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UK budget concerns causing investors to wait, says L&G CEO

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Simoes warns against tax changes that might deter savers

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L&G must do better winning over investors on strategy

-Simoes

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FTSE 100 giant to host investor event on retail unit

Thursday

(Adds details from investor update in paragraphs 6, 15, 22-22,

comment on credit stress paragraph 18)

By Iain Withers and Tommy Reggiori Wilkes

LONDON, Oct 23 (Reuters) - Britain must not deter

pension savers with tax changes in next month's budget, Legal &

General ( LGGNF ) CEO Antonio Simoes told Reuters, adding that

uncertainty was souring investment as the UK's biggest investor

battles to sell its own strategy.

Simoes, who has led the FTSE 100 giant since the start of

2024, said clarity was needed amid concerns taxes could rise for

savers, the wealthy or businesses in UK finance minister Rachel

Reeves' budget on November 26 to fill a fiscal black hole.

"I see a lot of pent-up demand for people to invest in the

UK. But people are sort of waiting now," said Simoes, adding

that any tax changes to pensions that put off savers would be

"really concerning for the country".

Simoes said he also needs to do better at convincing

investors of his strategy for L&G, which offers life insurance,

pension and investment products.

He vowed to improve performance at its capital-light asset

management and retail units while dismissing concerns that

demand was waning for L&G's biggest profit generator, buying

pension schemes from companies.

L&G will outline growth plans for its retail unit on

Thursday and told investors it was on track to deliver group

earnings growth this year at the higher end of its 6% to 9%

range. Shares were flat in early trading.

UK FISCAL WORRIES WEIGH

Simoes, who has supported the government's economic policies

since Labour won power last year, reiterated his backing for

reforms such as easing planning laws, days after L&G committed 2

billion pounds ($2.68 billion) more to British housing and

infrastructure.

He believes Reeves will find a budget formula, but said that

investor concerns about Britain's economy were weighing on L&G's

shares, which are down 4% since he started as CEO.

"Some of this is linked to (the UK budget) and sentiment

towards the UK. We tend to be a proxy for the UK economy," he

said, adding that, as a big investor in government debt, L&G

wanted to see "fiscal sustainability".

British rival Aviva has seen its stock rise more than

40% this year as it focuses on business lines demanding less in

capital.

'SHOW-ME' PHASE FOR L&G STRATEGY

Simoes, a former HSBC and Santander banker, was a surprise

pick to lead L&G. He has sought to simplify the sprawling

189-year-old group - selling housebuilder Cala and its U.S.

insurance unit - while promising bigger returns.

"What I need is to convince investors that the growth story

is there... We're very much in the 'show-me' phase," he said,

adding that he would like the share price to be higher and

wanted more growth-focused shareholders on board.

L&G dismayed some investors by paring its dividend growth,

but Simoes said its share price did not reflect plans to return

5 billion pounds including through buybacks over three years.

PENSION BUY-OUTS GROWING, NOT SHRINKING

Analysts are wary the lucrative pension buy-out boom could

peter out, as planned UK reforms allow companies to unlock

surplus cash themselves and the entrance of North American

giants Brookfield and Apollo adds competition.

But Simoes dismissed this.

"If anything, it is accelerating... We're not seeing the

(pension buy-out) market slowing down in any way," he said. L&G

has secured 11 billion pounds worth of buy-outs so far this

year, it said on Thursday.

L&G's institutional retirement arm, which houses pension

buy-outs, will be its biggest profit contributor for years to

come but will eventually peak as defined benefit schemes wind

down, Simoes said.

To prepare, L&G is investing in its asset management and

retail units, partly by offering higher-margin private market

investment products including via a Blackstone tie-up.

A recent flare up of credit stress in the U.S. market was a

sign of "exuberance" weakening lending standards in some areas,

Simoes said, but added L&G and Europe were not exposed.

L&G is targeting margins of more than 10 basis points in

asset management, after already raising them to nine from seven,

Simoes said, amid fierce competition that has compressed

industry fees.

Executives will lay out plans on Thursday for its retail

unit offering annuities and defined contribution (DC) pensions.

L&G said it would target 4% to 6% annual growth in the

unit's profit to 2028, a lower restated goal to account for the

sale of its fast-growing U.S. unit.

It expects profit from workplace DC pensions to triple by

2028, and for the wider retail division to generate more fees

and drive more cross-over business to asset management.

"In retail we've got this massive opportunity," said Laura

Mason, the unit's CEO, adding UK reforms requiring schemes to

merge into 'megafunds' would benefit providers like L&G.

($1 = 0.7451 pounds)