Lloyds Banking Group - Scottish Widows ACS

Case Studies

LBG - Scottish Widows

Innovative UK ACS Solution

Knadel helped Scottish Widows to launch the first property ACS of its kind in the UK, effectively a brand new fund structure within the European funds arena. The ACS pooled the direct property holdings of seven existing Life or Pension funds.  

Lloyds Banking Group has been a long-standing client of Knadel.  Since 2009, we have worked on over 20 projects and programmes for the organisation including: target operating model design & implementation; strategic supplier selection and contracts; M&A advice, model and contracts (sale of SWIP); product development and client strategy; outsource resilience; stock lending strategy and an ACD transfer. Starting with the insurance division of Lloyds Banking Group, we have built a reputation as an experienced trusted advisor and have been asked to undertake assignments across multiple areas of the bank.

The objective for Scottish Widows in creating this innovative ACS was to secure and offer the best possible returns and outcomes for the customer.

Business Challenge

As with many leading financial providers, Scottish Widows faced a situation where several Life or Pensions funds were in decline as mature books of business.  This was a direct result of policyholders cashing out their policies - maturities, retirements, deaths etc.  As a consequence they faced a number of problems:

  • Funds were in danger of becoming too small to provide adequately diversified holdings - potentially increasing cost and volatility of return;
  • There was a significant likelihood that funds would need to repeatedly sell larger properties and buy smaller alternatives incurring significant transaction costs;
  • Liquidity management becomes more challenging the smaller a fund becomes.

Scottish Widows recognised that these factors could have a damaging effect on the returns available to customers and with this mind embarked on a programme to address the problem by pooling funds and creating an ACS. This created a structure that is more open to the investment needs of future customers and also acts to the benefit of the current investors.   As a result the ACS fund manager has been able to increase returns by reshaping the portfolio to take advantage of opportunities that he would have had to pass up if he was managing multiple small portfolios. 

Knadel Value

As a highly regarded trusted advisor, Scottish Widows asked Knadel for recommendations and guidance to help devise and set up the ACS, and crucially to ensure an appropriate functional operating model.  Knadel brought a unique combination of fund knowledge and extensive operating model experience.

Our role was central to this complex process, engaging with the business, lawyers, HMRC and administrators to try and simplify the process and ensure it was clear and made sense for all stakeholders.  For one of the key components, Knadel was asked to step in and work with the legal team to bring a pragmatic resolution to the complicated tax elements of the fund - together our approach offered a better, faster and cheaper alternative to the existing tax advisory firm that had been advising Scottish Widows.


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Throughout this challenging programme, Knadel provided pivotal and invaluable advice. Their staff demonstrated a can do attitude and were seen as extension of the Scottish Widows team. Knadel brought a pragmatic approach to the project and assisted in launching the first ACS of its kind. As a result of this innovative work, Scottish Widows have been able to provide improved returns and reduce risk for its current and future customers.

Iain McGowan

Head of Fund Development, Reporting and Analysis, Lloyds Banking Group