Standard Life 'safe' pension fund was invested in sub prime mortgages

21 January 2009 / by Rachel Mason
Almost 100,000 people who invested their pensions in a Standard Life cash fund believed to be an 'ultra safe' alternative to stocks and shares actually had their money invested in toxic mortgages.

It is thought that the Standard Life Pension Sterling Fund was the only option offered to people who wanted to invest their pensions into a fund that was not affected by the ups and downs of the stock market.

But now Standard Life is writing to the 97,000 people who had invested their pensions in the £2.4billion fund to tell them that their average £19,100 deposit has been cut to £18,200 because the company made a loss by investing cash into mortgage-backed securities.

The news will come as a massive shock and disappointment for the policyholders – many of whom are near retirement – as their supposedly safe pension fund was actually invested into risky funds.

But any chance of compensation looks unlikely because Standard Life says it was clear from the start about where the fund was invested.

"The Pension Sterling Fund holds a mixture of assets, including cash deposits, Treasury bills and money market instruments, known as asset-backed securities," said John Gill, managing director of the customer service division at Standard Life.

"As is typical with this type of fund, the Pension Sterling Fund does not come with a guarantee that the unit price will not fall, as the value of the assets will go up and down in line with market movements.

"We have re-evaluated the available market data and this has indicated that the value of some asset-backed securities held within the Pension Sterling Fund has fallen substantially," said Mr Gill.

Standard Life says that after re-valuing assets to reflect current market values, the price of units in the Pension Sterling Fund have been reduced by approximately 5 per cent "a bigger fall than has previously been experienced by this fund".

Mr Gill continued, "customers invested in this fund may experience a reduction in the overall value of their pension funds, depending on the number of units held."

Standard Life says it is currently writing to those customers who may be affected to explain the reason for the fall in the price of the units in the Pension Sterling Fund, how it may affect them and what action they may wish to take.

"We anticipate that many customers will wish to remain invested in the Pension Sterling Fund. However, we also recognise that some customers, particularly those seeking greater short-term certainty, may prefer an alternative investment with a higher degree of predictability," said Mr Gill, offering the option of a deposit based fund called the Managed Cash Fund, which he says is "designed to produce lower levels of volatility and investment returns."

Those who are concerned or need information about their investment are urged to speak to a financial adviser.

If you have money invested in the Standard Life Pension Sterling Fund, or simply want to talk through your investment and pension options, make use of our no obligation independent financial advice services:

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