Standard Life Falls as U.K. See to Plan Collective Pensions

Jun 02, 2014 12:18 pm ET

(Updates with closing share price in fourth paragraph.)

June 2 (Bloomberg) -- Standard Life Plc dropped in London trading on reports that the U.K. will introduce collective pension plans, potentially risking revenue for insurers after more months of shakeups to laws governing the savings market.

Changes to workplace pensions will be announced on June 4 in the Queen’s Speech, where the government outlines legislative plans for the coming year, the Sunday Telegraph reported yesterday. The changes will let Britons contribute to pension plans shared with other members, similar to those in the Dutch market, creating bigger funds from which to receive income at retirement, the paper said.

“We’ve already done much to make workplace pensions more attractive, but the U.K. can learn from other countries in taking this further,” Pensions Minister Steve Webb said on his department’s Twitter feed in response to the report. Pension consultation results “will be published soon,” he said.

Shares of Standard Life, Scotland’s largest insurer, fell 1.7 percent to 393.3 pence in London, the biggest decline in almost two months.

“This adds another unwelcome layer of uncertainty,” Blair Stewart, an analyst at Bank of America Corp., wrote in a note to clients, citing Standard Life and Friends Life Group Ltd. as the most affected companies. “Collective schemes could continue to provide an administration revenue stream for insurers. The alternative is that collectives effectively become competitors.”

Largest Provider

Standard Life is the U.K.’s largest provider of defined- contribution pensions by assets, according to Barrie Cornes, an analyst at Panmure Gordon & Co.

The U.K. scrapped rules pushing retirees to buy an annuity in Chancellor of the Exchequer George Osborne’s March budget and capped the fees that pension funds are allowed to charge savers. Collective pensions, which would replace individual workplace pension plans, will be outlined in two new bills on June 4 and could be introduced as early as 2016, the Sunday Telegraph said.

“The benefit to members of such schemes is lower administration and investment management costs through scale efficiencies,” Bank of America’s Stewart said. There is “also a greater degree of certainty over pension payments,” he said.