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ScotLife given Royal assent to strengthen IFA relationships

Scottish Life&#39s deal with Royal London, announced last week, has given us a lot to celebrate and a lot to think about.

Of course, it is not yet finalised and depends, among other things, on a vote by our members and on approval by the Court of Session, with the process likely to last until the middle of next summer.

But we are confident the proposal will go through because it represents very good value for our policyholders – to the tune of £1.1bn – as well as being very good for the future of the company.

The offer from Royal London was the most concrete of all from the potential partners we consid- ered, in terms of the value to policyholders, with no strings attached.

Royal London also gave us a clear remit to continue with our current business strategy and to further develop our relationship with the IFA sector.

This was a tremendous vote of confidence in both the company and the IFA community.

The IFA sector is being backed as a winner. To adapt Mark Twain&#39s phrase, rumours of its death have been greatly exaggerated.

A large part of the goodwill contained in the price paid for Scottish Life was justified because of our relationship with the IFA community and the potential this relationship offers.

Even in these days, when the Government and regulators sometimes seem intent on making our business more difficult, the IFA sector&#39s qualities are underpinning its survival. In the margin-driven stakeholder regime, there is still a future for the good IFA.

The idea that pensions can be planned safely with the help of a decision tree, or that small business- people can provide DIY company pensions for their employees, is patently ludicrous. In reality, these are powerful opportunities for advisers to step in and offer a welcome injection of genuine help, good sense and clarity.

All these issues have been widely discussed by Scottish Life over the past year or so, well before we began talking to Royal London. But the emergence of this deal offers us the chance to address these opportunities – and others in the marketplace – more boldly than we could have done previously.

The fact that we can now become one of the best-capitalised companies in the sector allows us to plan more ambitiously than we could ever have done on our own.

It is important to emphasise that we are not going to change beyond recognition. We will build on our existing strengths but with the capitalisation and financial muscle to progress faster on a broader front and more aggressively.

We will focus on group business – whether occupational, stakeholder or group personal pensions – as well as our DC Solutions third-party administration.

We will develop our mortgage business and grow Scottish Life International more quickly to gain even greater success.

It is early days yet but we can see the potential to broaden our product range in conjunction with Royal London, whose excellent investment track record is well worth exploiting.

We have believed in our systems, our products and our relationships with the IFA community but, over time, we came to realise that our size might hold us back. We knew that discussions about our capital strength, or perceived lack of it, were sometimes taking us off panels and raising questions about our future.

From last week, we are more committed than ever to enhancing our place in the market and our relationship with the IFA sector. The only thing that has changed is that we can afford to be more ambitious.

We are now more than happy to discuss the size and level of capital backing which gives the enlarged group £30bn under management, around £4.5bn of available assets and a with-profits free-asset ratio of more than 40 per cent, placing us among the very strongest in the industry.

We are very optimistic for the future – and that future is with the IFA sector.

l Profile, p37

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