Standard Life has hit back at allegations that its Pensions Sterling Fund had investments in toxic mortgages.

Customers with investments in Standard Life's Pensions Sterling Fund recently received a letter from the company detailing that, as a result of market volatility and a re-evaluation of available market data, the fund's worth had dropped by around five per cent. It said that this could have caused a reduction in the overall value of customer pension funds.

National newspapers have run stories following the news of the fund's drop, which suggested that the insurance firm had invested monies from the fund into "toxic mortgages".

Standard Life quashes toxic mortgage rumours - EXCLUSIVEPensions Age has seen the original customer letter, which contains no reference to "toxic mortgages", but instead clearly states that the fund holds a mixture of assets, such as cash deposits, Treasury bills and money market instruments, known as asset-backed securities (ABS). A spokesman for Standard Life has also confirmed that the investments included non-conforming assets, such as buy-to-let, self-certified, high LTV and interest only, as well as sub-prime. However, he reassured us that "93 per cent of the assets are AAA, the safest around."

The spokesman added: "The issue here is the interpretation of 'non-conforming' mortgage backed securities, one of the asset classes held within the Sterling Fund. On face value, it would be easy to write a story saying we invested in toxic mortgages etc. However, the reality is we have no exposure to toxic mortgages or US sub-prime lending via this fund."

Paul Matthews, managing director and responsible for distribution in the UK at Standard Life, explained to Pensions Age: "We're very clear on this - we don't have any toxic mortgages. We do have a number of investments in AAA-rated ABS stocks and so we don't have any of those assets that are in America - we're backed by good UK companies."

Matthews said that in the current climate it has been difficult to get prices on some of these stocks as they are not that often traded, "and so when we re-priced them they were lower than the previous time".

- Pensions Age January 2009

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