Standard Life: with-profits misery

February 23 2007

Standard Life, once top of the pile of with-profits providers, has sunk disastrously over the years. The price of past mismanagement is now horribly plain.

Here's a sample of 2007 payouts from Standard's big rivals - and Liverpool Victoria, whose returns are best of all:

Provider                      Payout

Liverpool Victoria          £63,905

Prudential                    £49,492

Norwich Union              £47,904

Standard Life               £38,054

Endowment payouts based on contributions of £50 per month over 25 years, maturing 2007. Figures provided by Liverpool Victoria, February 22 2007.

How can such a gap have opened up - particularly when, within recent memory, Standard Life was viewed as one of the best with-profits companies?

The answer lies in the devastating consequence of Standard Life's massive exposure to the stock market during 2000-2003, when share values plunged.

Sure, during that period other companies, including Liverpool Victoria, also had exposure to equities and so lost money, too.

But those other companies stuck with the stock market and so have bounced back magnificently since.

Standard's bosses, on the other hand, led by the insurer's disgraced former chief executive Iain Lumsden, left, were gambling on the markets with money they could ill afford to lose. When share prices really hit rock bottom, Standard was forced to sell its shareholdings - the bosses had effectively bust the bank - and it hasn't participated in the recovery since. It's a terrible tale of bungled and reckless management, for which policyholders are patently paying - years later.

I suppose the slender consolation - for which Lumsden and the other architects of the mess can claim no credit - is the fact that Standard's shares have performed nicely since the company was floated last summer. That, at least for the policyholders who kept their shares when the company demutualised, is some good news....

- Richard Dyson

Comments

[john banks]

i would like to comment on a letter from john gill md customer service where he is telling us the value of our bond has increased by 13.8 percent in the last twelve months over the last 4 years. I have only received 2 percent per year. Twelve months ago the mva was aproximately £11k, to date it is down to 0. This is where the 13.8 percent bond increase comes from. I think this letter is absolute bull from standard life i have now surrendered my policy.