11 February 2009
Investor press release - payments for benefit of Pension Sterling Fund customers



Standard Life announces payments for benefit of Pension Sterling Fund customers

Standard Life has announced that it will make immediate payments for the benefit of all customers who invested in the Pension Sterling Fund and have been affected by the 4.8% fall in unit price arising from the valuation adjustment communicated on 14 January 2009. At that time, and prior to the valuation adjustment being made, the fund had 97,000 customers and was valued at 2.1bn.

We have listened to feedback and the concerns of our customers and key business partners and have decided to put customers back in the position they would have been before the valuation adjustment on 14 January 2009. This decision reflects the importance that we attach to the long-term relationships we have with our customers and business partners as well as our view that some customers would not have expected the value of their units to fall by this extent in one day, based on the information we provided on the nature of the fund.

We will make an immediate cash injection into the fund with payments provided to those customers who have left Standard Life in the period since the valuation adjustment was announced. We will also be writing to customers who invested in the Pension Sterling Fund to inform them of the way in which they can register any additional complaints they have in relation to this issue.

The immediate injection of cash will result in an additional approximate pre-tax charge of 100m against profits in 20081, 2. Excluding the impact of this amount, the total return on embedded value (RoEV) we expect to report at our Preliminary results on 12 March 2009 is currently above the guidance given in our Q4 2008 new business press release on 28 January. Our dividend policy remains unchanged as a result of this charge.

Going forward the Pension Sterling Fund will continue to operate as at present, investing in bank and building society deposits and floating rate notes3, the majority of which are asset backed securities, with an aim of providing greater returns than a fund invested purely in bank and building society deposits. Overall, the assets held within the fund are considered to be of high quality and, based on current expectations, to represent sound investments. However, customers invested in the fund should be aware that its value can fluctuate and in some circumstances may fall. Customers for whom this does not fit their risk profile can transfer into our Managed Cash Fund.

All figures are subject to audit.

For further information, please contact:

Media: Barry Cameron
Direct: 0131 245 6165
Mobile: 07712 486463
Email: barry_cameron@standardlife.com

Institutional Equity Investors: Gordon Aitken
Direct: 0131 245 6799
Email: gordon_aitken@standardlife.com

For customer enquiries please refer to the Important Fund Information section of www.standardlife.co.uk

Notes to Editors

  1. The post tax financial charge of approximately 78m will be reflected in 'other' experience variances within our reported embedded value operating profit for 2008.
  2. The expected financial impact under International Financial Reporting Standards (IFRS) is a pre-tax charge of approximately 100m that will be reflected within underlying profit for 2008. The post-tax impact is expected to be approximately 72m.
  3. Floating rate notes (FRNs) - a bond which pays a variable (i.e. floating) rate of interest linked to a reference rate such as LIBOR (London Interbank Offered Rate). Interest rate adjustments on FRNs are typically made every three months but this can vary.


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