26th January 2009

Standard Life's Pension Sterling Fund revaluation

A letter recently received relating to Standard Life's Pension Sterling Fund has advised that it is now subject to a 5% revaluation. This fund was promoted as a home for investors’ money “when the short-term outlook for equities, fixed-interest securities and property is uncertain”, yet I understand the fund has 13 per cent invested in “non-conforming residential mortgage-backed securities”, while only 12 per cent in cash!!!!

To make matters worse Standard Life launched a managed cash fund as an alternative in September but did not, it would seem, create a great awareness of it as a better or safer alternative to the Pension Sterling Fund.

The Pension Sterling Fund had been the safest fund available and, as such, many people nearing retirement had been automatically transferred into the fund through life styling.

Is Standard Life in breach of FSA Principle 7 which requires firms to be clear, fair and not misleading? Should compensation be due to anyone who or whose adviser was misled by the 2008 documentation promoting this as the appropriate fund to invest into “when the short-term outlook for equities, fixed-interest securities and property is uncertain”?

Should Standard Life now be reissuing this document with a clear breakdown of the fund's composition?"

Money Marketing noted that a fund composition document dated January 5, 2009 revealed that 44.27 per cent of the fund is invested in asset-backed securities, of which 44.57 per cent is prime residential mortgage backed securities, 30.05 per cent is non-conforming residential mortgage-backed securities and 23.6 per cent is commercial mortgage backed securities.

Hardly what one would expect from a “cash” fund to invest in when the short-term outlook for equities, fixed-interest securities and property is uncertain!

Any thoughts on this should be posted in the forum.

Panacea Comment