The lender said the acquisition of the business, which has £19bn in assets under administration and about 500,000 customers, will enhance its offering at Scottish Widows – its life assurance, pensions and investment arm.
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Scottish Widows currently manages more than £124bn of funds of which £35bn is in workplace pensions.
Lloyds said in a statement that the transaction is in line with its “targeted growth strategy and accelerates the development of its financial planning and retirement business”.
The bank did not disclose the price of the deal but said it expects it to “partially close” in the first quarter of 2018, followed by the transfer of assets, subject to regulatory approval.
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Antonio Lorenzo, the director of insurance and wealth at Lloyds and chief executive of Scottish Widows, said: "Today's announcement is a clear signal of Lloyds Banking Group's commitment to the financial planning and retirement segment."
He added: “The acquisition of Zurich's UK workplace pensions and savings business complements Scottish Widows' growth to date and provides us with an ideal opportunity to accelerate our goal to become a market leader in this important sector, for advisers and customers."
Shares in Lloyds fell 0.51% to 66.18p in afternoon trading.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said the move underlines the bank's commitment to the pensions market, pouring water over long-running rumours that it is looking to sell off the Scottish Widows franchise.
"This part of the business adds some diversification to the Lloyds stable without the risks inherent in the investment banking activities practiced by its peers," Khalaf said.
"By comparison the workplace pensions business is sleepy, steady and sticky. The defined contribution market is also growing, thanks to the government’s automatic enrolment programme which is forcing employers and employees to pay money into workplace pensions."
The analyst added that a charge cap on these schemes illustrates the wider fee pressure on fund management, meaning there is "strength in numbers for the likes of Scottish Widows and Zurich".
"This is compounded by the increasing regulation faced by financial services firms. We have already seen Standard Life and Aberdeen tie up to battle these headwinds together, no doubt that deal raised an eyebrow or two across the Edinburgh streets at Scottish Widows HQ."