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Court rules Standard Life must pay out pensioner for sterling fund loss

Standard Life has been ordered to pay compensation to a pensioner and was reprimanded by a judge for trying to “frighten” the pensioner into dropping the case.

According to The Daily Mail, John Petrie was one of around 100,000 investors who lost money in the insurer’s £2.4bn pension sterling fund, which was advertised as a cash fund but had less than a fifth of the fund invested in cash.

Standard Life agreed to pay out £100m in compensation to savers who lost money after the fund dropped by 5 per cent following a revaluation in January 2009. But it refused to compensate some investors like Petrie who lost money when the fund dropped around 0.5 per cent in November 2008.

Petrie pulled out his money in December, following the loss, and after failing to get any compensation from Standard Life, took the matter to the small claims court.

Judge Hickman at Milton Keynes County Court ordered Standard Life to pay Petrie compensation, lost interest and court fees and criticised the insurer for trying to “frighten” him into dropping the case. A ruling in the small claims court does not set legal precedent but may encourage others to seek redress.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Not very TCF!! what must Standard Life be thinking the publicity has cost more than the potential benefits of successfully defending the claim.However by comparison this is a minor skirmish compared with what the banks do on a daily basis.Until TCF is seen to be applied to the banks with the same rigour as life companies and IFAs then they will not attempt to modify their behaviour to customers..The recent Supreme Court ruling last month has done nothing to change banks thinking. Lets hope the OFT do better next time.

  2. Nicola

    While there are huge issues and cocks up around the ‘Sterling fund’ it was not and could not be a ‘cash’ fund. Its has, and remains a ‘Money Market fund’. In my understanding the only way to have actual cash on deposit in a pension wrapper is via a SIPP. (Please correct me if I’m wrong here!)

    What the fund did/didn’t promise varied on the fund fact sheet almost by the week! I saw 10 different historic fund factsheet, all which had different fund aims. A total c**k up, especially given that the fund was supposed to be the ‘safe’ option. Indeed, SL’s lifestyling plans used this fund as the supposed safe haven as the client came progressively out of other asset classes.

    Always, always look under the hood on anything you buy. A MM fund is, and will never be, a ‘cash’ fund. Always look what the breakdown of assets held is, and if you are not sure what something is, ask the fund manager to explain….

  3. Ok, the last comment should read:

    ‘A MM fund is NOT, and will never be, a ‘cash fund’

    DS 🙂

  4. Dathan,

    While it may not be possible to DIRECTLY hold cash in a non-sipp pension wrapper, a large number of companies offer(ed?) cash or deposit Funds. these place the money on deposit with a bank and provide units that increase in line with the bank interest rate (minus charges). An example I’m familiar with from a number of years ago was actually called the Halifax fund.

    I’m not familiar with the exact wording that Standard Life used for the sterling fund, but could understand how people could become confused if it wasn’t 100% clear.

    Also, maybe someone could provide clarification for me. I thought that stakeholder products had to offer a cash based fund for lifestyling. Wouldn’t it have to be mostly plain deposit based?

  5. Dathan Steele asks to be corrected if he is wrong, and so I am taking the opportunity. A “Money Market” sector fund CAN be all “cash” (deposit based), and some funds indeed are. However, they don’t HAVE to be and aset-backed FRN’s are allowed as per the ABI instructions issued in January 2009. But, as the Judge stated, you cannot market a fund as “cash” (which SL were clearly doing at the time) whilst holding nearly half of the fund in mortgage-book investments etc. Their problem was they never released this information on their fund fact sheets, or elsewhere, until after the fund had fallen.

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