Martin Flanagan: Aegon's BlackRock tie-up way ahead in pensions shake-up

The pensions industry has not had changes to seek in recent years. We have had final salary pension schemes giving way to defined contribution, partly due to company schemes coming under financial pressure and partly due to people living longer.

Martin Flanagan
Martin Flanagan

We have had the introduction of automatic enrolment for pensions. And then came Chancellor George Osborne’s reforms allowing pensioners to cash in some money rather than just take out annuities.

But another development has been to make the whole sector of workplace pensions one that is conducive to scale and therefore ripe for consolidation.

Hence yesterday’s news that Aegon, with its strong Edinburgh presence, is to acquire wealth manager BlackRock’s UK defined contribution (DC) platform and administration business.

The deal creates a sizeable entity, involving Aegon acquiring £12 billion of assets and 350,000 customers to create a business worth £30bn. It will be able to offer DC services to schemes of all shapes and types. It will leverage Aegon UK’s digital expertise in workplace savings and ­contract-based schemes with BlackRock’s focus on trust-based and investment-only markets in its own DC platform and administration business.

Not exciting – the likes of individual savings accounts (ISAs) and Self-Invested Personal Pensions (SIPPS) seldom are. But such consolidation is likely to be attractive to employers who are seeking various solutions to their employees’ needs in a one-stop-shop.

Aegon says the workplace savings market is expected to treble over the next decade. Such a tie-up with a major name like BlackRock should position it well for the transformation.

Jam tomorrow from AAM

Aberdeen Asset Management’s (AAM) latest results – a 40 per cent slump in halftime profits – shows the three-year slide in emerging markets continues to do the fund manager no favours.

AAM has responded with efficiencies, bolt-on acquisitions and new product and client lines. But the “challenges” have gone on so long that AAM seems to be promising not jam tomorrow, but jam a year or two down the line, if things pan out. The investment case is not currently compelling.