Royal London plans £6bn pensions deal

ROYAL LONDON, Britain’s biggest mutual life insurer, is planning to buy £6bn of insurance policies from Lloyds Banking Group.

The insurance giant, which is owned by more than 2m customers, is reportedly among parties expected to bid for the bulk annuities division of Scottish Widows, a life insurance and pensions company owned by Lloyds.

The deal would mark Royal London’s largest acquisition and comes nearly two years after it abandoned merger talks with rival insurer LV=, formerly known as Liverpool Victoria, Sky News reported. It follows reports in November that Lloyds was exploring the sale of assets from Scottish Widows, which are worth £6bn.

Lloyds, the UK’S largest mortgage lender, has recruited advisers from investment banks Fenchurch Advisory Partners and Morgan Stanley to consult on the deal, Bloomberg reported.

A bulk annuity is an insurance policy sold to a defined benefit pension scheme that covers the liabilities of payments to future retirees.

Rising interest rates have fuelled activity in the bulk annuity market as companies rush to offload their costly pension schemes. It is expected that a sale would allow Scottish Widows, which accounts for roughly 4pc of the bulk annuity market, to focus on its other insurance offerings.

Royal London was founded in 1861 as a burial club to help working people avoid having a pauper’s funeral.

The customer-owned group has since grown to become the UK’S largest mutual life, pensions and investment business, with about 8.6m of policies and more than £153bn of assets under management.

Last year, the group bought retirement mortgage specialist Responsible Life and Responsible Lending, gaining 400,000 new customers.