Jobs go in £1.8bn takeover by Abbey

Abbey National beat two other bidders for Scottish Provident

Abbey National says it is to cut hundreds of jobs after paying £1.8bn to take over insurance company Scottish Provident.

Members of Scottish Provident are to receive a windfall payment of up to £6,000 each through the deal, which will create a merged group employing 4,000 people in Scotland.

Abbey National has said the move will lead to job cuts over the next two years as the combined group implements rationalisation measures prompted by the merger.

But while the bank on Thursday morning told BBC News Online that "some compulsory redundancies" would be needed in addition to staff lost through normal turnover, Scottish Provident this afternoon said the institutions were "hopeful" that forced lay-offs could be avoided.

Policyholders will be offered windfall payments

About 10-15% of Abbey National staff leave every year, and the bank has said it will be able to redeploy workers around the group.

Unions had feared that 500 jobs would go following the deal, which will create a group managing £30bn of funds, and ranked as the UK's largest supplier of life protection plans.

Offices are also likely to be merged, with the bank saying the similar geographical spread of Abbey National and Scottish Provident operations offered the chance to make "substantial cost synergies with minimal disruption".

David Woods, group managing director of Scottish Provident, said the firm's Edinburgh headquarters would remain as an important office even after merger with Abbey National's Glasgow-based operations.

He said the deal would create jobs in the long term. Abbey National had doubled to 2,000 the number of jobs in its life division since 1992.

Members' approval

"This is about job creation, not job destruction," he told BBC News Online. "I think the problem in the future is more likely to be about whether we can find appropriate staff."

The deal, while set to complete next summer, depends on members voting the proposals through at a meeting early next year.

Members qualifying for full windfalls will receive £4,500 on completion of the deal, with a further £1,500 paid in bonuses throughout the life of their policies, Mr Woods said.

The 50% of members classified as non-profits policyholders will receive a single payment of £500.

Completion of the deal ends a five-month auction for Scottish Provident, one of the largest remaining mutual institutions, with Royal London and Liverpool & Victoria also bidding to take it over.

'Diversifying'

Analysts had originally valued Scottish Provident at about £1.4bn. Abbey National's chief executive, Ian Harley, has described the deal as "compelling".

"The transaction delivers on our stated strategy of significantly diversifying our business," he said. "It will substantially increase the proportion of the group's business in the high growth life and long-term savings sector."

The bank is attempting to diversify from its traditional mortgage and savings business, and aims to achieve 65% of profits from other activities.

Scottish Life

In a separate development, Edinburgh-based pensions specialist Scottish Life confirmed that it was reviewing its mutual status.

The Financial Times said the investment bank, Morgan Stanley Dean Witter, had been advising Scottish Life on possible demutualisation.

However, a spokesman said it was not uncommon for the mutual to carry out a regular review and it was under no pressure to change.

It was thought a sale could trigger windfall payments of up to £2,000 per policyholder.

Such a move by Scottish Life would leave Standard Life as the last Scottish mutual.