Lloyds to pay Standard Life Aberdeen £140m over Scottish Widows feud

An arbitration tribunal said the bank must now pay up after cancelling a deal early which it had with SLA’s predecessor company Aberdeen Asset Management.

The dispute dated back to February 2018 when Lloyds declared that a major account managed for subsidiary Scottish Widows by Aberdeen Asset Management should be pulled.

Aberdeen Asset Management bought an eight-year contract to manage assets for Scottish Widows in 2014 for £550 million.

However, after Aberdeen merged with Standard Life to create Standard Life Aberdeen last year, Widows’ parent Lloyds pushed Standard Life Aberdeen off the funds as it then viewed the arrangement as a conflict of interest for SLA because Aberdeen had, in effect, become its competitor.

Global investment manager Schroders then emerged as the suitor set to take control of the contested £109 billion Scottish Widows investment mandate.

However, in March a tribunal ruled that Lloyds did not have the right to cancel the £109bn investment management deal with SLA.

Moreover, the ruling did not give Lloyds the right to appeal.

Now a detailed settlement published yesterday orders that a third of the funds - recently valued at £35bn - will be retained by Standard Life Aberdeen at least until April 2022.

Those are the passive funds, which are less valuable in terms of fees paid, as well as £5bn in real estate assets.

The company said it would still work with BlackRock, which had won the mandates to manage Scottish Widows funds, subject to the arbitration decision.

Two-thirds of the funds will still transfer to Schroeder Wealth, a joint venture between Schroeder and Lloyds.

The £140m payment is in lieu of the loss of profits to Standard Life Aberdeen as a result of two-thirds of the funds being withdrawn.

Keith Skeoch, chief executive of Standard Life Aberdeen, said the settlement “represents a fair and positive outcome for both parties”.

He added: “We look forward to building on our relationship with Lloyds Banking Group and continuing to deliver positive outcomes for their customers.

“The retention of assets in our passive strategies [tracker funds] as well as active real estate portfolios positions us to benefit from scale and growth in these growing parts of the asset management industry.”

A Scottish Widows spokeswoman said: “We are pleased to have been able to reach agreement with Standard Life Aberdeen.

“We will continue to work closely with SLA to ensure there is no disruption to performance or service as we begin the process of an orderly transfer of assets to our new partners.

“There will be no immediate changes for our customers and we’ll keep them updated throughout this process.”