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Standard Life says it’s not for churning

Standard Life has hit back at a report which claims it is a “churner”, saying that only 15 per cent of its Sipp business has come from its personal pension book.

As reported in Money Marketing last week, a report, entitled The DNA of Life, by City analyst Fox-Pitt Kelton names Standard Life, HBOS, Prudential and Aviva as churners.

It measures persistency by calculating whether new business premium growth translates into reserve growth.

The report says Lloyds TSB, Old Mutual and Legal & General show the highest persistency rates, with net outflows of 9.1 per cent, 8.5 per cent and 7.4 per cent in 2005.

Standard, according to the report, has seen temporary improvement in persistency rates to 6.9 per cent in 2005 as policyholders held out for demutualisation windfalls.

But the analyst expects this to return to net outflows close to its pre-2005 levels of 11 per cent in 2006. It says it would not be surprised by a temporary spike higher than the firm’s historical average due to the demutualisation effect.

The report also claims that Standard’s attempts to cut expenses could reduce service levels, leading to a higher lapse rate and it predicts that Standard will have to set aside further cash in addition to the £19m budgeted to cover post-demutualisation lapses.

But Standard has hit back, saying its net results have been stronger than those of many of its rivals and despite persistent allegations of internal churning into its Sipp, only 15 per cent of its new business is transferred from its personal pension.

A spokeswoman says: “There is a growing call for net flow reporting to address the issue of churn and how it affects new business reporting. Using a net-flow-based measure, Standard Life has consistently been at the stronger end of the peer set, with an average ratio of 80 per cent, for example, inflows higher than outflows.

“Churn is an industry issue. Standard Life’s new business results show its Sipp business is not heavily reliant on internal churn.

“Only about 15 per cent of new business is generated by Standard Life pension surrenders. About 85 per cent of Sipp new business therefore relates to new Standard Life money.”

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