Standard Life has been forced to put aside GBP100 million to absorb the effect of demutualization as many policy holders cashed in their shares in the company to take advantage of the windfall payout.
The GBP100 special provisions mean that first half profit for 2006 was well below expectations of GBP206 million despite strong operating performance.
Our financial results for the first half of the year show strong sales growth and improved new business profitability. New business contribution of GBP91 million, almost three times the value for the whole of 2005, reflects the continued success of our strategy of concentrating on higher margin products which require lower capital investment, said group chief executive Sandy Crombie.
We have been net winners from the heightened activity in the UK pensions market. However, we have seen in recent weeks an increase in lapses and have deemed it prudent to set aside a provision until lapse levels return to normal, continued Mr Crombie.
The new pension simplification rules that came in on April 6, 2006, referred to as ‘A’ day, have prompted many customers to consolidate arrangements for their pensions. This consolidation has led to a trend of lapses in pension schemes throughout the sector, an effect which has been exaggerated for Standard Life by the demutualization of the company.