There are few examples, since the demise of Equitable Life, quite so ignominious, as the end to Standard Life.
Standard Life Assurance Limited is being sold to Phoenix Life for just £3.2bn , part of which will be paid to Standard Aberdeen in shares of Phoenix Life. It can be argued that the cross share-holding will mean that Standard Aberdeen still has an alignment of interest in the success of the new venture and some residual interests in the fate of its policy holders. But in practice, it is selling off its life insurance business and with it, its responsibility for the retirement outcomes of its workplace savings business.
“Good to go”
In hindsight, calling the workplace pensions product “good to go” was prophetic, it is indeed going and to what extent employers with Standard Life workplace pensions will find these good to go, we have yet to find out.
A few years ago , Standard Life was the default provider of workplace pensions. They achieved this by aggressive pricing (the most attractive propositions – such as the GPP they offered staff at Logica – had an all in price of 0.10%). This was backed up by a well-acclaimed investment proposition – fronted by the GARS fund and the outstanding reputation of Standard Life as a consumer brand. Standard Life were IFA friendly, offering attractive commissions on new business prior to the implementation of the Retail Distribution Review.
But since RDR and the introduction of auto-enrolment, Standard Life haves been supplanted first by Legal and General, who undercut them and out-marketed them to pick up most of the attractive AE business, in 2013 and 2014, and latterly by low-cost, high-impact master trusts who have hovered up the majority of the smaller businesses entering workplace pensions from 2015.
The disastrous performance of GARS over the past few years has not helped, but what has really hurt Standard Life was its failure to come up with a compelling proposition at a reasonable price . “Good to Go” may have been attractively named , but it was too expensive and inflexible for a market that wanted its functionality for free and saw little to admire about an investment proposition that was not delivering.
Along with NOW pensions, Standard Life is the great casualty of Auto-Enrolment. Had Standard Life Assurance, got it right (as L&G and B&CE did) , then its workplace pension would not have been “Phoenixed” and might have actually made the whole Standard Life proposition, a bit more attractive to Standard Life Aberdeen.
It’s Aberdeen with a big A and Standard with a small s
I must stop calling Standard Life Aberdeen that – undoubtedly, the total loss of the life business, including its live “workplace business” makes Aberdeen the predominate partner. Aberdeen has stripped Standard Life of its investment and platform business assets and spat out the pips on Phoenix.
Whether selling off the rival business to Scottish Widows, will be enough to attract back the £109bn of LBG assets, I very much doubt. The word on the street is that the money is in Aberdeen’s cul-de-sac and the only way for it is “out”.
The only winner in Aberdeen Standard is Martin Gilbert, who has now a firm grip on a diminished business. It’s a case of 1+1 = 1.5% – but that’s 50% more than Gilbert had before.
Where now for Standard workplace pensioners?
So where does this leave employers and policyholders with Standard Life “Good to Go” workplace pensions?
We’ve had a few statements from Phoenix, suggesting that there will be continuity of brand under some white-labelling arrangement. Corporate Adviser has been told
Standard Life, which had in recent years been the largest workplace pensions provider in the UK, will continue to market and distribute the workplace pensions, which will retain the Standard brand name, on a white-label basis, while the back office administration and ownership of the schemes will transfer to Phoenix.
But this doesn’t sound very core to Phoenix’s business model, which is essentially the management of closed books of business. Having spent some time working in a non-core area of British and American Financial Services , I do not envy those running “Good to go”, you will find the business cases you put forward for new investment , a lot more difficult.
Policyholders should be right to be worried. They are paying a premium price for a premium service. Finding that service owned by a “Zombie-insurer” will not go down well with many.
Governance – a fish out of water?
Much will depend on Phoenix’s attitude to governance. The Standard Life Governance Committee under Rene Poisson is now looking a fish out of water. I have consistently rated Phoenix’s IGC and hope that whatever merged IGC comes out of it, it combines the best of both. If the IGC is dumbed down, the proposition will surely follow.
Standard Life also own a number of master trusts, including one that is used for workplace pensions. It will be interesting to see what changes occur on the boards of these.
And finally, the teams at Standard Life will be reunited with the teams at Elevate, who manage a number of insured investment only propositions – including that of Lloyds Banking Group’s own staff pension scheme. There are considerable savings that might be made by using the Elevate platform at the investment platform of Good to Go and the Mastertrust
But are these cost savings to benefit the shareholders of Phoenix or the policyholders and members of the Standard Life workplace propositions? Strong Independent Governance will be needed to ensure that a balance of interests is maintained.
For more information…
New Model Adviser has produced a really effective slide show on the wider implications of the phoenicisation of Standard Life. Access it via this link