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Money Management

Lloyds, Standard Life Aberdeen argue over validity of terminated £109 billion allocation

Lloyds Banking Group and its subsidiary Scottish Widows are "disappointed" by Standard Life Aberdeen's disagreement with a decision to terminate a £109 billion ($150.2 billion) allocation over competition concerns.

The money manager, the result of a merger between Standard Life and Aberdeen Asset Management last year, said in a regulatory filing Tuesday that it "does not consider that LBG, (subsidiary) Scottish Widows or their respective affiliates has the right to terminate" the allocation. Lloyds and Scottish Widows said in February that notices were sent to Standard Life Aberdeen seeking to terminate the arrangements, enabling a review to take place. Arrangements agreed at the time of the Standard Life Aberdeen merger state that any termination is subject to a 12-month notice period before it takes effect, said notices at the time.

In February, Lloyds Banking Group and Scottish Widows — a life insurance, retirement and investment business — said a review of investment management arrangements would be launched. The two gave notice to terminate investment management arrangements with Standard Life Aberdeen related to about £109 billion of wealth and retirement assets run by legacy Aberdeen entities.

An announcement at the time by Lloyds and Scottish Widows said the contracts with Aberdeen enabled the termination of arrangements "in the event that Aberdeen was subject to a change of control with a material competitor." The merger between Aberdeen and Standard Life, "which is a material competitor of Scottish Widows" and Lloyds' wealth business, was cited by the firm.

Tuesday's regulatory filing by Standard Life Aberdeen said the firm had informed Lloyds "that it does not agree that, following the merger of Aberdeen Asset Management PLC and Standard Life PLC, SLA was in material competition in the U.K. with LBG and that, therefore, SLA does not consider that LBG, Scottish Widows or their respective affiliates has the right to terminate the" allocations.

"The parties are engaging with each other within the framework of the dispute resolution process envisaged" under the contracts, said the filing.

A statement provided by a Scottish Widows spokesman said: "We note and are disappointed by the comments made by Standard Life Aberdeen, particularly in the light of our position as a major customer. Standard Life Aberdeen is a clear and material competitor of Scottish Widows and Lloyds Banking Group in the U.K. and to suggest otherwise is not credible."

The statement said that, in any event, the contract would have formally ended in March 2022.

"We are confident of our legal position and that our actions are in the best interests of our customers, and we are therefore surprised at the course of action pursued by Standard Life Aberdeen," added the statement.