Standard Life takes £100m hit after pay-out

PROFITS at Standard Life are to take a £100 million hit after it announced that it will compensate 97,000 customers hit by a fall in the value of its Pension Sterling Fund.

The Edinburgh-based insurer had invested almost half of the money in its £2.1 billion fund into asset-backed securities, where returns have been linked to the troubled mortgage markets.

But losses on the "toxic debts" caused the fund to be devalued by 4.8 per cent last month, leaving investors in the fund with average losses of £900 each.

Until last September, the fund had been the only cash option offered by Standard Life for those looking to seek refuge for their retirement funds away from the stock market turmoil.

Now Standard Life has agreed to cover the fall in value, with the money coming out of its 2008 profits. It admitted that it may not have fully informed customers that the value could fall by as much in one day.

In a statement today, the firm said: "We have listened to feedback and have decided to put customers back in the position they would have been before the valuation adjustment on January 14.

"This decision reflects the importance that we attach to the long-term relationships we have with our customers and business partners as well as our view that some customers would not have expected the value of their units to fall by this extent in one day, based on the information we provided on the nature of the fund."

When calls for compensation emerged last month, Standard initially said there was no case for it to pay out except for those who put money into the fund between December 23, 2008 and January 13, 2009 – the period between it realising its assets had to be revalued and actually revaluing them.

Although it will impact profits, the company said dividends would not be affected.

It added: "Overall, the assets held within the Pension Sterling Fund are considered to be of high quality and, based on current expectations, to represent sound investments."