View more on these topics

Standard smoothing shock

Standard Life is to stop smoothing except on maturity and will not be paying terminal bonuses on shorter contracts as its slashes with-profits payouts by up to 15 per cent.

The company is warning that payouts will continue to fall over the next year and it will start making bonus declarations every three months, starting in May.

Offering smoothing only on maturity or retirement will adversely affect many policyholders. For a regular-premium pension pol-icy taken out in 1997, Standard has a persistency figure of only 55.7 per cent, according to FSA figures. It has £2m policyholders.

A £50 a month 25-year endowment will now pay out £75,984 on maturity compared with £99,747 last year. In 2001, it would have paid out £110,136.

The company would not comment on its remaining reserves but says the with-profits fund last year lost 12.5 per cent and it now valued at around £30bn.

Despite the cuts, Standard says a with-profits policy would still have outperformed a deposit account or UK unit linked equity fund over 25 years.

The company is mailing IFAs to explain its actions.

Standard Life head of with-profits communications David Hare says: “The last year has taken away some of our advantage but not all. We have always said that smoothing could be reduced or withdrawn.

“We will concentrate smoothing on maturity and retirement – that is what people bought their policy for.”

Needanadviser.com director Ashley Clark says: “This spells the death for with-profits. There is no way I will recommend a product that provides smoothing only on maturity. It is just a managed fund and is not low risk.

“Providers have spent the last 20 years jockeying for position declaring unrealistic bonuses and it is all now coming home to roost.”

Recommended

Yorkshire aims to strike right Accord

Yorkshire Building Society is setting up an intermediary subsidiary, Accord Mortgages, to extend its lending criteria away from the traditional society approach to lending. It says the launch of Accord in March or April will give it freedom to develop products that are wanted by brokers such as loans with higher income multiples. Yorkshire Building […]

Boomer business

As baby boomers start to reach retirement age, there will be an explosion in demand for what are known as at-retirement products. Do not forget that, in the post-war era, this generation has driven most of the advances in finance which we currently enjoy. They also hold a huge proportion of the country&#39s assets, which […]

Independent view

As I write this article, the FTSE 100 has just fallen below 3,500 and I am starting to wonder whether turning down the offer to be vocalist in a young Parisian snowboarder&#39s band back in 1993 was, in hindsight, a bad career move. The music business did not offer much in the way of job […]

Northern Rock Guernsey – Fifty:Fifty Issue 14

Monday, 3 February 2002 Type: Offshore guaranteed equity bond and high interest account GUARANTEED EQUITY BOND Aim: Growth linked to the performance of the FTSE 100 index Minimum-maximum investment: £5,000-£2.5m Term: Five years Guarantee: Capital returned in full at end of term regardless of performance in index Return: Up to 70% growth in the FTSE […]

Jelf flexible benefits

In Focus: How to choose a flexible benefits provider — seven top tips

Jelf Employee Benefits looks at some of the key considerations employers should think about when reviewing and choosing a flexible benefits provider. Choosing the right benefits for your employees is one thing but delivering a successful employee benefits strategy is about understanding the complete picture and delivering it in a personalised way so that it resonates with each and every individual in your business. 

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com