The agreements announced today are mutually beneficial and simplify the partnership focusing it on the provision of Standard Life Aberdeen's high-quality asset management services to Phoenix Group and its insurance and workplace pension customers. Standard Life Aberdeen's purchase of the Wrap Self-Invested Personal Pension ("Wrap SIPP"), Wrap Onshore Bond and UK Trustee Investment Plan ("TIP") businesses from Phoenix Group will also support its growth agenda for these businesses.
The partnership with Phoenix Group was expanded when Standard Life Aberdeen sold its UK and European life insurance business to Phoenix Group in 2018 (the "Insurance Sale"). While the Insurance Sale allowed Standard Life Aberdeen to streamline its own operations, it also created a complex network of commercial and operational services between the groups, including in respect of certain pensions and savings products and the shared use of the "Standard Life" brand.
The two groups have now agreed to simplify these arrangements and strengthen their relationship in the following way:
· The strategic asset management partnership (under which Standard Life Aberdeen currently manages c£147.4bn* of Phoenix Group assets) will be extended and will now operate until at least 2031. The key changes relate to the price adjustment mechanism agreed at the time of the Insurance Sale which protects Standard Life Aberdeen in the event of certain types of asset withdrawals.
· Standard Life Aberdeen has a market-leading offering for its UK financial adviser clients in the form of its Wrap and Elevate platforms. To support its ambitious growth plans for these businesses and the continuous improvement of its service to its UK adviser clients, Standard Life Aberdeen will purchase the Wrap SIPP and Wrap Onshore Bond businesses from Phoenix Group. The economic risk and reward in these businesses will transfer to Standard Life Aberdeen with effect from 1 January 2021 with the legal transfer to follow by a Part VII transfer scheme targeted for completion in late 2022. Wrap SIPP and onshore bond customers should see no service impact arising from the transfer.
· Standard Life Aberdeen will continue to partner with Phoenix Group to design and provide investment solutions for Phoenix customers. In addition, it will acquire the TIP business from Phoenix Group to consolidate its investments offering for UK pension scheme clients. Standard Life Aberdeen already provides investment services for these clients.
· Standard Life Aberdeen will sell the "Standard Life" brand to Phoenix Group during the course of 2021. As a consequence, certain colleagues who support this brand and related marketing will also transfer to Phoenix Group. Standard Life Aberdeen will pay £32m to Phoenix Group in return for Phoenix Group bearing the cost of some transferring colleagues going forward. The sale of the "Standard Life" brand and the transfer of related marketing colleagues are not expected to impact materially on our results. Standard Life Aberdeen has initiated a branding review, the outcome of which it will announce later this year.
· The upfront payment by Standard Life Aberdeen for the purchase of the Wrap SIPP, onshore bond and TIP businesses will be £62.5m, which will be offset in part by expected payments from Phoenix Group to Standard Life Aberdeen relating to the profits of the business prior to completion of the legal transfer. Standard Life Aberdeen expects its Adviser vector to benefit from its acquisition of these businesses (which represent existing AUMA of c£36bn**).
· All outstanding differences between the two groups in relation to legacy matters have been settled as part of the agreements being announced today. The resolution of these legacy matters will not materially impact on Standard Life Aberdeen's 2020 financial performance and will result in Standard Life Aberdeen receiving a net cash inflow of £34m in February 2021. This represents an inflow of £54m relating to specific indemnities and a £20m outflow relating to settlement of other legacy matters.
· Other existing services and platform arrangements between the groups will gradually be terminated to simplify the strategic partnership.
Standard Life Aberdeen's beneficial shareholding in Phoenix Group remains c.14% and it retains the right to appoint a director to the Phoenix Group board. Given the strength of the partnership that is being created to focus on growth, Standard Life Aberdeen continues to view its shareholding in Phoenix Group as strategic.
Commenting on the transaction, Stephen Bird, CEO of Standard Life Aberdeen, said:
"The "Standard Life" brand has an important heritage. In the UK, it has strong recognition as a life insurance and workplace pensions brand. This is closely aligned with Phoenix's strategy and customer base. This is much less the case with the business we are building at Standard Life Aberdeen which is focused on global asset management, our market-leading platforms offerings to UK financial advisers and their customers, and our UK savings and wealth businesses. That's why I am excited about the work we are doing on our own brand, which we look forward to sharing later this year".
Andy Briggs, CEO of Phoenix Group said:
23 February 2021
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Notes to Editors
About Standard Life Aberdeen
Standard Life Aberdeen plc is a global asset management company with financial adviser platform and savings and wealth businesses in the UK. We have offices in over 50 locations worldwide and employ around 6,000 people.
Our expertise and resources enable us to offer a wide range of investment solutions and services designed to meet our clients' needs today, tomorrow and for the longer term. We manage and administer £511.8 billion of assets worldwide*.
Wherever we are in the world we strive to make a positive long-term impact. This means delivering world-class investment solutions. It also means operating ethically, encouraging good practices among companies we invest in, and providing support and expertise for the benefit of the communities in which we operate.
Standard Life Aberdeen plc is headquartered in Scotland. It has over 1 million shareholders and is listed on the London Stock Exchange.
Find out more about Standard Life Aberdeen.
* As at 30 June 2020
** As at 30 September 2020