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&#39Standard charges cut to hit with-profits bonuses&#39

Life office experts claim Standard Life&#39s move to cut char-ges on its pension prod-ucts will reduce bonuses for millions of its with-profits policyholders.

Many industry experts claim the only way Standard can subsidise the move is by raiding its with-profits funds, with the knock-on effect of hitting annual bonus levels for policyholders.

The reduction in charges and the maintenance of “substantial initial commission” payments to IFAs have fuelled a debate as to how the life off-ice can make the aggressive move without cross-subsidising from its with-profits pot.

Standard announced it would reduce charges on new and existing pension policies under a new single annual charging structure. The provider claims a typical customer will see their charges reduced by 0.6 per cent a year.

National Mutual deputy managing director Graeme Laws says: “What this move basically means is the transfer of assets from with-profits members to IFAs.”

But Standard Life executive director Sandy Crombie says: “The move will cost £25m but we will not be los-ing any money in the long run as people would have voted with their feet if charges had remained the same. Around 750,000 existing contracts will be affected.”

Standard Life has issued a “promise” to its endowment mortgage policyholders guaranteeing that policies will meet their projected value as long as the company hits certain targets.

Provided that the comp-any earns on average at least 6 per cent after tax each year on the assets in which the policy is invested, every endowment policy will meet its target. Assistant general manager (marketing) Graham Stornie says: “Six per cent is an achievable and prudent rate of return.”

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