Management of Scottish Widows customers' assets following the merger of Aberdeen and Standard Life

Scottish Widows and Lloyds Banking Group's Wealth businesses have decided to review their asset management arrangements and have therefore given notice to Standard Life Aberdeen plc (“Standard Life Aberdeen”) to terminate their partnership agreements with Aberdeen Asset Management plc ("Aberdeen").

Scottish Widows and Wealth entered into the partnership with Aberdeen following the sale of Scottish Widows Investment Partnership in 2014. This included long-term contracts for the management by Aberdeen of over £100bn of assets on behalf of Scottish Widows and Wealth.

These contracts enabled Scottish Widows and Wealth to terminate the contracts in the event that Aberdeen was subject to a change of control with a material competitor. Aberdeen recently completed a merger with Standard Life plc, which is a material competitor of Scottish Widows and also of Wealth. At the time, Scottish Widows and Wealth agreed to delay a decision regarding the exercise of their termination rights for a period of six months following completion of the merger, during which period the parties agreed to discuss in good faith ways to build a successful relationship and address the competition issue.

As no agreement has been reached, Scottish Widows and Wealth have decided to terminate their partnership agreements with Standard Life Aberdeen and to review their long-term asset management arrangements. Scottish Widows offers a broad fund range. This includes funds where we control the mandate, as well as offering access to external funds offered by third parties.

The majority of assets, including our pension default portfolios, are held in multi-asset portfolios mandated by Scottish Widows. Here we have full responsibility for the portfolios including their strategic asset allocation and selection of component funds for each of the asset classes.

In most cases, we outsource stock selection within these component funds to Aberdeen. We ensure that both the portfolios and component funds are being managed in line with their mandates and in each case, monitor their investment performance.

Control of the mandates and the underlying funds will remain with us. This ensures that we continue to invest in line with our commitment to customers. Similarly, there is no change in the ownership of assets, which also remain with Scottish Widows and Wealth.

There are no immediate changes for customers. Following completion of the review, Scottish Widows and Wealth anticipate implementing the new arrangements by the end of H1 2019. Scottish Widows and Wealth will work with Standard Life Aberdeen to ensure no disruption to performance or service in the interim.

Questions and Answers

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Why are you changing your asset management partner? Are you unhappy with Aberdeen's performance or service? Do you think performance and service will decline as a result of this? How quickly will you make these changes?
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February 2018

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Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655.

Scottish Widows Unit Trust Managers Limited. Registered in England and Wales No. 1629925. Registered Office in the United Kingdom at Charlton Place, Andover, Hampshire SP10 1RE. Tel: 0345 300 2244. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 122129.

HBOS Investment Fund Managers Limited, registered in England number 941082. Registered office in the United Kingdom at Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 119223.

Scottish Widows Bank is a trading name of Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales, no. 2065. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 119278.

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