Nish to defy sceptics with rise in profits

STANDARD Life chief executive David Nish is this week forecast to defy public scepticism towards pensions with figures showing that he is achieving profit targets laid down when he took over two years ago.

Shaky financial markets and falling public confidence in the savings industry are expected to have trimmed £700 million from income.

The City believes this 15 per cent slump to just over £4 billion can be attributed to a particularly volatile final quarter in 2011 triggered by the Eurozone sovereign debt crisis.

But despite the squeeze on income, Nish is expected to reveal a 12 per cent rise in operating profits to £476m and another year of dividend growth.

One insurance industry executive said: “There was a pronounced drop across the board in long-term savings last year as the volatility in markets got progressively worse. Standard Life won’t be immune from that, even if its direct exposure to the Eurozone is pretty negligible, at about £50m.

“As investor confidence dropped, there is plenty of anecdotal evidence that customers and independent financial advisers [IFAs] were not interacting as much. People did not want to transfer funds, and that affected inflows at Standard and its competitors.”

Standard Life Investments, the group’s asset management business, was impacted by the deteriorating climate, revealing in the third trading quarter of 2011 that funds under management had slid from £200bn in June to £191bn.

It comes as recent surveys have suggested that public confidence is falling in saving via pensions against the austerity backdrop in Britain.

The National Association of Pensions Funds said in a recent survey that 54 per cent of employees were not confident in pensions compared with other ways of saving.

And a joint report by Standard Life and Edinburgh University last year said there was work to be done in improving communication on pensions products, including sweeping away baffling jargon.

“Implicitly, those reports suggest there is a job to be done in winning the public back to pensions in the current climate,” one analyst said.

It is thought, however, that Nish will remain bullish on the medium-term hopes for the pensions industry. He is expected to say that a big positive for the company, Britain’s largest provider of corporate pensions, is the introduction by the government of auto- enrolment next autumn.

The group has said that it believes auto-enrolment will bring another 400,000 people into the pensions market. A source close to the company said: “Our relationship managers are doing a lot of behind the scenes work on auto-enrolment already, so no massive marketing campaign is thought necessary.”

Nish will say there are other ways to save than pensions, as Standard is expected to reveal a strong performance in its Isa business.

The City consensus forecast for the company’s total dividend for 2011 is a 5 per cent increase to 13.65p against 13p in 2010, via a 9.05p final payment.

Nish is expected to stress Standard’s commitment to the UK, where it does most of its business, amid reports that rival Prudential is considering a switch to an Asian tax base.