COMMENT
Standard Life Investors To Receive Windfall

By Cliff D'Arcy
October 17, 2005

Bosses at Standard Life, Europe's biggest mutual life insurer, have formally voted in favour of floating the company on the London Stock Exchange.

This means that around 2½ million Standard Life members are in line for windfalls averaging a grand when the insurer demutualises next summer. Members will be allocated free shares worth at least £500, with the typical payout being around the £1,000 mark. Note that these free shares will be in addition to members' policies - they won't replace them.

How large an allocation of free shares individual members receive will be down to how long they have been a member of Standard Life, and how much they have saved. However, anyone who opened a policy after 30 March 2004 is unlikely to qualify for a windfall, nor will anyone who is only a customer, not a member, of the firm. To be a member, you must be a policyholder of The Standard Life Assurance Company, which usually means being an investor in its with-profits fund. Applications for new policies received on or after tomorrow, 18 October, will not give rise to any membership rights.

If you have a Standard Life policy which matures before next summer, it may be worth reinvesting some or all of the proceeds back into the firm. Otherwise, you could lose out on free shares, perhaps because by just a few months. Then again, members are to vote on a special resolution to allow windfall payouts to policyholders whose policies mature before next year's Special General Meeting, so you may be fine.

The company is contacting all eligible members this month in order to confirm their policy and personal information, so make sure that you respond quickly, otherwise you could lose out. In some cases (for example, with overseas members), policyholders may be offered cash or policy enhancements in lieu of shares in return for surrendering their membership (and ownership) of the company. Members may also be given the option to buy additional shares at a discount to the flotation price.

However, there's a long way to go before a successful flotation. Standard Life members must vote on demutualisation proposals at a Special General Meeting next May or June. For the stock-market listing to go ahead, three-quarters (75%) of members would need to vote in favour of the plan. Regardless of how much they have invested with the firm, members each have a single vote, so each has an equal say in the decision.

Finally, financial regulator the Financial Services Authority must approve the plan and, as an Edinburgh-based firm, Standard Life has to gain approval from the Court of Session in Scotland before floating. If this happens, the company could become a public limited company, Standard Life plc, as early as July 2006. The firm is expected to be valued at around four to six billion pounds, which means that it is likely to become a member of the blue-chip FTSE 100 index.

Standard Life provided more information to members in an update distributed in August, which you will find here (PDF file; needs Adobe Acrobat Reader).

More: Check out this simple, tax-free investment | Homeowners Win Endowment Compensation.

Cliff is a member of Standard Life, thanks to a duff mortgage endowment!