“Our agreement to acquire Aegon UK significantly accelerates our vision to be the UK’s leading retirement savings and income business,” said Standard Life chief executive Andy Briggs.
“We will be in an even stronger position to meet the evolving needs of our 16 million customers with enhanced digital, advice and distribution capabilities …strengthening our standing in one of the world’s most attractive markets.”
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The enlarged group will administer £480 billion assets.
The Hague-based Aegon group will have a 15% stake in the enlarged business, which it reckons will have good growth prospects.
However, employees of Standard Life and Aegon UK will be worried about the implications for jobs. The businesses employ around 3,500 people in total in Scotland.
Standard Life highlighted the potential to achieve £110m annual cost synergies. It said a significant share of the savings will come from “rationalisation of combined group operations and head office costs”.
The deal represents the latest in a series of upheavals in the pensions sector in Scotland, which has long been a mainstay of the economy.
The Standard Life pensions operation was acquired by Phoenix group in 2018 after its previous owner decided to focus on asset management.
Phoenix saw great value in the Standard Life business and the related brand, which it adopted in March.
Standard Life chief executive Andy Briggs (Image: Standard Life)
Aegon UK developed out of the former Scottish Equitable pensions business, which its Dutch parent group acquired in 1998.
Aegon group went on to acquire the UK’s Guardian Life and Pensions.
However, in December Aegon group launched a strategic review of its UK business after deciding to focus on its ambition to become a leading life insurance and retirement business in the United States.
Group chief executive Lard Friese said Standard Life was the right owner for Aegon UK.
“The businesses are complementary and the combination offers an excellent outcome for Aegon UK’s customers and colleagues,” he said. “Aegon’s shareholding will provide an opportunity to participate in the future success of the enlarged group.”
Standard Life said the deal would create a business that ranked second in the market for the provision of workplace pension schemes in the UK, by adding the £74bn assets managed by Aegon UK to its £71bn.
It will create opportunities for Standard Life to sell products to Aegon’s 2.1m workplace scheme customers.
Standard Life noted that the transaction would also transform it from a smaller retail provider to the UK’s second largest retail pensions and savings platform by assets. It will add £86bn assets under administration and 1.8 million customers.
In addition to the £110m operating cost savings, Standard Life expects to benefit from a £340m one-off reduction in the amount of capital it needs to invest in supporting group operations following the deal.
Aegon UK has its headquarters in Edinburgh. It also has offices in London, Peterborough and Witham in Essex. It employs 2,800 people in the UK.
Standard Life has headquarters in London but a significant share of its operations are based in Edinburgh. The group employs 6,600 people in the UK.
Asked about the potential for jobs losses, a spokesperson for Standard Life said: “This acquisition is about growth and there is no fixed headcount target associated with the acquisition at this stage.
“Clearly there will be some overlap in terms of corporate and support functions but our priority as we integrate the businesses is to retain service and regulatory outcomes.”
The spokesperson added: “Any organisational changes would be managed carefully and communicated clearly … for the foreseeable future it is very much business as usual for both organisations.”
Standard Life has agreed to pay Aegon £750m cash. It will fund the balance of the £2bn acquisition cost by issuing shares to Aegon.
Phoenix acquired the Standard Life pensions business months after the original Standard Life group merged with Aberdeen Asset Management. The business created through that merger decided to focus on investment management. It went on to face ridicule after adopting the ABDN brand before being renamed Aberdeen in March last year.
Aberdeen has a 10.7% stake in Standard Life and has given its backing to the proposed acquisition of Aegon UK.
Scottish Widows’ owner Lloyds Banking Group and Royal London were reported by the FT to have shown interest in acquiring Aegon UK.
Standard Life shares closed up 2%, 15.2p, at 729p in London.