Lloyds Banking Group has agreed to acquire Zurich's UK workplace pensions and savings business, which has assets under administration of more than £15bn and around 500,000 customers.
The bank said the deal would build on Scottish Widows' current offering while delivering a modern, flexible workplace savings platform and an enriched customer experience.
Scottish Widows currently manages more than £124bn of funds of which £35bn is workplace pensions business.
The deal will also see Zurich enter into a multi-year, exclusive distribution partnership to provide group life protection solutions to certain corporate clients of LBG's commercial banking services.
LBG director and Scottish Widows chief executive Antonio Lorenzo said: "The acquisition of Zurich Corporate Savings 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.
"Zurich Corporate Savings is highly regarded and has achieved good growth in assets under administration driven through strong relationships with large-scale corporate clients and their intermediaries. The greater proposition choice created through this acquisition will help us meet adviser and customer demands and ensure we continue to evolve our service proposition so that we are easy to do business with."
Zurich UK chief executive Tulsi Naidu added: "We see today's announcement as a very positive step forward for our business. We are simplifying our organisation and focusing on markets where we have strong assets and can best serve our customers and distributors. Our UK life and savings strategy is simple - to establish market leading positions in retail wealth, and retail and corporate protection, while growing our new corporate longevity and de-risking business.
"This new exclusive deal with LBG broadens our corporate protection distribution footprint. To support our other ambitious growth plans, we are also investing in a new multi-million pound retail protection platform and enhancing the range of products on our retail wealth platform."
The Zurich Corporate Savings proposition will broaden Scottish Widows' participation in the large pension scheme sector, with master trust and group self-invested personal pension (GSIPP) solutions. It will also provide a flexible investment capability to support advisers to create bespoke client investments and access assets not previously available via Scottish Widows.
As part of the transaction around 200 Zurich employees - including key management, relationship managers, technical experts and operations staff, located primarily in Cheltenham - are expected to transfer to LBG under a TUPE arrangement.
The acquisition is expected to partially close in the first quarter of 2018, with subsequent completion and transfer of assets following the required regulatory and legal approvals.