L&G told to axe divi over £10bn bond ‘loss’

LEGAL & General has come under renewed pressure to suspend its dividend amid estimates it is sitting on as much as £10bn of bond market losses.

The UK Shareholders’ Association (UKSA) is urging the pensions and savings group to suspend its £754m payout, due next month, arguing that the economic outlook is far too uncertain.

Dean Buckner, UKSA’s policy director and a former official at the Bank of England’s regulatory arm, said the slide in bond prices since the beginning of the year means L&G will be sitting on huge paper losses.

Corporate bond prices have been pushed down as investors dumped their debt holdings at the start of the coronavirus pandemic, thinking the inevitable recession would mean companies might become unable to pay the interest and even go bust. Buckner estimates L&G’s bond market losses could be up to £10bn.

Sir John Vickers, former chairman of the Independent Banking Commission, has already called on L&G to suspend its dividend. Rivals including Aviva, RSA, Direct Line and Hiscox have ditched their payouts in an effort to preserve cash.

L&G claims its financial position is easily strong enough to pay the dividend.

A spokesman said: ‘We simply do not recognise these numbers. Our decision to pay our recommended dividend is considered, prudent and affordable. It is the right thing to do for our thousands of personal shareholders, for the pension system and the economy.’