of Corporate Governance in relation to remuneration.

Remuneration Committee

The Committee is chaired by Sir David Walker. The other members are Beverley Hodson, Ronaldo Schmitz, James Strachan and Sir Rob Margetts. Sir Rob Margetts (who was independent on appointment) was appointed to the Remuneration Committee on 12 December 2006, having previously attended by invitation. All other members of the Committee are independent.

By invitation the meetings are also attended by the Group Chief Executive. The Resources & International Director, Gareth Hoskin, attends as the executive responsible for advising on remuneration policy. No person is present during any discussion relating to their own remuneration. New Bridge Street Consultants LLP (‘NBSC’), which the Committee appointed, acts as independent adviser to the Committee and attends the meetings. NBSC does not provide any other services to the Company, other than remuneration advice.

The remuneration strategy, policy and approach for all staff are reviewed annually by the Committee. The Committee considers the policy in relation to senior executive remuneration in the context of remuneration structures across the Group as a whole. All share schemes and long term incentive plans are established and monitored by the Committee. The Committee makes recommendations to the Board each year in respect of the Chairman, executive directors’ and other senior executives’ remuneration.

In March 2007, the recommendations were all accepted. The terms of reference of the Remuneration Committee are available on the Company’s website or on request. The terms of engagement between the Company and NBSC are available on request.

During the year the Remuneration Committee undertook a formal review of its own effectiveness and is satisfied that it had been operating as an effective Remuneration Committee meeting all applicable regulatory requirements.

Remuneration Policy

The Group’s remuneration policy is broadly consistent for all employees and is designed to support recruitment, motivation and retention. Remuneration is considered within the overall context of both the sector of which the Group is a part and the Group’s individual businesses. The policy for the majority of employees continues to be to pay around the relevant mid-market level with a package designed to align the interests of employees with those of shareholders and with an appropriate proportion of total remuneration dependent upon performance. Management work in partnership with our trades union, Amicus, to ensure our pay policies and practices are free from unfair bias. This is monitored by an annual equal pay audit.

The policy for executive directors is described in more detail below.

Remuneration Policy for Non-Executive Directors

Non-executive directors are appointed for a period of three years. Their performance is reviewed annually. They may be reappointed for a further three years and, if considered appropriate and depending on performance, a final period of three years. Appointments may be terminated by either party without notice. Fees for the non-executive directors are determined by the Group Board, based on a range of external information and advice set within the aggregate limits contained in the Articles of Association.

During 2006, the fees of the non-executive directors including the Chairman were reviewed. The conclusion of the review was that no change should be made to the fees of the non-executive directors, which are set out below. The Chairman’s fee (which is a single amount encompassing all his responsibilities) was increased to £325,000 per annum with effect from 1 January 2007. Other non-executive directors receive a base fee of £60,000. An additional fee of £40,000 is payable for the joint role of Chairman of the Remuneration Committee and Vice Chairman. An additional fee of £20,000 is payable to the Chairman of the Audit Committee. These additional fees reflect the responsibility and time commitment required of these roles. It is expected that non-executive directors will use 50% of their fees, after UK tax, to buy Legal & General shares, to be retained by them for their remaining period of office. There is no remuneration other than these non-pensionable fees except where the Company meets authorised expenses of non-executive directors incurred on Legal & General activities.

NED	Current contract start date	Current contract end date
Frances Heaton	June 2004	June 2007
Beverley Hodson	Nevember 2006	May 2007
Sir Rob Margetts	October 2005	May 2008
Rudy Markham	October 2006	October 2009
Ronaldo Schmitz	November 2006	May 2010
Henry Staunton	May 2004	May 2007
James Strachan	December 2006	December 2009
Sir David Walker	February 2005	February 2008

 

Remuneration Policy for Executive Directors

The remuneration of the Group’s executive directors comprises salary, participation in an annual bonus plan (paid partly in cash and partly in deferred shares) and the Group’s Performance Share Plan (PSP), which is a long term incentive plan, plus pension and ancillary benefits. The variable elements of pay (for example, the annual bonus plan and PSP) are designed to provide a strong alignment of interest between the individual and the shareholders through providing rewards which are linked to the generation of superior returns to shareholders and strong financial performance. The chart illustrates that a significant proportion of pay is performance related. When setting remuneration, regard is given to levels of pay in individual market comparators, related to job size, function and sector, and individual and company performance. Data is obtained from a variety of independent sources (including NBSC, Towers Perrin, Watson Wyatt, Monks, which is part of PricewaterhouseCoopers, our auditors, and McLagan). Where possible, the practice is to use at least two independent sources of information for each individual role. The remuneration policy is to pay at or around the market median. The market against which the remuneration for the executive directors is measured is primarily the FTSE 100, with special reference to companies in the UK financial services sector.

Summary of Key Features of Executive Directors’ Remuneration in 2007

Element of remuneration package	Purpose	Policy	Summary of how it operates
Base Salary	Help recruit and retain key employees Reflect the individual’s experience and role within the Group Salary is supplemented with normal benefits available to senior executives including car allowance, medical insurance and staff discounts. Legal & General products can be acquired by executive directors on the terms available to other members of staff	To pay at around the mid-market relative to the FTSE 100, with particular regard to other relevant financial institutions Regard given to individual skills and experience In specific circumstances (for example, a new appointment) may set salaries below mid-market, with a view to reaching mid-market level within two to three years	Paid monthly in cash Normally reviewed by the Remuneration Committee annually and fixed for the 12 months commencing 1 January
Annual Bonus	Incentivise executives to achieve specific, pre-determined goals over a short term period Reward ongoing stewardship and contribution to core values Deferred element, awarded in shares, provides a retention element	Maximum bonus potential set by reference to market comparators (currently 105% of base salary) On-target bonus of 80% of base salary for the Group Chief Executive and 64% of base salary for the other executive directors Percentage of bonus deferred and awarded in shares	All executive directors have objectives related to Group KPIs, plus individual divisional and personal targets Bonus out-turn determined by the Remuneration Committee after year end, based on performance against targets Normally, 62.5% of the bonus paid in cash and 37.5% paid in deferred shares to be held for three years
Performance Share Plan	Incentivise executives to achieve superior returns to shareholders Align interests of executives and shareholders through building a shareholding Retain key executives over three year performance period	Awards of nil cost shares made annually, with vesting conditional on relative Total Shareholder Return (TSR) measured over the three subsequent years Maximum annual grant of basic award is 50% of salary Maximum amount which may vest is four times basic award (ie. 200% of salary) and the minimum which may vest is nil	Vesting condition measures the Group’s TSR versus the FTSE 100 The basic award of shares will vest if TSR is at median, with the maximum amount vesting if Legal & General is ranked at the twentieth percentile. No awards vest below median The Remuneration Committee will also assess whether the underlying financial performance of the Company is reflective of the TSR out-turn and in exceptional cases may scale back vesting
Pension	Reward sustained contribution	Provide competitive post-retirement benefits No compensation for public policy or tax changes	Participation in a Group pension scheme Accrue benefits according to length of service up to retirement Cash alternative for executive directors opting for enhanced protection above the Lifetime Allowance, see Pension sections.
Share Ownership Guidelines	To align the interests of executive directors and shareholders	The Group Chief Executive is required to build and maintain a shareholding of 200% of base salary and, for other executive directors, 100% of base salary	Executives are expected to build a shareholding through the vesting of shares under the Group’s share incentive plans. Existing shareholdings and shares acquired in the market are also taken into account

Proportion of Base Salary vs Performance Related Remuneration (%)

Chart data

Remuneration Policy for Other Senior Executives

The remuneration policy for senior executives below Board level is consistent with that followed at executive director level. There are 28 executives in the UK whose salaries exceed £150,000.

Salary Range	Number of Executives
£150,000 – £175,999	16
£176,000 – £200,999	5
£201,000 – £225,999	4
£226,000 – £250,999	2
£251,000 +	1

The total salaries of these executives is £5,195,842.

Salary

The policy is to pay salaries around the mid-market level for the individual performance within the context of the relevant market for the job. However, when setting salaries, judgement is exercised by the Committee, having regard to individual experience and responsibility.

Accordingly, particularly when a new appointment is made, salary levels may be set at a lower level than the mid-market position, with a view to increasing towards this position over the two to three years following promotion. This approach is being followed in the case of Tim Breedon’s appointment to the role of Group Chief Executive and in respect of John Pollock.

Salary is the only pensionable remuneration and it is normally reviewed annually with effect from January.

The base salaries for the executive directors for the financial year beginning on 1 January 2007 are as follows:

Name	Salary
Tim Breedon	£740,000
Kate Avery	£350,000
Andrew Palmer	£440,000
Robin Phipps	£450,000
John Pollock	£320,000

Annual Bonus

For payments relating to 2007 performance the maximum annual bonus potential for the executive directors has been increased from 96% to 105% of salary of which approximately 62.5% of any bonus earned is normally paid in cash, with the balance being paid in shares under the Share Bonus Plan described below. This increase recognises the need to pay the executive directors competitively relative to other companies of a similar size and complexity. The proportion of bonusable targets based on empirical measures and group performance has been increased. The level of bonus payable for on-target performance has not increased, and is based on the mid-market bonus levels for the job in comparator companies. This remains at 80% of salary for the Group Chief Executive (of which a maximum of 50% is payable in cash and 30% in deferred shares), and for the other executive directors it is 64% of salary (comprising 40% cash and 24% deferred shares). Accordingly, bonus payments will only increase for the delivery of superior performance.

The executive directors’ bonuses are based on a variety of targets, including Group KPIs (applicable to all directors), performance of the business unit for which the individual is responsible (where applicable), and personal targets. The bonus which results from the delivery of these objectives will be reviewed by the Committee based on its view of the executive’s overall performance and regulatory compliance.

As stated above, 37.5% of any bonus earned is normally deferred into shares under the Share Bonus Plan. The Plan grants conditional shares which are held in a trust for three years during which time dividends are paid. It is a deferred bonus scheme with awards designed to encourage employee retention based on annual performance. It is not a long term incentive plan and there are no performance conditions for release. The value of the shares awarded to directors is reported in the year of performance. The chart overleaf summarises the key features of the bonuses for each executive director.

Performance Share Plan

Executive directors are entitled to participate in the Group’s Performance Share Plan (PSP), which is the only long term incentive arrangement available to senior executives in the Group, though the Remuneration Committee is considering the introduction of a specific arrangement for the LGIM business. The PSP was approved by shareholders in 2004.

Under the PSP, basic awards of shares are made to top managers. The Committee reviews the quantum of basic awards made each year to ensure that it is in line with the market. The maximum annual basic award in 2006 and 2007 is 50% of salary.

The number of shares which vest is dependent on Legal & General’s Total Shareholder Return (TSR) compared with that of the other FTSE 100 companies at the date of award measured over a fixed three year period. The award will lapse if Legal & General’s TSR is ranked below median at the end of the three year period.

If the TSR is at median then the basic award will vest and be transferred to the executives. They will receive four times the basic award if Legal & General is ranked at the 20th position or above at the end of the three year period, with the amounts reducing on a pro rata basis between 20th position and median. The FTSE 100 is currently considered to be an appropriate comparator group. The TSR performance conditions are independently reviewed by NBSC.

Additionally, the Committee assesses whether the underlying performance of the Company is reflective of the TSR out-turn. In exceptional circumstances, the Committee may exercise their discretion to scale back the vesting of awards, if it was felt that the Company’s financial performance did not justify the level of vesting. The parameters which the Committee use in making this assessment include market share, partnerships gained and maintained, cost constraint, capital management and shareholder perception.

Dilution Limits

The PSP and the Share Bonus Plan operate with market purchased shares which are held in an Employee Benefit Trust. The Company’s all-employee plans may be satisfied using either new-issue or market purchased shares.

The Company’s all-employee plans and the now closed Executive Share Option Plan operate within the ABI’s dilution limit of 5% in 10 years for executive schemes and all its plans operate within the 10% in 10 years limit for all schemes. As at 31 December 2006, the Company had 4.37% share capital available under the 5% in 10 years limit, and 8.83% share capital available under the 10% in ten years limit.

Examples of executive directors’ targets for 2007

% weighting of total bonus
	Group KPI’s	Other Group Financial Targets	Other Group Targets	Divisional Financial Targets	Other Divisional Targets	Example Targets
Tim Breedon	30%	50%	20%			Deliver return to shareholders
Kate Avery	30%			30%	40%	Improve profits in the individual and corporate long term savings market and deliver customer experience targets
Andrew Palmer	30%	30%	40%			Manage Group external financial reporting, manage capital requirements, execute strategic projects, monitor and strengthen the control environment
Robin Phipps	30%			30%	40%	Deliver UK Operations sales and value added targets, manage regulatory risk and compliance requirements, develop and deliver distribution strategies
John Pollock	30%			30%	40%	Deliver profitable strategies for the general insurance, annuities and protection markets, whilst also delivering customer experience targets

Share Ownership Guidelines

In order to align further the interests of the executive directors and the shareholders, the executive directors are required to build a significant personal shareholding in the business. The Group Chief Executive is expected to build a holding of shares valued at twice salary while the other executive directors are expected to build towards a holding valued at one times their salary.

Although not contractually binding, the Committee retains the discretion to withhold future grants under the PSP if executives do not comply with the Guidelines.

Five Year Total Shareholder Return

The chart below shows the value, as at 31 December 2006, of a £100 investment in Legal & General shares on 31 December 2001, compared with £100 invested in the FTSE 100 on the same date.

Five Year Total Shareholder Return¹

Chart data

Source: Thomson Financial

1.

Rebased 31 December 2001

Benefits

Other benefits for executive directors provided by the Group are:

– pension scheme;

– car allowance;

– medical insurance; and

– staff discounts. Legal & General products can be acquired by executive directors on the terms available to other members of staff.

Pensions

Each of the executive directors is a member of the Group UK Senior Pension Scheme (“the Plan”), details of which are given in the Pension section.

In response to the Government’s changes to pensions legislation and, in particular, the introduction of a lifetime allowance, the Committee was mindful that the Company’s policy is not to compensate for public policy or tax changes. Accordingly, those executives who elect solely for primary protection, remain in the company pension scheme and there has been no compensation, despite any potential additions to their personal tax burden.

For those executives who elected for enhanced protection, they may opt out of the Plan for future service accrual. In such circumstances, for future service accrual after 6 April 2006 these executives are eligible for a non-bonusable cash supplement up to 35% of base salary. The exact level of cash supplement is set at a level to ensure the cost to the Company, including allowance for National Insurance costs, does not increase. Consistent with the legislation, affected executives will be entitled to a pension determined by reference to pensionable earnings at retirement, provided this does not breach the enhanced protection requirements.

All-Employee Share Schemes

There are share schemes for all UK employees. Executive directors participate on the same terms as all UK employees in the Savings related share option scheme (SAYE), the Company Share Option Planand the Employee Share Plan, which are all approved by Her Majesty’s Revenue & Customs (HMRC).

Directors’ Remuneration for Financial year ended 31 December 2006

Annual Bonus2						Total
	Salary/fees £’000	Benefits1 £’000	Cash in lieu of pension £’000	Cash £’000	Deferred £’000	2006 £’000	2005 £’000
Executive:
Kate Avery3	320	20	8	172	103	623	589
Tim Breedon4	675	21	110	392	236	1,434	1,058
Andrew Palmer	415	35	–	233	140	823	760
Robin Phipps	425	21	–	234	140	820	772
John Pollock	280	20	50	157	95	602	464
	2,115	117	168	1,188	714	4,302	3,643
Non-executive:
Frances Heaton	60	–	–	–	–	60	61
Beverley Hodson	60	1	–	–	–	61	62
Sir Rob Margetts	300	1	–	–	–	301	300
Rudy Markham5	15	–	–	–	–	15	–
Ronaldo Schmitz	60	7	–	–	–	67	64
Henry Staunton	80	–	–	–	–	80	73
James Strachan	60	–	–	–	–	60	60
Sir David Walker	100	–	–	–	–	100	100
	735	9	–	–	–	744	720
Former Chief Executive:
Sir David Prosser6	174	2	–	72	–	248	1,503
	3,024	128	168	1,260	714	5,294	5,866

No directors received any compensation for loss of office.

The information in this table has been audited by the independent auditors, PricewaterhouseCoopers LLP.

1.

Benefits include car allowances, medical insurance and travel expenses for work purposes.

2.

In respect of the financial year, executive directors earned bonus of 86-93% of salary.

3.

Prior to 6 April 2006, Kate Avery was capped at the statutory limit for pension contributions of £105,600 for 2005/6, and received a cash allowance of 15% of salary above these earnings, which is included in the “Cash in lieu of pension” column above. Since 6 April 2006 (A-day) onwards, her uncapped pay became pensionable for future accruals only and the cash allowance has, therefore, ceased.

4.

The total remuneration for Tim Breedon for 2005 is £41,667 lower than the figure disclosed in the 2005 Annual Report and Accounts. The basic salary figure disclosed in the 2005 accounts, £500,000, was his basic salary from 1 June 2005. His basic salary from 1 January 2005 to 31 May 2005 was £400,000, giving basic salary earnings of £458,333 for the year.

5.

This amount is paid to his employer and he therefore does not participate in the share purchase.

6.

Sir David Prosser retired as Chief Executive and from the Board with effect from 31 December 2005, although he continued to be employed by the Company until March 2006. He received no compensation for loss of office and was a good leaver under the various share plans with details of his entitlement set out in last year’s report.

DIRECTORS’ SHARE INTERESTS

The holdings of directors in office at the end of the year in the shares of the Company, including shares awarded under the Employee Share Plan and Share Bonus Plan (2005 onwards) but not vested, are shown below. These exclude unvested awards made by the Company under the Share Bonus Plan (pre 2005) and the Performance Share Plan.

	31 December 2006	1 January 20061
Kate Avery	786,612	450,625
Tim Breedon	1,263,588	814,126
Frances Heaton	75,874	62,885
Beverley Hodson	75,961	62,972
Sir Rob Margetts	453,145	385,527
Rudy Markham	-	-
Andrew Palmer	721,816	561,460
Robin Phipps	1,403,222	966,830
John Pollock	381,606	250,709
Ronaldo Schmitz	83,235	70,246
Henry Staunton	96,247	78,879
James Strachan	61,821	47,396
Sir David Walker	217,147	187,134

1.

Or date of appointment if later

SHARE OPTIONS¹

Options awarded to executive directors under the Company Share Option Plan (CSOP) and Executive Share Option Scheme (ESOS) or acquired under the Company’s Savings related share option scheme (SAYE) comprise:

Movements in Year

		Share Options 1 Jan 2006	Options (exercised/ lapsed) granted	Share Options 31 Dec 2006	Exercise price (p)	Earliest exercise date	Latest exercise date
Kate Avery	(SAYE)	32,272		32,272	55	1.5.10	31.10.10
	(CSOP)	545		545	158.47	11.4.03	10.4.10
	(CSOP)	19,589		19,589	148.62	10.4.04	9.4.11
	(ESOS)	220,430		220,430	148.62	10.4.04	9.4.11
				272,836
Tim Breedon	(SAYE)	-	9,220	9,220	101.4	1.10.09	31.3.10
	(CSOP)	545		545	158.47	11.4.03	10.4.10
	(ESOS)	78,115		78,115	162.36	23.4.02	22.4.09
				87,880
Andrew Palmer	(SAYE)	29,863		29,863	55	1.5.08	31.10.08
	(CSOP)	545		545	158.47	11.4.03	10.4.10
	(CSOP)	19,589		19,589	148.62	10.4.04	9.4.11
	(ESOS)	307,710		307,710	148.62	10.4.04	9.4.11
	(ESOS)	436,400		436,400	147.48	10.4.05	9.4.12
	(ESOS)	700,000		700,000	78	10.4.06	9.4.13
				1,494,107
Robin Phipps	(SAYE)	2,493		2,493	76	1.10.07	31.3.08
	(SAYE)	13,745	(13,745)	-	55	1.5.06	31.10.06
	(SAYE)	-	6,393	6,393	117	1.5.09	31.10.09
	(CSOP)	545		545	158.47	11.4.03	10.4.10
	(CSOP)	19,589		19,589	148.62	10.4.04	9.4.11
	(ESOS)	362,260		362,260	148.62	10.4.04	9.4.11
				391,280
John Pollock	(SAYE)	29,863		29,863	55	1.5.08	31.10.08
	(CSOP)	545		545	158.47	11.4.03	10.4.10
				30,408

Notes

 

•

No options lapsed during 2006. As at 31 December 2006, there were 78,115 options outstanding for executive directors where the exercise price exceeded the market price of 160p. The range of share price during 2006 was 119.25p to 160p.

•

The performance target applying to unvested share options under the ESOS and CSOP is that the Company’s TSR performance must be at least at the median relative to the FTSE 100 over a fixed three year period from grant.

•

The SAYE scheme is approved by HMRC and, in accordance with the relevant legislation, has no performance conditions.

The Company’s register of directors’ interests, which is open to inspection, contains full details of directors’ shareholdings and share options.

GAINS ON THE EXERCISE OF SHARE OPTIONS

Gains on share options represent the difference between the market price of the shares at the date of exercise and the exercise price paid under options which have been exercised by the directors during the year.

		Options exercised	Exercise price (p)	Market price at date of exercise (p)	Gain 2006 £’000	Gain 2005 £’000
Robin Phipps	SAYE	13,745	55	139.75	12

Note
The information in these tables has been audited by the independent auditors, PricewaterhouseCoopers LLP.

Share Bonus Plan (pre 2005)

	Awards granted1	Number of shares awarded	Awards vesting during the year	Outstanding awards as at 31 December 2006
Kate Avery	10 April 2003	76,923	76,923	-
	8 April 2004	62,500	-	62,500
Tim Breedon	10 April 2003	107,692	107,692	-
	8 April 2004	112,500	-	112,500
Andrew Palmer	10 April 2003	121,154	121,154	-
	8 April 2004	87,500	-	87,500
Robin Phipps	10 April 2003	123,077	123,077	-
	8 April 2004	90,625	-	90,625
John Pollock	10 April 2003	42,308	42,308	-
	8 April 2004	43,750	-	43,750

Note

1.

These awards vest on the third anniversary of the award date.

performance share plan

	Awards granted1	Base award of shares	Maximum award receivable for stretch performance	Awards vesting	Awards lapsing	Maximum outstanding awards as at 31 December 2006
Kate Avery	10 April 2003	125,000	500,000	287,500	(212,500)	-
	8 April 2004	120,000	480,000			480,000
	7 April 2005	119,734	478,936			478,936
	24 April 2006	106,700	426,800			426,800
Tim Breedon	10 April 2003	156,250	625,000	359,375	(265,625)	-
	8 April 2004	150,000	600,000			600,000
	7 April 2005	158,758	635,032			635,032
	24 April 2006	240,076	960,304			960,304
Andrew Palmer	8 April 2004	170,000	680,000			680,000
	7 April 2005	158,758	635,032			635,032
	24 April 2006	142,267	569,068			569,068
Robin Phipps	10 April 2003	187,500	750,000	431,250	(318,750)	-
	8 April 2004	180,000	720,000			720,000
	7 April 2005	168,514	674,056			674,056
	24 April 2006	142,267	569,068			569,068
John Pollock	10 April 2003	37,500	150,000	86,250	(63,750)	-
	8 April 2004	75,000	300,000			300,000
	7 April 2005	93,126	372,504			372,504
	24 April 2006	87,138	348,548			348,548

1.

These awards vest on the third anniversary of the award date subject to the satisfaction of performance targets as described above.

2.

In 2007, in respect of performance in 2006, the Remuneration Committee decided that executive directors should be granted base awards of performance shares to the following values: Tim Breedon, £370,000; Kate Avery, £175,000; Andrew Palmer, £220,000; Robin Phipps, £225,000 and John Pollock, £160,000.

3.

The table shows the maximum number of shares which could be awarded if awards were to vest in full.

4.

The 2006 award share price was 140.58p.

Pension Entitlements¹

	Age at 31 December 2006	Increase in accured pension in 2006 £’000	Accumulated accrued pension at 31 December 2006 £’000	Transfer value of accrued benefits at 31 December 2006 £’000	Transfer value of accrued benefits at 31 December 2005 £’000	Increase/ (decrease) net of employee contributions in 2006 £’000
Kate Avery	46	5	22	308	226	69
Tim Breedon1	48	68	233	3,489	2,302	1,178
Andrew Palmer1	53	21	214	3,760	3,348	391
Robin Phipps	56	14	243	4,763	4,166	576
John Pollock	48	12	126	1,836	1,575	256

Notes
The information in this table has been audited by the independent auditors, PricewaterhouseCoopers LLP.

1.

The transfer values of accrued benefits at 31 December 2005 for Tim Breedon and Andrew Palmer respectively, are £131,000 and £194,000 higher than the figures disclosed in the 2005 Annual Report and Accounts. The amounts disclosed at 31 December 2005 in the table above reflect a bonus sacrifice amounts in March 2005 which were not shown in the equivalent table in the prior year.

The increase in accrued pension during the year excludes any increase for inflation.

On retirement from Legal & General at age 60 and subject to statutory limits, executive directors are entitled to pensions as follows:

• Andrew Palmer and Robin Phipps: two thirds of their annual salary.
• Tim Breedon and John Pollock: one sixtieth of eligible salary for each year of service through to the date they opted for enhanced protection. Since opting for enhanced protection on 6 April 2006 they have received a cash supplement in lieu of pension accrual as shown in the Directors’ Remuneration table. Consistent with the legislation their pensionable earnings at their retirement will be used to determine their ultimate pension entitlements.
• Kate Avery: one sixtieth of eligible salary for each year of service

On death in service, a capital sum equal to four times salary is payable, together with a spouse’s pension of four ninths of the member’s pensionable remuneration. Protection is also offered in the event of serious ill health. This latter benefit has no transfer value in the event of the insured leaving service.

Directors, like all managers, may elect, before its award, to sacrifice all or part of their cash bonus into pension.

Directors’ Loans

At 31 December 2006 and 31 December 2005 there were no loans outstanding made to directors.

Service Contracts

The policy and practice for the notice entitlement of all executive directors is a six month rolling notice period, plus a six months’ salary, pension and car allowance entitlement on termination. These entitlements may be mitigated and/or spread over the period of notice. Copies of executive directors’ service contracts are available for inspection during normal working hours at the registered office. The date of the contract is the appointment date in the section on directors.

External Appointments

The Company considers that certain external appointments can help to broaden the experience and capability of the executive directors. Any such appointments are subject to annual agreement by the Remuneration Committee and must not be with competing companies. Subject to the Committee’s agreement, any fees may be retained by the individual. Tim Breedon receives £15,000 as a director of the Financial Reporting Council, Andrew Palmer receives fees of £44,000 as a non-executive director of Slough Estates plc and Kate Avery receives fees of £30,000 as a non-executive director of Kelda Group plc. Robin Phipps is an unpaid director of the ABI.

The Directors’ Report on Remuneration was approved by the directors on 12 March 2007.

Sir David Walker
Chairman of the Remuneration Committee

Independent Verification Review

New Bridge Street Consultants LLP (NBSC) act as advisers to the Remuneration Committee. In addition, they were asked to verify that the 2006 remuneration practice for executive directors followed the Remuneration Policy put to the 2006 Annual General Meeting. In conducting this work, NBSC has reviewed the elements of executive director remuneration during 2006, as detailed in the policy statements of the Directors’ Report on Remuneration 2005 (DRR 2005). They confirmed that they are satisfied that the remuneration practice during 2006 has been in line with the stated policy set out in the DRR 2005.