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

bigmondy

Cannot argue with that EB2015.

As someone with 40% shortfall and a piddling insulting MEP four years ago - I too feel aggrieved. However SL were not alone in this - the whole financial community were complicit.

bowlhead99

As was explained earlier, they did split out the ownership of their assets when they demutualised so people with big investments with them took an ownership slice of the company. Those ownership slices have improved in value since they were handed out, just as the ownership slices of lots of businesses have improved in value in recent years.

SL are not currently selling endowment products or things linked to the value of SL shares, as investments. So you can go and buy a product from them or you can go to a broker and own a piece of their company. When you buy a product you are buying a product not a right to the profits of the person selling the product.

I don't think the desire for SL to serve its shareholders, just like other financial services groups server their respective shareholders, presents any particular 'red flags' for people buying SL products in the current market. Apart from the fact of course that they may underperform rival's products, but that is what investment risk is all about and is why people pick and choose between rival companies before investing.

I do not currently have investments in any SL products so this is not a recommendation.

However SL were not alone in this - the whole financial community were complicit.

Endowments didn't end well for a lot of people who bought them from a lot of suppliers. SL are not particular bad guys IMO.

EB2015

Hi Bowlhead,


yes, what you have said is factually correct but...and there is always a but!....the value of the share that endowment holders were given in no way reflect the shortfall on the majority of maturing endowments; just look at the previous posters situation.


What the whole situation does show though (and what I meant by a 'red flag') is that it is very important for an 'investor' (even prospective policy holders) to understand FULLY what THEY are doing with THEIR money and not to rely on the advice of an FA, however independent HE/SHE may be...as when things don't perform its not HIS/HER loss as HE/SHE still gets paid.


Caveat emptor!

bowlhead99

An FA is giving advice. They are not telling you that you have to do something. If they are regulated to give independent advice you should have some certainty that their advice is fit for purpose, but they do not have a crystal ball.

You are right that things may not perform as well as you or the adviser expects. Normally things do perform within the range of what is known could happen. If the adviser is independent and regulated and recommend you do something and do not tell you there is any risk, or they put you in a product that a reasonable professional advisor would not have thought was suitable for your needs given all the facts, or you did not appear to understand what the product was, then they do take on the risk of it being a mis-sale.

Of course if you are taking advice of a 'tied' financial advisor or sales agent who is not selling you independent advice, than you have to take it more with a pinch of salt. Caveat emptor as you say.

Joshuam

Clear as mud just spoke to standard life.Im a basic rate tax payer 20% not sold any shares at all, not used any capital gains tax allowance. If I stick with the default position C the payment will be minus 10% tax. I thought looking at posts on here I would get all of the 73p per share :j:j

bowlhead99

You will get the 73p per share don't worry.

Basically what happens is they tax man gives you a 'virtual' tax credit of one nineth of the value of the dividend - they give this to all UK taxpayers.

So they say to you that your dividend is 'worth' in total 81.111p including the value of the credit.

Then HMRC says that as a basic rate taxpayer you need to pay 10% tax on your dividends which is the standard rate for basic taxpayers earning dividends. It would be more if you were a higher rate taxpayer but on basic rate you only pay 10%.

This 10% is charged on the 81.111p. That comes out to 8.111p tax.

Of course, you never received the 81.111p full dividend, that was just the figure gross of tax credit. What you physically received was 8.111p lower, at 73.0p.

HMRC say jolly good, this tax credit malarky has covered your 10% tax liability on the notional 81.111p and you are allowed to keep the 73p net cash that SL sent you.

So basically SL send you 73p a share and you keep it and don't have to pay any of it to anyone. HMRC see it as a notional bigger number that you paid tax on, but let you fund the tax with a free tax credit that they give you to incentivise you holding shares in companies. Only if you were a higher rate taxpayer, and needed to pay more than the 10% on the 81.111p so that the tax bill wasn't covered by their free credit, would you pay any physical extra tax out of the 73p that arrives in your hand.

Clear as mud?

Basically all you need to know is that as a basic rate taxpayer if you receive a dividend you will not receive less cash per share than the UK company declares, whether it is SL or Tesco or Lloyds or whoever, because you don't need to pay any tax because it's covered by a free credit. Only higher rate taxpayers need to worry about choosing between a dividend (that they pay tax on and isn't fully covered by the credit) or a capital gain instead (the B shares).

Simply ignore the forms and you will get the standard option which is C shares and a dividend of 73p in your hand with no further tax to pay.

Joshuam

Thanks bowl head,
Mud is clear option c for me then. Set him on SL he's doing your job for you

bowlhead99

Joshuam wrote: »

Thanks bowl head,
Mud is clear option c for me then. Set him on SL he's doing your job for you

Really I am doing the job of your tax advisor. The company is just paying dividends out like thousands of companies do every year. They put a Key Questions and Answers pdf together to accompany the Circular. I would encourage people to read it: http://www.standardlife.com/generalmeeting/index.html

extract from first page:

Option 1: Income Option (C Shares)
It is expected that the dividend should generally be treated as income for tax purposes (in the tax year ending 5 April 2015 in the UK and the tax year ending 31 December 2015 in Ireland).

If you are an individual UK taxpayer, you should be entitled to a tax credit equal to one-ninth of the dividend received. For basic rate taxpayers, this tax credit should fully satisfy the income tax liability arising on receipt of the dividend, and no further tax should be payable.

Joshuam

Yes thanks tax advisor(bowlhead),didn't read the circular fully got in a panic after speaking to SL

IanSt

Hello everyone,

There's some good advice in here, but didn't spot an answer to my particular question.

My wife holds these Standard Life shares from within an ISA, does it make any difference for her whether she takes the B or the C option.

I thought the capital route would have been more tax-efficient, but I have to admit it's all very confusing...

Thanks for any assistance