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Standard shock charges stun IFAs

Standard Life has stunned IFAs with new charges on all with-profits business which advisers say will force them to revisit thousands of client files and sound the death knell for with-profits.

The new charges, ranging from 0.25 to 0.75 per cent, will hit all existing and future business on with-profits policies.

Advisers say they could be forced to revisit all recommendations placing clients in Standard WP products as the charges, combined with the block on projecting mutuality benefits, will leave projections over 1.25 per cent a year lower.

New and existing WP bonds and annuities face a 0.25 per cent charge for a guarantee of original capital while pension funds face a 0.5 per cent levy.

Older pension contracts with a 4 per cent guarantee and endowment policies with a 3 per cent guarantee face a 0.75 per cent charge.

Standard marketing director Mike Leahy says the move is the insurer&#39s way of telling people “there is no such thing as a free lunch”.

He says Standard can impose charges to pay for guarantees but is offering options, including refunds or fund switches on new business written since November 15, 2003.

The move comes after Bradford & Bingley, HSBC subsidiary First Direct&#39s IFA arm and Skipton Financial Services all put sales of Standard Life with-profits bonds on hold indefinitely.

Leahy says: “All the reasons why with-profits were valid in the past are still valid but the way we illustrate them is different. Guarantees will now cost money whereas in a previous economic environment they cost nothing.”

Richard Jacobs Pension & Trustee Services director Richard Jacobs says: “I am stunned by this move. This is the death of with-profits. I am a believer in with-profits but how can I promote it when things like this come out?”

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