SLA to focus on asset management and platforms whilst Phoenix takes Standard’s life and pensions business
Today’s announcement is unlikely to come as a surprise to many as news had emerged a few weeks back that big changes were imminent. However we now know that Standard Life Aberdeen (SLA) and Phoenix Group have agreed a simplification and extension of their strategic partnership which brings about major changes for both groups.
The partnership between the two was first announced back in 2018 when Phoenix paid SLA a total consideration of £3.24bn. It included a provision for Phoenix to license the Standard Life brand, while SLA would provide the aligned marketing services, in perpetuity.
According to SLA, today’s announcement “significantly simplifies the arrangements for the Standard Life brand and related marketing, and extends the strategic partnership. It said that “financial elements of the deal today are being disclosed but should be understood as part of a single commercial package, and in the context of the original transaction.”
- SLA and Phoenix’s asset management partnership will be extended to at least 2031 (original arrangement was up to 2028) – SLA currently manages c£147.bn for Phoenix
- SLA will pay Phoenix £62.5m for the purchase of the Wrap SIPP, onshore bond and TIP businesses – this represents c£36bn of AUMA
- SLA will pay Phoenix £32m in return for Phoenix bearing the cost of some colleagues, who are transferring, going forward – SLA will no longer provide marketing services to Phoenix
- Phoenix will pay SLA a net figure of £34m to settle legacy matters
Perhaps most eye-catching for investors will be the fact that Phoenix will own the Standard Life brand. The value of the Standard Life brand has not been disclosed.
According to Phoenix, the ownership of the Standard Life brand is seen as a key enabler for delivering their Workplace and Customer Savings and Investments (“CS&I”) growth strategies at pace. The relevant marketing, distribution and data team members will transfer from SLA to Phoenix ensuring that Phoenix has full discretion over marketing and communications. This will support the delivery of a more cohesive experience for customers, clients and their advisers. The group reports that by investing in the Standard Life brand, Phoenix will accelerate the delivery of a broader set of product and service propositions and be better positioned to take advantage of opportunities arising through the shifting landscape of the long-term savings and retirement market. Phoenix will continue to partner with SLA to design and provide investment solutions for its customers.
SLA has initiated a branding review, the outcome of which will be announced later this year. It will include all client facing businesses and the publicly listed company.
Commenting on the transaction, Stephen Bird, CEO of Standard Life Aberdeen, said:
“The most successful partnerships in business tend to be formed on clear and simple terms. What we are announcing today is an agreement that simplifies the relationships between Standard Life Aberdeen and our strategic partner Phoenix Group in a way that will allow us to work together constructively as partners for at least the next ten years. Both businesses will be able to play to their respective strengths in the partnership.
“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:
“I’m delighted with today’s announcement and the extension of our strategic asset management partnership with Standard Life Aberdeen until at least 2031. This recognises the global expertise and excellent service that Aberdeen Standard Investments delivers to Phoenix Group and our customers as our preferred asset management partner. The simplification of the Standard Life brand, sales and marketing will be a key enabler of Phoenix’s growth strategy, which in turn should lead to greater asset flows to ASI.”
Details of the transaction are as follows:
- 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.