Lloyds Banking Group has agreed to pay £140m to Standard Life Aberdeen (SLA) in order to resolve the issue of terminating a £109bn fund management contract.

The bank decided to scrap the mandate managed for subsidiary Scottish Widows, citing competition concerns.

The decision was said to be the result of the merger between Standard Life and Aberdeen.

Under the settlement, SLA will retain management of a third of assets worth nearly £35bn till at least April 2022. These assets comprise passive and real estate portfolios.

Third-party managers will oversea the remaining two-thirds of the assets.

Earlier, Lloyds split the management of the assets between BlackRock and Schroders.

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The settlement comes after a tribunal ruling that favoured SLA and conceded that Lloyds was not entitled to end the arrangements.

The settlement money is aimed at compensating SLA for loss of profit due to the transferring AUM.

SLA CEO Keith Skeoch said: “We are pleased with the settlement with LBG and believe that it represents a fair and positive outcome for both parties.

“We look forward to building on our relationship with LBG and continuing to deliver positive outcomes for their customers.

“The retention of assets in our passive strategies as well as active real estate portfolios positions us to benefit from scale and growth in these growing parts of the asset management industry.