Standard Life suffers a £3.5m SIPPs hit

STANDARD Life has wasted up to £3.5 million gearing up for aspects of new pensions legislation scrapped just four months before they were set to come into force, The Scotsman can reveal.

The life and pensions giant has forked it out in an attempt to capitalise on the much-heralded ability to put residential property and alternative assets into pensions come 6 April.

The Edinburgh-based group spent the funds on overhauling its systems, developing its self-invested personal pension (SIPP) offering, producing marketing literature and drafting in legal teams to ensure it was well-placed to attract the lion's share of a huge anticipated influx of new pension business. An estimated 11 billion had been stockpiled across the UK, ready to invest in the buy-to-let property market after A-Day.

However, Chancellor Gordon Brown performed a shock U-turn in the pre-Budget Report this week, effectively closing the door on investors placing residential property in their pension pots.

The turnaround in allowing tax relief on residential property, as well as more exotic assets - such as classic cars, fine wine, art and stamp collections - has hit the financial services industry hard.

Standard Life - which has built up a 40 per cent share of the individual SIPP market, with its offering the cornerstone of the mutual's relentless search for more profitable business - has borne the brunt of that in Scotland, according to sources.

"It's cost Standard Life millions to set up systems for something that isn't going to happen," said a source close to the company. "Regulation costs everyone a fortune and now here's another 3.5m down the drain. That's a write-off to with-profits policyholders. It has to be, because the company's still a mutual."

A spokesman declined to comment on the figure and stressed that the SIPP market was "not dead". But the Association of British Insurers conceded that the Chancellor's volte face had serious repercussions for firms planning heavily for the new tax regime. "Designing systems, designing products, designing product literature has all come at a cost," said a spokesman. "There's likely to be a financial cost and a cost in terms of disruption to businesses that will be forced to un-design that which has been designed."

Ian Naismith, head of pension market development at Scottish Widows, said Brown's change of heart had cost it tens of thousands, while Scottish Equitable is also believed to have been hit. It was last night unavailable for comment.

Jason Hemmings, an associate director of Albannach Financial Management in Edinburgh, said: "The financial services sector has invested millions ensuring platforms are in place for the revolutionary pension changes, just to be vetoed by Brown's 11th-hour stunt. It's no wonder our economy is only growing at 1.75 per cent. This is not the first time Brown's failure to listen to the pensions industry has cost it dearly: stakeholder pensions have been an abject failure, but cost the industry a massive amount to implement with little or no return. When will the Chancellor start listening and stop meddling?"

Alan Steel, chairman of Linlithgow-based Alan Steel Asset Management, said that, while the withdrawal of tax relief was in consumers' best interests, the industry's anger was understandable. "You could see all the dangers," he said. "But that should have been obvious to anyone with half a brain a year and a half ago. It makes you wonder what Brown is up to."

Bonds break 1bn mark

MORE than 1 billion has been invested in Standard Life bonds this year - the highest annual investment in the bond range since their launch.

That sum - a 40 per cent increase on last year - was driven by demand for its capital investment and distribution bond, which clocked up sales of 859 million and 130m respectively.

But just 12.5m was invested in its with-profits bonds, down 73 per cent on a 2004 figure of 46.7m.