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Standard Life share price falls on hit from Osborne’s pension shake-up

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The insurance giant's admission that it will be hit by the government's pension shake-up sent shares down three per cent to 440.7p in mid-morning trade today.

The figures

In results posted this morning, Standard Life said operating profit before tax rose six per cent to £290m in the six months ended 30 June, from £274m during the same period a year earlier.

The Edinburgh-based insurer added that assets under administration rose to £302.1bn in the first half of this year.

But the company added that thanks to new pension rules, which came into effect earlier this year, the contribution from annuity products was likely to fall by between £10m and £15m by the end of the year compared with 2014, while the contribution from asset liability management was likely to reduce by between £30m to £40m.

Why it's interesting

There's little doubt the pensions-shake up, which removes the need for savers to buy annuities and eliminates pension tax breaks for people earning £100,000 or more, will be reflected in its full year results, Standard Life said. 

Nevertheless, the insurer has been increasingly focusing on asset management – and in a nod to this Keith Skeoch, who runs the firm's growing investment division, is due to replace outgoing chief executive David Nish tomorrow.

"Pensions reforms in the UK have started to bite and contribution from annuity products are likely to reduce further. The group will need to offset this decline with alternative products," Brenda Kelly, head analyst at London Capital Group, said.

What Standard Life said

Nish said: 

We are continuing to see the benefits of our expanding distribution capabilities and strategic relationships, with 70 per cent of net inflows from outside the UK and strong growth in net inflows through the wholesale channel.

Our UK fee-based propositions continue to build momentum with regular contributions into our workplace pensions up 15 per cent. The strength of these propositions, investment solutions and our market positioning means we have been able to help our customers with the new pensions regulations and continue to support them as saving for their futures becomes increasingly front of mind.

In short

Sweeping changes to the pensions sector have hit Standard Life's annuities business – but the company is moving its focus to alternative products.