19 Mar 2019
Standard Life Aberdeen wins Lloyds mandate dispute
Standard Life Aberdeen (SLA) has won the legal battle against Lloyds, stopping them from cancelling a £100 billion investment management contract early. This could cost Lloyds bank hundreds of millions of pounds in extra fees.
Lloyds had argued that the £11 billion merger of Standard Life and Aberdeen Asset Management, to form SLA in 2017 allowed for them to end Aberdeen’s 2014 contract to manage a large proportion of its pension assets, because it considered Standard Life as their competition.
After a lengthy arbitration process, a tribunal ruled that Lloyds Banking Group did not have the right to terminate the £100 billion fund management contract.
Winning the case means that Lloyds will have to pay some, or all of the £390 million the asset manager would have earned under the terms of the contract, which is set to expire in March 2022, even if they continue to transfer assets to BlackRock and Schroders.
Edward Firth, analyst at KBW Chambers, said:
“The ruling does not allow any right of appeal. We would expect Lloyds to have to pay compensation. This is likely to be in the order of around £300 million.”
A spokesman for Lloyds-owned insurer, Scottish Widows, commented on how they were “disappointed” with the result, however, they would be pressing ahead with their plans to transfer assets to BlackRock and Schroders. He added:
“We will continue to work closely with Standard Life Aberdeen to ensure there is no disruption to performance or service.”
In October 2018, Lloyds gave BlackRock a contract to manage £30 billion in assets, one of the biggest investment contracts in Europe last year, which would be invested using the company’s index strategies.
Lloyds has remarked that the deal will begin after the arbitration process or when the current contract expires.