THE pensions giant that is buying the Standard Life brand has underlined its belief in the name’s value amid expectations the market will grow strongly in coming years as it posted strong growth in profits.
Phoenix Group agreed last month to buy the historic brand from Edinburgh-based Standard Life Aberdeen, which has decided to focus on investment management.
The deal, which will end a near 200-year association with the brand on the part of Standard Life Aberdeen and forebears, reflects the vendor’s belief that there are better prospects in the investment business than in pensions.
The group sold its pensions operation to Phoenix for £3.2 billion in 2018 a year after it was formed through the merger of Standard Life and Aberdeen Asset Management. However, it retained the Standard Life brand.
New chief executive Stephen Bird said last month that Standard Life Aberdeen had decided to adopt a new brand that will support its focus on global investment management. It will be revealed this year.
However, Phoenix said yesterday that the purchase of the Standard Life brand will give it greater freedom to pursue growth opportunities in the long-term savings market in the UK.
Phoenix made its name as a consolidator of closed pensions businesses, which have stopped taking on new customers. It is increasingly confident there are good returns to be made in the open market, which it serves through Standard Life. The Standard Life operation employs 2,800 people in Edinburgh.
Phoenix chief executive, Andy Briggs, said the brand acquisition would be a key enabler for accelerating the group’s Open business growth strategy and helping it to win cash-generative business.
Demand for savings products is increasing as people are being required to take greater responsibility for saving for retirement. Many employers have stopped operating schemes that provide pensions based on employees’ final salaries in favour of making defined contributions into schemes that pass the associated investment risk on to members.The Government helped increase the size of the market by introducing the requirement that employers automatically enrol staff into pension schemes.
Mr Briggs noted: “People’s needs are changing as they move through the stages of the life savings cycle. We are seeing strong growth in the workplace market, driven by auto-enrolment, an ageing population and a move from defined benefit to defined contribution pension schemes. We also know that as individuals prepare for retirement and move into the decumulation stage of the savings life cycle, they are increasingly seeking guidance.”
He added: “We are focused on engaging our c.14 million customers to better understand their savings needs and provide innovative solutions as they journey to and through retirement. We estimate annual flows of about £30 billion per annum into products supporting this stage of the life savings cycle.”
The customer base includes members of schemes that are closed to new members.
Phoenix Group grew operating profit to £1.2 billion in 2020, from £0.8bn in the preceding year helped by the £3.2bn acquisition of Reassure, a closed pension book specialist, from Swiss Re.
Phoenix has headquarters in London. It also has a big operations centre in Birmingham.The group has around £338 billion of assets under administration.
Under the deal struck last month, Standard Life Aberdeen agreed to sell the Standard Life Brand to Phoenix during the current year.
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Phoenix extended the term of the agreement under which Standard Life Aberdeen manages around £147bn funds by two and a half years, to 2031. Standard Life Aberdeen will pay £115m to Phoenix. It will take control of Wrap businesses that provide services in areas such as self-invested personal pension plans (SIPPS).
Standard Life Aberdeen has a 14% stake in Phoenix, which increased its annual dividend to 47.5p per share for 2020 from 46.8p.
Standard Life Aberdeen will announce its results for 2020 today.
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