Standard Life Bonanza

Standard Life Bonanza

Those of you who hold endowment policies with Standard Life may be in for a small windfall, if the company abandons its mutual status and floats.

Standard Life has posted its policy documents to members outlining the terms of the proposed deal, and inviting them to vote in favour either by post or at a special meeting on May 31.

The company says that 2.4M members will be eligible for free shares.

A Standard Life spokesman is quoted as saying:

"The way shares are being allocated is on the basis of a range of factors, which include the type of policy someone might have with us, how long it has been held and how much is in it."

For example, the company said that a policyholder who had been paying £50 a month on a mortgage-linked endowment since 1984, would receive 1287 shares worth about £3350.

Someone whose endowment policy started in 1989 would receive 544 shares, worth £1440, while a policy started in 1994 would earn 132 shares, worth £350. In each case, this would be on top of the basic allocation of 185 free shares. In addition, the company said everyone who holds their shares for up to 12 months after the initial flotation date, expected in July, will receive one more free share for each 20 they already own.

One question mark yet to be answered is what effect the "mortgage endowment promise" (MEP), given by the company in September 2000, will now have.

The company pledged that, subject to certain conditions being met, as long as future investment earnings averaged 6% a year it would top up any shortfalls on the endowments.

The finer details of the promise revealed that it only applied to those who were told back in 2000 that their policy was at risk of failing to hit its target amount.

Those told after that date were not covered!

In 2004 Standard Life welched on its promise, and abandoned the MEP as unaffordable.

In its proposal document, Standard Life says that if members back its flotation plans, the MEP for qualifying members "will no longer be dependent on a capital growth condition. Instead [it] will be based on investment returns on the with-profits fund".

A spokesman claimed:

"The amount payable to holders of top-up MEP policies will be broadly equivalent to that which would have been paid by Standard Life under the current promise."

We shall see.