Standard's pension sterling fund falls 5 per cent
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Standard Life has revalued its pension sterling fund resulting in a fall in value of almost 5 per cent for 97,000 investors.
The insurer has blamed recent market volatility for the revaluation, particularly the fact market values of mortgage-backed securities, which form a significant part of its mixture of assets, have plummeted.
Standard Life claims in its marketing material that the fund, which is often used in lifestyling, can be a temporary home for investors’ money “when the short-term outlook for equities, fixed-interest securities and property is uncertain”. It adds that it is wholly invested in cash.
But the fund in fact holds a mixture of assets, including cash deposits, treasury bills and asset-backed securities, most of which are mortgage-backed securities.
It says the mix is designed to provide greater growth potential than a standard bank or building society account but without any capital guarantee, meaning the value of the assets can go down as well as up, in line with market movements.
Standard says, in a note to advisers: “Due to the exceptional market conditions in recent months, there has been limited trading in asset backed securities and this has led to a general downturn in the current market values of these assets.
“The asset backed securities we hold in the Pension Sterling Fund are high quality assets that we aim to hold to maturity, when we expect them to return their higher ‘par’ value.
“However, in order to be fair to customers who wish to leave the fund and to those who wish to stay, the value of the current unit price must reflect the presently reduced market values.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Some investors will be surprised they have managed to lose 5 per cent in what was supposed to be a very secure fund.”
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