Blow to Standard Life sales from safe-haven fund U-turn

Published on Thursday 30 April 2009 21:42

STANDARD Life was yesterday forced to admit that its £100 million U-turn over a "safe-haven" pension fund had badly hit its sales at the beginning of this year.

Unveiling a 27 per cent drop in UK life and pensions sales in the three months to the end of March, Standard Life conceeded that the row over its Pension Sterling Fund had "significantly" hit business.

However, the Edinburgh-based group said that after it bowed to pressure to compensate nearly 100,000 investors early this year, sales of its products had picked up again.

According to yesterday's figures, excluding "lower margin" bulk investment bond deals, UK life and pension sales for the quarter were down 17 per cent. Worldwide life and pension sales fell 20 per cent to 3.6bn.

However, the impact of the dispute over the "save-haven" fund was still being felt by the former mutual yesterday.

Standard Life was forced to do a U-turn when policyholders and independent financial advisers put intense pressure on the group after it cut 4.8 per cent from the value of the fund. Despite being marketed as a cash safe haven, it was partly exposed to mortgage-backed securities.

After five weeks of "research" Standard Life agreed to compensate the 97,000 investors with a 102 million cash injection.

Yesterday Standard Life admitted that the revaluation, announced in February, caused a fall in businessat the start of the year. "This led to significantly reduced sales level until mid-February when we injected 102m into the fund," it said in its first-quarter sales update.

Finance director David Nish said that in the lead-up to injecting the cash there was a period "where many distributors were saying 'we'll wait and see what your decision is'", before giving it further business. It was unclear how much business was lost as a result of the incident, he said.

Sales picked up quickly following the announcement and the run rate of product sales in March and April was now "well ahead" of the rate in the weeks leading up to its cash injection.

Standard Life became the third major life and pensions firm to report lower sales this week. Aviva, Britain's largest insurer, and Friends Provident have also revealed falling first-quarter sales. Nish said the fall at Standard Life was almost entirely down to a fall in underlying asset values, cutting the value of customers' policies being transferred to its books.

Overseas, Standard Life's businesses in Germany and Ireland both reported falling sales, while Canada, India and China all reported modest increases.

Although sales are falling, Standard Life's capital position remains steady. Its Financial Groups Surplus – a measure of the strength of its balance sheet – fell just 100m during the first quarter to 3.3bn.

Worldwide sales were about 6 per cent ahead of market forecast. Standard Life shares fell 2.4 per cent to 190.3p yesterday.

Chief executive Sir Sandy Crombie, who has announced he is to step down, said underlying performance was sold despite the impact of the financial markets, but conditions would "remain challenging".

Nish, one of the favourites to take Crombie's job, said: "I said this morning that I was very happy being group finance director of Standard Life. Great job. Quite happy today."