Policyholders in Standard Life have missed out on about £1.25bn in gains because of the company's decision to switch out of equities last year, reports The Times.
Profits foregone for each of the 2.6 million with profits policyholder is calculated at £480, the paper writes.
The switch into bonds was triggered by tougher regulations intended to ensure life companies are fiscally sound, and in Standard Life’s case resulted in the biggest single sell off of equities by a UK institution – approaching £8bn worth of shares.
The FTSE 100 index’s 500 points gain in the past three months has amplified the opportunity cost of last year’s decision, the paper adds.
UK INFLATION COULD be set to strengthen according to the Bank of England’s quarterly report published yesterday, with suggestions from governor Mervyn King that this will rule out another interest rate cut this year.
Markets reacted strongly to the Bank’s forecast that if it cut the base rate to 4% - or another 0.5% - it would trigger above target inflation, The Daily Telegraph writes.
The pound strengthened against the dollar and other currencies as a result, while the stockmarket did not fall. However, the Bank has also cut its forecast for UK GDP growth through the rest of this fiscal year to 2% from 2.5%, well below the 3% to 3.5% being banked on by chancellor Gordon Brown and his Treasury minions.
The chief unknown is how rising energy prices will feed through to the economy. King says higher oil prices will feed through in the form of higher inflation, but also argues that growth is being supported by a weaker pound – which helps exports – and a flattening off of the fall in consumption.
The Scotsman adds signs of another spat between the Treasury and Bank of England on how to interpret what is happening to the economy, after King criticised the government’s decision to shift the timing of the start of the current economic cycle.
That has helped Gordon Brown retain his claim of sticking to a ‘Golden Rule’ of only borrowing to invest over the cycle. King is less sure, noting that: “We have a different way of thinking about the economy and how it evolves. I am not even sure whether it makes sense to think about the cycle as a well-defined phenomenon."
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