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Lloyds Banking Group is planning to move £6bn of workplace retirement savings from Willis Towers Watson to Scottish Widows, as the bank’s in-house pension provider carries out a major overhaul of its offerings.
The bank has written to more than 100,000 of its pension scheme members to tell them about the changes. The consultation closes in August and the switch is expected to complete in the second quarter of next year.
The move would more than double the assets in Scottish Widows’ “master trust scheme”, a pooled arrangement where a pension provider manages money on behalf of multiple companies. The master trust differs from contract-based workplace schemes, which are agreements between the pension provider and each employee.
It comes as Scottish Widows prepares for a major revamp of its defined contribution pension offerings, including a new digital portal and investment approach that will sharply reduce exposure to UK equities and boost US stock allocations.
Scottish Widows manages £165bn of pensions on behalf of customers. Of this, more than £100bn is in contract-based workplace schemes. Its multi-employer master trust manages £3.7bn. Lloyds said transferring its staff’s defined contribution pension to its own scheme would bring it in line with peers such as Aviva, Standard Life and Legal and General, which also provide in-house pension services to employees.
Lloyds said: “In line with industry trends, we are proposing a shift to our own pensions product, which offers a market-leading digital interface and greater financial flexibility for our people.”
Scottish Widows is the UK’s second-largest pension provider. Its balanced portfolio for savers five years from retirement delivered annualised returns of 4 per cent over the past five years — compared with a 5 per cent average in that category across 24 master trusts ranked by Corporate Adviser earlier this year.
The 210-year-old firm is about to make some major asset allocation changes to the £72bn of workplace pension assets in its default funds — with the aim of “enhancing risk-adjusted returns by capturing more growth opportunities in high-performing international markets”, according to a document explaining the changes to clients.
It is planning to cut allocations to UK equities in its highest growth portfolio from 12 to 3 per cent, the Financial Times has previously reported. For its lowest risk default portfolio, the allocation will reduce from 4 to 1 per cent.
The highest risk portfolio will have its North American equity exposure increased from 46 to 65 per cent by January under the current plans, which could change, while the lower risk portfolio will go from 17 to 25 per cent.
The planned changes come after Scottish Widows last month refused to sign a pledge by 17 pension providers to invest at least 5 per cent of their default funds in UK private market assets by 2030. It was the only big UK pension fund manager not to do so.