Standard Life could leave an independent Scotland

Standard Life is devising plans to relocate its operations to England if Scotland votes "yes" in its independence referendum later this year.

In its annual report published on Thursday, the chairman of the Edinburgh-based long term savings and investment business Gerry Grimstone said: "We will take whatever action we consider necessary - including transferring parts of our operations from Scotland - in order to ensure continuity and to protect the interests of our stakeholders".

The company has started to set up additional registered companies outside Scotland, into which parts of its operations could be transferred if necessary.

Standard Life's management are concerned about the currency an independent Scotland would adopt, the setting of interest rates, regulation, the taxation of savings and the timetable for joining the European Union. Chief executive David Nish said judgement could not yet be made in a definitive way because of these many uncertainties.

It is believed that a formal monetary, regulatory and currency union would need to be carved out between by an independent Scotland and the rest of the UK, with the most sought-after employees potentially reluctant to work north of the border due to uncertainties over the personal tax regime.

The issue came to a head recently when Chancellor George Osborne, Labour Shadow Chancellor Ed Balls and Liberal Democrat chief secretary to the Treasury, Danny Alexander, confirmed they would oppose formal monetary union with Scotland.

Fall in pre-tax profit

Standard Life's statement is particularly symbolic because it has been headquartered in Scotland for 189 years. It has around £240 billion of assets under management and is the UK's biggest provider of defined contribution pensions.

It reported pre-tax profit for the year ended 31 December 2013 has declined to £801 million from the previous years's £963 million on Thursday.

The company said this was due to a particularly strong 2012, which included a £96 million win from a court case against insurers who had provided professional indemnity insurance for Standard Life’s Pension Sterling Fund. The payout was to recoup losses from a top-up which Standard Life was forced to make in 2009, but for which the insurers were later found to be liable.

Annual total revenue grew to £20.5 billion from £19.2 billion in the previous year. Assets under administration were up 12% to £244.2 billion, driven by strong net inflows up 92% to £9.6 billion, with particular success in workplace pension schemes as the auto enrolment scheme was rolled out.

The insurance company has also reversed bonus cuts with profits plans, but its 25-year mortgage endowment payout has fallen to an all-time low.

It said 98% of its mortgage endowment customers would face a shortfall in repaying their mortgages, including 100,000 whose policies mature this year. This is down to the "with-profits" plans being backed by 60% to 67% equities, which had a good run over the period. comparatively, endowment holders are backed by only 40% equities.

For shareholders, a final dividend of 10.58p was proposed, an improvement on 9.80p in the previous year, producing a total for the year of 15.80p, compared with 14.70p last year.

Analyst view

Although shares in Standard Life fell by around 2.5% on Thursday morning, Panmure Gordon analyst Barrie Comes was bullish on the company.

He said it had "released a good set of 2013 results that were ahead of expectations", as well as a "positive and upbeat" outlook statement.

"Following an exceptional run in 2012, and a good performance in 2013, the shares have continued to rally in 2014 (up 7%)," he added.

"Despite this, we see further upside and maintain our 'buy' recommendation and 420p per share target price."