UK - Standard Life is to close its non-contributory £695m staff final salary scheme as part of a series of cost-cutting measures ahead of its floatation.
The Edinburgh-based firm has conceded that demutualisation is “inevitable” as it can no longer rely on the dwindling pot of cash provided by its with-profits customers to underwrite its growth aspirations.
Standard Life’s bid to cut costs by 20% includes making 1000 staff redundant – mainly from its Edinburgh office – and closing its defined benefit scheme, which has a £180m FRS 17 deficit, to new members from November 16.
The firm is due to consult with staff about a replacement flex scheme, which will begin in November 2005.
Chief executive Sandie Crombie said: “We need to make significant changes to our UK life and pensions business to reduce costs and write more profitable business.
“While this will mean job losses and the closure of our DB scheme, the business must be in a shape to compete successfully in the market for long-term financial services.”
John Scott & Partners research and investment manager Patrick Connolly pointed to Standard Life simply not being as strong as it used to be.
He said: “It wasn’t too long ago when Standard Life was triple-A rated and deemed to be one of the strongest companies around. They are not in that bracket any more, but we’re certainly not telling people to panic and head to the doors.”
The life office’s decision to float had been widely expected but some experts said the timing was “surprising” since the strategic review was due to be completed in the summer.
Hargreaves Lansdown pensions research manager Tom McPhail said:
“Standard Life isn’t in trouble but it is having to move its feet fairly quickly in order to keep its balance. If you look back to the beginning of the year, a great deal has happened in a short space of time.”
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