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Standard sets aside £100m to pay for post-float exodus

Standard Life has set aside £100m to plug losses caused by falling persistency rates and people cashing their policies after netting demutualisation windfalls.

Standard Life says its demutualisation has delayed the impact of A-Day on its pension business and it expects increased pension lapses caused by A-Day to continue until April 2007.

The firm is putting aside a pre-tax provision of £100m to cover expected lapses, with £79m of the amount for A-Day-related lapses and the remaining £21m for demutualisation related lapses.

The provision will be taken out of its pre-tax operating profits which cuts Standard Life’s profits to £206m in the first half of this year compared with £395m for the full year of 2005 calculated on a European embedded value basis.

UK life and pension new business grew by £78m on an EEV basis in the first half of the year compared with £27m for the full year 2005.

The present value of new business premium for UK covered life business totalled £4,330m in the first six months of this year boosted by strong Sipp and investment bond sales. This compares with new business of £6,455m in the whole of 2005.

Standard Life Assurance chief executive Trevor Matthews says: “We were essentially immune to the A-Day effect before our demutualisation but now it is taking place. A-Day has caused people to look at their pension arrangements and people have consolidated them. There is a bubble effect going on here and our assumption is this bubble will continue to the end of the tax year.”

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