Standard Life - 73p Cash Payment But .......

bowlhead99

bigmondy wrote: »

Sorry bowlhead - you have been great - I am a higher rate tax payer and I dont think I have used any CGT entitlement apart from the dividend i will get from SL - they are the only shares I have. I have about £4k in a Building Society account but I think I pay tax on the piddling amount of interest at source.

I am interested in holding the folding with the b option - I should be ok according to your last suggestion?

If you have plenty of cgt allowance, because you haven't sold any shares or investment properties or whatever this year, then take the B shares and you'll be fine.

As a side note, your small interest amounts won't have their full 40% tax withheld at source. Banks and building societies only take 20% or nothing. You should declare them separately to HMRC.

zolablue25 wrote: »

I appreciate this is very slightly off topic but can someone please confirm that the B shares are issued at a rate of one per Ordinary Standard Life share held? i.e if I have 500 SL shares I would be issued 500 B shares (before them being immediately bought back).

The reason I ask is that I would like to go for the B option as I don't have any other capital gains liabilities, but the website asks how many shares I would like to take as B option.

Thanks in advance for any help

Just indicate that you want to go for the B option in respect of all (500) of your shares.

babyj3

There is an article in the Telegraph dated 2/3/2015 by Richard Evans with an answer from Helen Miah of the Share Centre, answering an email entitled -Standard Life decision to return 9 shares for every 11 has left me worse off. Why?
This puts the same point of view as the first post on this thread and my subsequent posts and as far as I am concerned confirms my own views.
Helen Miah has put it simply and briefly so it is easy to understand
There are 10 comments so far regarding this article
I suggest anyone with any questions reads this article which I feel is unbiased and easy to understand and the comments are interesting too.

bigmondy

A link would help to those of a time limited persuasion baby.

Chris75

babyj3 wrote: »

There is an article in the Telegraph dated 2/3/2015 by Richard Evans with an answer from Helen Miah of the Share Centre, answering an email entitled -Standard Life decision to return 9 shares for every 11 has left me worse off. Why?
This puts the same point of view as the first post on this thread and my subsequent posts and as far as I am concerned confirms my own views.
Helen Miah has put it simply and briefly so it is easy to understand
There are 10 comments so far regarding this article
I suggest anyone with any questions reads this article which I feel is unbiased and easy to understand and the comments are interesting too.

You are very confused and wrong. Reread the article.


http://www.telegraph.co.uk/finance/personalfinance/investing/shares/11437775/Standard-Lifes-decision-to-return-nine-shares-for-every-11-has-left-me-worse-off.-Why.html


SL has more of your money before the redemption than it will have after it. If profits remain the same you will get more return for each £ you have invested with them. Lovely


Giving you money back effectively reduces the value of the company by what they have returned. No profit there but if they couldn't find a use for that cash perhaps you can?


If they wanted to declare a dividend totalling say £1000 and they had 100 shares you would get £10 per share. If they redeemed 50 shares so that there were only 50 left you would get a dividend of £20 per share. The company simply decides the total value in £'s that it wants to pay & divides it by the number of shares that are going to receive it.

bowlhead99

There is an article in the Telegraph dated 2/3/2015 answering an email ...

As you mention, I see the headline of the article is "Standard Life's decision to return nine shares for every 11 has left me worse off. Why?"

This is not actually the question they went on to ask and answer.

The answer to that specific question is "the return of capital has not left you worse off, it has left you better off, with the same overall value in your hands and owning a share of a more efficient company".

If you simplify it, to a pure cash perspective ignoring the efficiency gains of your company from distributing your cash pile, you are not worse off, you are break even. But at no point do they attempt to answer the headline question posed, by telling somebody that they are mistaken for thinking they are worse off. They ignore it and write a different question for the body of the article, having baited in as many readers as possible with a sensationalist headline about people being made worse off, which they never try to back up. This is the way journalism works these days, unfortunately.

The question that they put in the Q&A article was not "I have been left worse off, why?" ; it was "where's the benefit?"

babyj3 wrote: »

Helen Miah has put it simply and briefly so it is easy to understand

The question was basically, I am getting some cash back but I will have fewer shares at the same value they used to be, so I don't seem to be getting any extra value overall, in what way am I better off?.

The answer to that is that the way you are better off is that you previously owned an inefficient company with a fifth of its value sitting in cash in a bank account, which would not generate very good returns for you; while now you will have an efficient company with a more sensible amount of cash in its bank account and a fifth of the value returned to you in cash, so you can invest that surplus cash in something that generates good returns for you.

Like into this new, efficient company, or some other efficient company, or a high interest bank account paying 5% a year risk free, or whatever floats your boat.

However, the letters page of a newspaper is not the place for Share Centre staff to educate the masses about how to understand intrinsic investment value. Newspapers want soundbites from people like Helen and have a limited wordcount. So, Helen focussed on the pure 'valuation of everything pre- and post- consolidation' and said it is simply a return of capital; it is not free money.

Which is partially true. The free money (via increase in overall market value of the business) was obtained by the act of agreeing to sell Canada and return proceeds to shareholders - which was viewed positively by the markets, creating value. If Canada had not been sold, the value would not have been created and the SL valuation would be lower.

But importantly, if Canada had been sold and the proceeds not returned to shareholders, with a strategy of keeping it on balance sheet instead, the valuation of the business would not have been so high as it now is, because everyone would think the board were buffoons, for mismanaging the cash. Less value would have been created.

There are 10 comments so far regarding this article
I suggest anyone with any questions reads this article which I feel is unbiased and easy to understand and the comments are interesting too.

It is easy to understand because it doesn't try to give a full answer.

The same basics - the fact that the act of consolidation does not create or destroy value ; the value was created by agreeing to sell Canada and return cash to investors - was explained further up this thread.

Some of the comments below the article make sensible points. Some of them are funny, like "Perhaps like many large Companies SL simply wish to reduce their shareholder base. I wouldn't be surprised if this was one of the reasons for the disposal, although SL would never admit that in public". Yes I'm sure they decided to sell their largest overseas operations just so some smaller shareholders would sell up, and not for any business reasons.

I note that of the few comments posted, that person who comes across as a cynic and has some criticism still intends to hold their shares and buy more and are happy with the company overall. Must be just you that doesn't get it, eh babyj3

eispy

I am a small shareholder (just over 600) and an unemployed non tax payer with a very limited knowledge of such financial matters. I have read the Standard Life Q&A sheet and most of what has been written here but I have to say I am no clearer as to what option I should go for..... and to be honest I don't think I'm alone! Can anyone tell me please what option would be best for me, the Income Option or the Capital Option? I feel there are plenty of people in the same boat as me who will do nothing simply because they don't know what to do so any help would (in simple terms for a simple lady would be very much appreciated.

bowlhead99

In simple terms if you do nothing you will receive a dividend of about 600 x 73p = £438. This will be income but as people don't pay tax on UK dividends unless they are a high rate taxpayer, and you are not even a low rate taxpayer, there is nothing else to do except spend the £438 cash. Or put the cash into savings, or use the cash to buy more investments via a stockbroker or investment platform, etc etc.

bigmondy

If you would prefer to be "Holding The Folding" do nothing and take the money SL send you. £438 could be a nice wee trip eispy.

Alternatively - if your instinct tells you the share price will go up significantly (hmmmm?) then reinvest in additional shares.

Treat yourself to a wee windfall.

zolablue25

bowlhead99 wrote: »

This will be income but as people don't pay tax on UK dividends unless they are a high rate taxpayer,

Ah, this is news to me. I had decided to go for option B as I didn't want to pay tax on the payout, but as I'm a standard rate taxpayer anyway it shouldn't make any difference. Thanks for that little nugget of information, I may as well stick to the C option.

EB2015

So if SL have this money that they don't want to leave 'sitting' there not investing could they not have used it to reinstate the FULL MEP 'promise'?


Those with endowments may remember that SL made a 'promise' in 2000 to cover shortfalls on endowments. They then (in 2004) decided (reneged?) that due to (more) poor performance/diminishing assets that their 'promise' would only pay between 40-70% of what was originally agreed UNLESS 'in the unlikely event that our assets increase we will increase the MEP to that originally stated i.e. 100%'


So, it appears that SL 'promises' to their endowment holders carry far less weight that those to their shareholders...I wonder why?...perhaps this should act as a 'red flag' to anybody considering 'investing' in a SL product rather than investing in their shares :-)