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Leave our pensions alone, says Standard Life chief
David Nish, chief executive of Standard Life (SL.L), urges the chancellor not to hit higher rate tax payers saving into a pension in next week's Budget.
David Nish, chief executive of Standard Life (SL.L), has urged the chancellor not to scrap higher rate tax relief on pensions in the Budget next week.
The Treasury spends £7 billion a year on pensions tax relief for higher rate tax payers. Speculation has grown that George Osborne will target this as he attempts to balance the country’s books and reduce the deficit.
Nish said this would be a mistake as it would further damage the public’s confidence in pensions, which have been subjected to successive tinkering by successive governments. In 2010/11 the amount saved in to ISAs (individual savings accounts) overtook pension contributions for the first time. The comparative simplicity of ISAs is often cited as a reason for this.
‘What worries me is the greater uncertainty it causes consumers. We’ve got to get back to a savings culture in the long term,’ said Nish. ‘We’ve had too much change [to pensions] and change that appears to identify individual savers would be really unfortunate.’
Nish denied he was speaking from commercial self-interest. Although Standard Life is one of the biggest pension providers in the country, it sells a broad range of savings products and Nish claimed the issue of higher rate tax relief was not ‘core to us’.
The damage would come, he said, from discouraging people from saving into a pension which, he hinted, would undermine Osborne’s wish for pension funds to invest in long-term infrastructure projects. Arguing that there should be no further changes to pension rules, he said: ‘That would do the country a lot of good as that would provide capital for investment in the future.’
Nish was speaking after Standard Life declared its 2011 results. These beat forecasts with operating profits before tax jumping 28% to £544 million.
Ironically, given Nish’s comments on pension changes, the results were flattered by a £64 million accounting gain caused by the company switching its staff pension scheme from a link to RPI (retail price index) inflation to the cheaper CPI (consumer prices index) measure. Similar switches elsewhere in the private and public sectors have angered unions who argue the change in index linking weakens a key benefit for workers.
However, cost-cutting and an 8% rise in fee-based revenues to £1.2 billion also contributed to the profits surge.
Nish said it was 'great' to be in 2012 as Standard Life was well positioned to benefit from two big changes coming this year: the auto-enrolment of workers into company pension schemes, and the abolition of commission to financial advisers at the end of the year.
With a better-than-expected final dividend of 9.2p the share price rose 1.5p to just over 238p. This brings total dividends paid to shareholders to 13.8p, an increase of 6.2%. The share price has risen 25% in the past six months.
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