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Standard Life makes £160m charge cap provision as annuity profits drop

Standard Life has set aside £160m to cover the costs of implementing the Government’s 0.75 per cent charge cap as the firm reported a sharp drop in annuity profits post-Budget.

The insurer’s half-year results, published this morning, show UK pre-tax profits rose marginally year-on-year, from £159m in the first six months of 2013 to £165m this year.

However, the provider’s £160m provision is not reflected in these figures.

Standard Life says: “There was an EEV non-operating profit impact in the period arising from the £160m provision to reflect future restrictions in the charges on the qualified workplace pension schemes as a result of the recent regulatory changes announced by the DWP.

“Whilst the £160m EEV provision reflects the impact on future profit from an expected reduction in income, we anticipate the related ban on commission and other changes in market practice to have an offsetting benefit, resulting in no significant net impact on our cash generation in the next few years.”

The spread/risk margin, which measures the profitability of annuity business written by the provider, was down 4 per cent, from £78m in the H1 2013 to £75m this year.

Standard says the Budget changes announced in March resulted in a 59 per cent reduction in profits on new annuity sales, although it says this was offset by increased profit from “ongoing asset and liability management”.

Profits from “new” retail business increased 31 per cent, from £35m to £46m, while profits from “old” retail business also rose marginally, from £91m to £95m.

However, profits from Standard Life’s corporate arm were down 12 per cent, from £42m to £37m.

Total platform assets under administration increased 11 per cent, from £19.4bn at the end of 2013 to £21.5bn in June this year, with the number of adviser firms using the platform up from 1,236 to 1,286.

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Why is this a surprise. When has anyone seen Standard Life even within the top 5 of annuity rates? They have relied on inertia and people taking their own second rate annuity when vesting.

    Reality has now struck with the public becoming more aware of the options. Little to do with the Budget and taking the cash and everything to do with competitive OMOs and impaired rates on offer.

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