Lloyds bank has agreed terms with Zurich to acquire for an undisclosed amount its UK workplace pensions and savings business, a division that presently has up to £19bn assets under management (AUM).
The deal brings with it 500,00 customers and is being seen as a major shot in the arm to Lloyds’ Scottish Widows pensions and retirement business, Scottish Widows having been acquired by the UK bank in 1999.
Scottish Widows presently has £124bn AUM, of which £35bn is workplace pensions business, so this represents growth of up to around a half in one stroke.
Lloyds plan to become ‘market leader’ in pensions and retirement
Antonio Lorenzo, Lloyds Banking Group director for insurance and wealth and chief executive of Scottish Widows, described the move as “a clear signal” of Lloyds’ commitment to the financial planning and retirement sector.
Speaking bullishly, he said that the acquisition of Zurich Corporate Savings complements Scottish Widows’ growth to date and “provides us with an ideal opportunity to accelerate our goal to become a market leader” in the sector.
He paid tribute to Zurich’s good growth in AUM – driven, he said, through “strong relationships with large-scale corporate clients and their intermediaries”.
Commenting on Lloyds’ swoop, Laith Khalaf, a senior analyst at Hargreaves Lansdown, pictured left, said that it would have the effect of “scotching rumours that have circulated for years” that the bank is looking to sell off Scottish Widows.
He pointed out that the move adds some diversification to the Lloyds stable “without the risks inherent in the investment banking activities practised by its peers”.
“By comparison, the workplace pensions business is sleepy, steady and sticky,” Khalaf said, adding that the defined contribution market is also growing “thanks to the government’s automatic enrolment programme which is forcing employers and employees to pay money into workplace pensions”.
He warned that a charge cap on these schemes illustrates the wider fee pressure on fund management, which means there is strength in numbers for the likes of Scottish Widows and Zurich, not least due to the increasing regulation faced by financial services firms.
“We have already seen Standard Life and Aberdeen tie up to battle these headwinds together,” Khalaf concluded, a deal that “no doubt… raised an eyebrow or two across the Edinburgh streets at Scottish Widows HQ”.
As part of the deal, around 200 Zurich employees, mainly based in Cheltenham, Gloucestershire, are expected to transfer to Lloyds.