Standard Life issued their With Profits annual statement on 26th January 2010. Our broad observations are that most classes of business are backed by a reasonable mix of investment assets and that past performance seems reasonable too.

From an advice perspective, the key point that struck us here at Fraser Heath was the low exposure to equities for with-profits policyholders who have a guaranteed bonus rate. Some pension policyholders have a guaranteed bonus rate of 4% a year and this fairly modest commitment is clearly causing Standard Life some concern. The assets backing the guaranteed book are now invested 81.2% in fixed interest and cash, suggesting that Standard Life feel they cannot affiord to take risks. The growth prospects of this book is clearly limited and a policyholder should prepare themselves for a return likely to be no more than the 4% guaranteed return. This may of course entirely suit policyholders, especially cautious savers and those approaching retirement but more speculative savers with some time to go before retirement should seek out advice.

The second observation is that their With Profits Bond fund returned 8.6% over the year with the same asset mix as Aviva's with profits fund started and ended 2009, but which only returned 6%. Our observation here is that Standard Life's With Profits Bond has very low guarantees unlike Aviva's fund and as a consequence appears to have been able to avoid selling equities cheaply and buying them back more expensively like Aviva did.