In March 2019, an arbitration tribunal found that Lloyds was not entitled to dissolve the contract.
Throughout the dispute, the Scottish company continued to manage around £104bn ($130bn, €116.6bn) of assets under management for Lloyds’ subsidiaries.
The two firms have agreed that Standard Life Aberdeen Group will continue to manage one third of the total assets under management (AUM) – approximately £35bn – until April 2022, when the original contract expires.
The AUM are made up of £30bn in passive portfolios and £5bn in real estate funds.
The remaining two thirds will be gradually transferred to third-party managers over nine months.
Additionally, Lloyds agreed to pay £140m to Standard Life Aberdeen Group to compensate the firm for loss of profit caused by the transfer of the AUM.
Keith Skeoch, chief executive of Standard Life Aberdeen, said: “We are pleased with the settlement with Lloyds Banking Group (LGB) 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.”