The big news on Friday is that Standard Life Aberdeen (SLA) has agreed to flog its life and pension business to the grandmaster of dead closed book consolidation, aka Phoenix Group. Phoenix is where customer service goes to die. It’s where life policies become lifeless, and pension plans are ‘zombified’. You might remember such names as Pearl, Abbey Life, Sun Life and Axa Wealth! But you only really know Phoenix exits when you’re banging your head against your desk trying to get a valuation from them.
With this deal, SLA is effectively getting out of life and pensions business for good. It intends to focus on the ‘capital-light’ asset management business going forward. The main company being sold is the Standard Life Assurance Limited (SLAL), which includes:
- UK Mature (c£56bn of assets), which includes with-profits, annuities, protection, pensions and investment bond business;
- Europe Mature (c£12bn of assets), which includes with-profits business and annuities in Germany, and pensions, annuities, protection and life assurance business in Ireland; and
- Legacy Workplace (c£21bn of assets), which is a mature back book of with-profits workplace pension products.
- Workplace (c£19bn of assets), which includes workplace pension products;
- Retail Growth (c£46bn of assets), which includes pensions and savings products, and income drawdown business; and
- Europe Growth (c£12bn of assets), which includes investment products and offshore bonds.
In English, that means all annuities, life and pension books, including personal, GPP, stakeholder, workplace plans. The whole lot is going off to Phoenix!
But, but the platform
The only exception is the platform and advice businesses. SLA intends to retain Wrap, Elevate, Parmenion and 1825, ostensibly to stay close to customers. However, there’s a lot of nonsense on Twittersphere as to what happens to the SIPP, Onshore and Offshore bond wrappers on the SL Wrap. So, let’s see if we can untangle the web.
- Standard Life Savings Limited (SLSL) is the provider of the Wrap Platform, Wrap ISA and Wrap Personal Portfolio. SLSL is a subsidiary of SLAL, but this is specifically carved out in the sale agreement.
- Standard Life Assurance Limited (SLAL) is the provider of the SIPP and Onshore Bond on the Wrap. This is the main legal entity being sold.
- Standard Life International, based in Dublin, is the provider of Wrap International Portfolio Bond (IPB, aka the offshore bond.) Again, all indication is that the business in Ireland and the rest of Europe is being sold with rest of its parent company.
Here’s the thing some Wrap users don’t seem to appreciate – technically speaking, your SIPP and bond wrappers on the Wrap are NOT provided or administered by the platform. They are products available on the Wrap but provided by different legal entities. This is why there is a separate ‘product administration charge’ of 0.15% (or 0.05% for Core terms) for Wrap SIPP, Onshore Bond and IPB. The product admin charge is different than the platform charge, which is charged on all assets on the platform. For instance, if you have a Wrap SIPP, you pay a separate charge (0.40%, tiered) for the platform and a separate charge (0.15%) for the SIPP wrapper.
Going by the public announcement issued by SLA, my reading is that while Onshore Bond, IPB and SIPP assets will remain on the Wrap after the deal, these wrappers will be administered by Phoenix!
“Aberdeen Standard Investments will continue to manage £110.5bn of AUM on behalf of the Disposed Businesses, while Phoenix Group will continue to provide and administer insurance products to Standard Life Aberdeen’s Retail Platforms representing £24.5bn AUA comprising largely SIPPs and offshore bonds.”
Read between the lines. It literally says Phoenix ‘will continue to provide and administer’ £25bn of assets ON the Wrap.
Do the sums. We know that there’s c£46bn of assets on SL Wrap alone. And c45% of that is in SIPPs, c8% in IPB and c1.5% in Onshore Bond. So the assets in the SIPPs, IPB and Onshore bond add up to around £25bn mentioned above.
There are two possible routes here of course;
- The SIPP and bond wrappers will be provided by Phoenix as third-party products on the Wrap. Even if the total fee remains unchanged under this arrangement, your client will pay c0.40% (tiered down) to SL Wrap for the platform and additional 0.15% product admin charge to Phoenix! The asset remains on the platform, but Phoenix is the product provider.
- SLA remains the provider of the SIPP and bond wrappers but outsources the administration to Phoenix. But since SIPP and bond wrappers are provided by Standard Life Assurance Limited, which is being sold, SLA will have to move these products to at least two separate legal entities – one onshore, to administer IPB and the other onshore, for Bond and SIPP. These entities presumably have to be a lifeco since the Onshore Bond, and IPB are life products! Wait, but didn’t we say the whole point of this deal is for SLA to get out of insurance business? Yeah. I don’t see the second route being plausible because the whole reason for this sale is for SLA to rid itself of Solvency II requirements, which applies to insurance businesses!
Either way, you will see a noticeable difference eventually, in service and terms of these products. Congrats, you’ve been phoenixed!
Of course, SLA’s PR machine is out in its glory telling platform users that nothing will change after the sale. It takes a certain level of gullibility to believe that.SLA’s PR machine is telling platform users that nothing will change after the sale. It takes a certain level of gullibility to believe that. Click To Tweet
Solvency II is wreaking havoc on UK life businesses. It’s a key driver behind Axa’s exit from the UK savings sector, the decoupling on Old Mutual and now, the end of Standard Life as we know it.
Think about this. SLAL is worth £3.2bn, about the same market cap as Phoenix. Why did SLA sell to Phoenix instead of, err… Widows?
Well, because Lloyds is keen to make a play in the platform and advice sector. It will be competing with 1825 and SL Wrap/Elevate. It’s easy to see why Lloyds isn’t too keen on one of its fiercest competitors managing its customers’ assets.
SLA is obviously desperate to get out of life business and to focus on ‘capital light’ asset management. There are headwinds in that space (read MiFID II and Vanguard), but with a £2bn war chess from this sale, SLA figures it has a better chance as an asset manager than as a lifeco.
Make no mistake about SLA’s ambition. It wants to be a ‘world-class asset manager’, with a platform and advice business bolted on. It’s going after big mandates to manage assets for insurers. It’s no longer interested in administering pensions and ISAs for Mrs Miggins.
Dropping the ‘Standard.’
Right now, both Standard Life Aberdeen (SLA) and Standard Life Assurance Limited (SLAL) have too many words in common. Something has to give after the sale. Will the SLAL be rebranded as Phoenix? Or will SLArebrand as… err… Staberdeen. Or Aberdeen.
I don’t know. But one thing is clear, one way or the other, the ‘Standard’ will drop!