The subsidiary of financial services group Old Mutual has since signed a contract with FNZ to deliver platform and outsourcing services.
It said FNZ was a proven platform supplier and outsourcer with an existing, fully functioning UK platform service of significant scale and it has a number of major UK financial institutions as clients.
OMW said that it had suffered a string of cost overruns and delays on the project with IFDS. Last October it said that the upgrade would cost £450 million (R7.7 6billion).
But on Tuesday, the company warned that sticking with the original supplier, IFDS, would have led to greater costs. So it has terminated its contract with IFDS and has instead signed a deal with FNZ, which should put the new system into operation by late 2018 or early 2019.
It said the costs might rise slightly from the £450 million reported last year. OMW has already spent £330 million on the scheme. However, going with the FNZ deal the preliminary cost estimates are expected to be between £120 million and £160 million.
OMW chief executive Paul Feeney said: “Given the cost, effort and time already invested in the programme, we have not taken these decisions lightly. This has been a difficult journey for all stakeholders. We have made tough decisions today but we believe they are the right decisions for our customers, their advisers, our business and our shareholders.”
The new platform with FNZ is expected to provide additional functionality that was not included in the previous arrangements. Management estimate this would have cost in excess of a further £50 million and taken a further two years post migration to deliver.
OMW expects to update the shareholders later in the year about the developments.
Read also: Old Mutual continues to unbundle
Bruce Hemphill, chief executive of Old Mutual, said: “OMW continues to grow and develop its business as demonstrated by its recent strong first quarter net flows and growth in funds under management. Today’s announcement on the UK Platform Transformation programme shows decisive action and we do not expect these decisions to affect the managed separation of Old Mutual.”
Last week, the UK asset management business reported its highest ever quarter for client inflows and funds under management for the first three months to end March.
The business’s net client cash flows, excluding Old Mutual Italy and the South African branches, increased by 59 percent to £2.7 billion in the quarter to end March, up from £1.7 billion reported in the same quarter in 2016.