Widows rumoured to be lining up Standard’s corporate pensions book acquisition

Lloyds Banking Group is believed to be in advanced talks with Standard Life Aberdeen to buy the Standard Life corporate pensions book and roll it into Scottish Widows.

The deal, following on yesterday’s announcement that Lloyds is buying the Zurich corporate pensions book, would make Scottish Widows the largest corporate pensions provider in the UK by a considerable margin.

Speculation emerged in June that Standard Life could be buying Scottish Widows. But Corporate Adviser has been told by several different sources that a deal where Widows is the buyer not the seller is currently being worked out. One source says discussions are advanced and described the chances of the deal happening as 80 per cent.

Yesterday’s announcement that LBG is buying Zurich’s corporate pensions book will make Scottish Widows the third largest UK provider.

Based on Q3 2016 AUA figures, published in Platforum’s February Workplace Savings Guide, Scottish Widows’ acquisition of Zurich would give it a combined £47.7bn AUA, compared to L&G at £56.9bn and Aviva at £55.0bn. Adding in the Standard Life Aberdeen book would take it to around £85bn, considerably bigger than its rivals. The deal would also further Standard Life Aberdeen’s aim of focusing on asset management.

A source suggested that September’s first bulk transfers of group DC schemes through Origo, where schemes passed between Standard Life and Scottish Widows automatically, may have been a test run for future consolidation of assets.

Aberdeen bought Scottish Widows Investment Partnership in 2014, since when it has run significant assets for the provider. Lloyds has pledged to give 12 months notice of any intention to withdraw funds from Aberdeen.

Lloyds agreed not to progress further deal talks until six months after the Standard/Aberdeen merger completed. That merge completed in August, meaning no official announcement might happen until February 2018.

A Standard Life Aberdeen spokesperson says: “Anything beyond what is in our prospectus is speculative. In terms of our pension and savings business more broadly – it has built a strong position in both the UK platform and workplace pension markets.  Our commitment to this market has been demonstrated in a number of ways recently through the acquisition of the Elevate platform, the continued expansion, through acquisition of our national advice arm – 1825 – and reaching over 1 million employees auto-enrolled since 2012.”

Standard Life Aberdeen prospectus statement on relationship with Lloyds:

“Since Aberdeen acquired Scottish Widows Investment Partnership Limited in 2014, Aberdeen and Lloyds have enjoyed a strong business partnership and Lloyds remains a key customer of Aberdeen. It is the intention that the Combined Group will explore ways in good faith to build a successful relationship with Lloyds for the benefit of their respective customers, businesses, shareholders and other stakeholders.

“Lloyds has agreed to delay making a decision in relation to (i) the exercise of any applicable termination rights arising as a result of completion of the Merger in the various agreements between Lloyds and members of the Aberdeen Group (the “Relevant Arrangements”) and/or (ii) the making of certain material unscheduled withdrawals of assets by any means whatsoever (including by virtue of any termination at will under any or all of the Relevant Arrangements) from the management of the relevant member(s) of the Aberdeen Group under any of the Relevant Arrangements, in each case from and including the date of Lloyds’ agreement until the end of a period of six months from the date of completion of the Merger (the “Minimum Period”).

“Lloyds’ agreement is to allow the discussions referred to above to take place in a spirit of mutual cooperation.

“If Lloyds ultimately decides at or after the end of the Minimum Period to terminate any of the Relevant Arrangements, it will give at least 12 months’ notice in writing to the relevant members of the Combined Group prior to withdrawing its funds under management.”