Lighthouse Regulatory News (LGT)

21 January 2019

Lighthouse Group plc

("Lighthouse" or the "Group")

Conclusion of strategic review of auto-enrolment business

Lighthouse Group plc (AIM: LGT), the national financial advisory group, is pleased to announce that it has completed its strategic review of the Corporate Pensions Trust ("CPT"), the unbundled Master Trust incorporating the Lighthouse Pensions Trust, the Group's proprietary solution for small and medium sized businesses looking to meet their obligations to provide auto-enrolment compliant workplace pension schemes.

In September 2018 the Group announced a strategic review of the business following the introduction by the Pensions Regulator ("TPR") of a new authorisation regime for Master Trusts which comes into operation on 1 April 2019. The new regime will significantly increase the annual running costs, both in the year of initial application for authorisation and in all subsequent years, as well as the capital required to be held to meet any future wind-up costs.

The Group has now concluded that review and determined it would not be in the best interests of shareholders to continue to provide financial support to the CPT to enable it to apply for Master Trust authorisation. This decision has been communicated to the CPT Trustees.

During its strategic review the Group considered alternative scheme providers to which the participating employers and members of the CPT might be able to transfer and discussions were held with a number of interested parties. Those discussions resulted in the Group identifying the Auto-Enrolment Master Trust ("AEMT") operated by Smart Pension Limited ("Smart"), which is part-owned by Legal & General, as the most appropriate candidate to assume responsibility for receiving the assets and members within the CPT.

Heads of Agreement between the Group and Smart have now been signed with the proposed transfer having been approved by the Trustees of the CPT, subject to the AEMT obtaining Master Trust authorisation from TPR (Smart is expected to submit its application to TPR imminently). Further details about Smart are given in the section "About Smart Pension Limited" set out below this announcement.

Accordingly the scheme administrator for the CPT has today written to all employers advising them of the position and of the proposal for all participating employers and members and the scheme assets to be transferred to the AEMT once that scheme has been authorised. TPR has indicated that it expects its reviews of applications for authorisation by Master Trusts to take three months before approvals are granted. With final TPR approval anticipated during April 2019, it is anticipated that new employer and member contributions will be paid to the AEMT from May 2019. The scheme assets will likewise be transferred from the CPT to the AEMT by the end of June 2019. The Group expects the wind-up process to take a minimum of six months from the date of the scheme assets being transferred.

The Group has agreed to continue to fund the operating costs of CPT Trustees during the process, together with the costs of winding-up the CPT once all transfers have been effected. It is intended that the existing contractual arrangements between the Group and participating employers within the CPT for the provision of regular payroll assessment and opt-in/opt-out reviews will be renewed but with the AEMT as the scheme provider post transfer.

The impact of the proposed transfer is expected to be broadly cost neutral in 2019 and should provide a small net income stream after associated costs from 2020 onwards.

Malcolm Streatfield, Chief Executive Officer of Lighthouse, commented: "Given the investment made by the Group to date in establishing and maintaining the Lighthouse Pensions Trust, the significant increase in operating costs that will arise from the Pensions Regulator's new authorisation regime, and the highly competitive market for the provision of auto-enrolment compliant workplace pension schemes, the maintenance by the Group of the Lighthouse Pensions Trust, within the Corporate Pensions Trust, could no longer be justified.

"The Board is pleased to have secured, in principle, a deal to transfer participating employers and members and the scheme assets accumulated within the Corporate Pensions Trust to the Auto-Enrolment Master Trust run by Smart Pension Limited. The transfers, once the AEMT has been approved by the Pensions Regulator, will provide a well-backed and market-leading home for those employers and members who have previously chosen to use the Corporate Pensions Trust to meet their auto-enrolment obligations, whilst enabling the Group to concentrate on its primary business of providing appropriate financial advice, particularly through its affinity connections, and giving a recurring revenue to the Group for years to come."

Andrew Evans, Chief Executive Officer of Smart Pension Limited, commented "We are delighted to enter into this partnership following an in-depth review by the Lighthouse Group, on behalf of the CPT Trustees. We are impressed with Lighthouse Group's approach to excellence in client service and care, which will continue going forward. This is great news all round, particularly for the employers and members of the CPT who will have access to our world-class technology."

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About Lighthouse Group plc

Lighthouse has been listed on AIM since 2000 as an integrated financial services company for investors, coupled with significant scale in terms of distribution through financial advisers and wealth managers and its fully diversified business model.

As one of the UK's largest autonomous financial advice and wealth management groups, Lighthouse provides a comprehensive range of services to businesses and individuals and is retained by most of the major trades unions and other affinity groups to advise their combined memberships of over 6 million members.

The Group aims to increase its relationships with, and the benefits it derives from, its affinity group and professional partners.

In addition to a wide range of financial advice, the Group has developed innovative products to meet the specific needs of its retail and corporate customers.

Lighthouse operates from its headquarters in London as well as having principal operating offices in Stockport and Woodingdean, near Brighton.

For more information please visit: http://www.lighthousegroup.plc.uk/

About Smart Pension Limited

Smart was formed in 2014 and has established itself as one of the largest Master Trusts in the UK auto-enrolment market, excluding those owned by insurance companies or funded by Government. Smart's AEMT has c.95,000 participating employers and c.650,000 members and currently has c.£200 million assets under management. It offers a superior member experience utilising proprietary technology developed by Smart and is competitively priced. The pricing structure to be offered to CPT participating employers and members is likely to be considerably lower than that currently charged by the CPT.

Legal & General owns 17 per cent. of Smart and supplies the main default funds used by the AEMT, all of which have out-performed their respective benchmarks over a one and five year period.