It seems somehow fitting that Standard Life is now owned by Phoenix Group, given the regenerative powers of the mythical bird.
Standard Life is one of the oldest and most established names in the pensions market. But in recent years it has been looking to rebuild its reputation after a period of uncertainty that included its short-lived and fairly unsuccessful merger with the investment house Aberdeen in 2017 and its subsequent acquisition by Phoenix Group — an insurer best known at the time for running closed life insurance funds.
Now Standard, and its parent Phoenix, are on the front foot, with a strategy designed to reset the business with a number of strategic initiatives and senior hires from competitors, notably Aviva – with Andy Curran and Colin Williams both rejoining Phoenix CEO Andy Briggs – and new ideas for shaping retirement saving.
Standard Life’s workplace managing director Gail Izat has been with the organisation for over a decade, joining the workplace pensions business in 2019 after a stint in Frankfurt leading the provider’s German and Austrian operations.
Izat says the pensions business has faced a number of challenges in recent years, with flat growth and confusion in the market around its brand. This was not helped by the fact that after Standard Life Assurance was bought by Phoenix, Standard Life Aberdeen continued to use the Standard Life name for a further 18 months. It’s also had a default fund investment strategy that has erred on the side of diversification and missed out on strong investment returns.
But Izat is upbeat about Standard Life’s future prospects, and says Phoenix’s investment in the company is helping to give it a new lease of life. And she says it is the workplace business that is at the heart of its revived fortunes.
“The acquisition by Phoenix was transformational for Standard Life’s workplace business. I think under SLA this part of the business struggled to get the investment that it needed, so we had fallen slightly behind in terms of our proposition.
“At that point we had a strategy that focused primarily on just retaining and looking after existing clients, rather than an ambitious growth strategy.”
In contrast she says Phoenix has invested new money into the business, buying the Standard Life brand last year.
“Standard Life is an iconic and historic brand, so it’s important for us to have ownership of that so we can continue to invest in it. We still have a good relationship with Abrdn, but it is somewhat more straightforward now, and they are one of the investment houses we use.”
The decision to buy Standard Life Assurance also transformed Phoenix’s business model. Rather than being primarily a manager of closed funds, it is now the UK’s largest retirement savings company, with £310bn of assets and 13m customers. Last year the group’s open division, which includes Standard Life, moved into a positive cash flow position for the first time, with income from its workplace business and bulk annuity divisions offsetting the run-off that from its heritage business. This prompted The Times to run the headline ‘The zombies are no longer setting pace at Phoenix’.
Izat says that Phoenix sees Standard’s workplace division as being firmly in the driving seat and key to its future growth strategy. “This is how it attracts new customers and builds commercial relationships.”
Growth is starting to return she says. In 2020 for example it won just one new scheme. Last year (2021) it added 40 new schemes to its books.
Buying back the brand is only part of the investment that Phoenix has made in Standard Life. Izat says the strategy has been to focus on three areas of the workplace business: member engagement, use of data and digital innovation, and financial wellness. But to be successful all of these have to be underpinned by the right investment solutions.
One area Standard Life has been keen to address is its under-performing default funds. According to the latest data from Corporate Adviser’s master trust report the giant Active Plus III Universal SLP was the worst-performing fund in the growth phase over the past five years. The provider is now in the midst of transitioning all members, not just new business, to a new arrangement – the Sustainable Multi Asset (SMA) default solution. The transition process is already underway with £1bn transferred by March and the bulk of assets to be shifted between May and August, with the process being completed in the second half of 2022.
Izat says: “Being part of Phoenix has enables us to look at some different investment solutions. So we launched Sustainable Multi Asset last year and that is our default for new business. It is more ESG focused, with a clear target of a 50 per cent reduction in carbon emissions, and we screen out certain sectors, such as controversial weapons, tobacco products, thermal coal and unconventional oil and gas. Alongside this we try to drive positive change through increased stewardship and investment into companies that are helping the transition to a lower carbon economy.
“But it’s also designed to deliver member outcomes with increased equity exposure.”
She points out that the fund has performed well – albeit over a relatively short time frame – with a 15 per cent return in 2021. Simulated backdated performance suggests better longer term results that the current default, she says.
“We’ve moved the master trust already, so that was around £1bn in assets and around 85,000 customers. By the end of the year we will have moved 1.5m customers and about £15bn of assets.”
She points out that Standard Life has offered a master trust for 40 years now, “longer than most people in the industry” — and this is likely to be a key growth area, as value-for-money regulations and increased ESG requirements sees many smaller single employer trusts consolidate into larger pension vehicles.
Izat describes the company as having a “relentless focus” on data analytics. “We use a segmentation model that enables us to look at customer’s life stage and their level of wealth. We’ve developed a digital client analytics platform that lets us share this information with clients and advisers so that we can develop communication and engagement strategies together.”
Standard Life has also invested in a new mobile app — part of this “digital first” communication strategy. Izat points out that this is “fully transactional”, using the latest fingerprint and face ID and enabling members to view current statements and projections, change investments and update beneficiaries.
Izat says that one of the key concepts they are trying to build into their products and services is the idea of ‘financial wellness’. “This term is well know in the US, but less common among consumers in the UK. We define it as being in a state where members feel secure and in control of their finances.”
In order to achieve this, Izat says it is important that engagement and communication strategies have a wider focus than pensions and retirement savings. “What’s stopping people being in control of their finances? People are often trying to balance short-term and longer-term goals and don’t know where to start. Jargon can hinder the process and decisions can seem difficult and frightening.”
To help improve wider financial wellbeing Standard Life has partnered with fintech company Moneyhub to develop an Open Finance solution, Money Mindset, that allows members to view their whole financial footprint in one place. “People can pull in other pensions, their mortgage, their savings, their insurance and their credit card. There are budgeting tools and nudges. We are hoping this will help build both financial confidence and competence about shorter term money management which will help with decision making around longer-term savings and pensions.”
This focus on wider savings, has also seen Standard Life launch a ‘homebuyer hub’ giving guidance, tools, calculators and articles aimed at members looking for help on buying their first home. “We’re finding it is really popular. One of the most downloaded articles there is about the Bank of Mum & Dad.”
Moneyhub isn’t the only fintech Standard Life has partnered with lately. It’s also recently partnered with Cushon to provide a range of workplace savings, including an Lifetime Isa, Junior Isa and GIA.
Izat says: “We’re effectively partnering with these fintechs to accelerate our growth strategy. It lets us go faster. That was really important to me coming into this business, that we could move fast and develop new solutions for members. But it also lets us offer best of breed solutions. Partnering with smaller, more agile firms has been really helpful for us.”
She says this is part of the company’s ethos: bringing outside thinking in-house. Izat herself is a prime example of this. In 2019 she took up the role of workplace pensions director, leading the customer relationship managers, business development managers and the pitch and RFI teams, having previously been CEO of Standard Life’s German and Austrian division. She is now in charge of the whole Workplace Business Unit.
But unlike many senior industry figures, Izat only joined Standard Life in 2010, her first role within the financial services sector. Prior to this she had worked across a number of industries, including oil and gas, manufacturing and telecoms.
What does this wider experience offer? She says: “It’s important to bring that outside thinking into the pensions industry. Whether it is how to engage customers or looking at B2B relationships, there are lessons we can learn from outside pensions.
“If you’ve not worked in an industry for life, and don’t see yourself as the ‘expert’ then it forces you to focus on your leadership and building a team. You’re not tempted to think you know best and get stuck in a particular set way of doing things.
“Having experience of say the German pension system, and other industries allows me to join the dots and think more strategically. It’s been a real strength to come in with a fresh mindset, particularly as the workplace business unit hadn’t been the leading engine under SLA. I wasn’t connected to any of that, so I was able to draw a line under it and forge forward with a new growth strategy.”
One area where it is clear Izat wants to develop the proposition is around at-retirement products and services. Izat says the company is trying to influence the government and regulators to do more around this issue. “While we are proud of what we offer at the moment — which includes the investment pathways, pre-retirement communication, access to guidance, webinars and retirement planning tools — we need to do more as an industry. This is a priority for us.”
She says she’s like to see “much more done under the banner of guidance” to help these savers, but points out that under current regulations this is difficult. “There’s not much you can do without straying into regulated advice. This does put a lot of providers off.”
Phoenix has recently undertaken work with the Social Market Foundation, and one of the recommendations from this research was that the FCA should provide clearer information on its definitions of guidance and advice, she says.
Izat says it is important to look at more than just pensions. This, she says, goes back to the concept of financial wellness and taking a more holistic approach to people’s finances. One key area is to also include housing wealth. As she points out there is about £5 trillion in housing wealth in the UK, and around 67 per cent of this is held by the over the 50s.
Under the group’s product suite of retirement solutions, Phoenix does offer equity release mortgages. “There is room to look at how we might use this wealth to bridge the gap in retirement savings.”
As she points out Standard Life has expertise and experience when it comes to issues like longevity. “We’re definitely looking at whether we can use that in terms of how we develop propositions in retirement. This will be a strategic focus for us going forward.”
Outside of these future product developments Izat says one of her main priorities has been to persuade employee benefit consultants and advisers that Standard Life is now back in business in the workplace market. She says the firm remains committed to playing “in all segments of the market”, from large corporates to SMEs.
“We have gone from a position where we weren’t doing new business at all, to stating we want to grow dramatically. It was perhaps understandable that consultants were a bit sceptical to start with, but I think we are making strong progress in rebuilding those relationships.
“We are starting to see a lot of positive feedback, particularly in the corporate adviser market. Advisers and consultants want to see more competition in the workplace market. I think they are glad to see Standard Life is back.