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

bowlhead99

amateur_investor wrote: »

Most of the shareholders are of the understanding that they will neither gain of lose as a result of the consolidation.

That's right, most shareholders have this understanding. They and you are entirely absolutely 100% correct on this point. A share consolidation, on its own, simply changes the number of shares that are in issue and therefore the value per share. Slicing up the total pot in a different way, so that everyone still owns the same percentage of the company, does not by itself create or destroy value.

It seems reasonable that shareholders should get something from the sale

They do. There was a sale, which changed the total value of the company for the better. That is what they got from the sale.

and £1.7bn

The shareholders are getting paid £1.75bn in cash in the format that they most prefer - either as a dividend or as capital proceeds, selected by themselves to best fit their personal circumstances.

The £1.75bn has been split up between all the shareholders to 73p for every share. Each shareholder will receive 73p for every share they own, which they would not have received if the company hadn't sold its Canadian operations for CAD 4 billion.

Chris75 wrote: »

The form suggests that for a standard rate tax payer who has not used his full Capital Gains Allowance the choice is tax neutral but that seems odd.

The form says that for those choosing income they will receive a tax credit equal to the basic UK tax liability.

As no such liability, nor tax credit, would arise for those choosing the capital option does this not mean that as far as Standard Life is concerned it is effectively distributing more to those that choose the C option (to pay for the tax credit) than it does to those who choose the B Option?

No, SL doesn't have to pay for the income tax credit. It is a good corporate citizen and pays its corporation tax to avoid fines or sanction from HMRC, but that is all it needs to do.

HMRC give a 'notional' or 'imputed' tax credit to individual investors receiving dividends that it pays, because HMRC set up a system which incentivises people investing into companies - whereby basic rate taxpayers only have a 10% tax rate on dividends and are granted a notional tax credit which covers it. For every £90 dividend declared by the company, HMRC give the notional £10 tax credit. Then the basic rate taxpayers go to pay their 10% tax on the £100, which is only £10, and find that it's entirely covered by the tax credit.

But the company can just declare and pay out the £90, it doesn't have to pay out £100. It pays out the £90 and basic payers receive the £90 and don't individually have to pay further taxes. Alternatively they could pay out £90 as a capital return and if the investor didn't have a gain that exceeded their annual capital gains allowance, the investors don't individually have to pay further taxes.

Either way, the company only physically pays £90.

babyj3

amateur_investor wrote: »

This comment doesn't help.
I don't understand a lot of what is mentioned in previous posts. I'd just like to know why standard life shareholders get nothing from the sale and £1.7bn.

I feel misled/misinformed by Standard Life when they wanted my vote in Septenber 2014 - end of story
There are a few posters on here who are obviously much more intelligent and have vast knowledge of investments that is far beyond me and I bow to their superior knowledge
There have been examples of cakes and trees - Mary Berry and Roy Lancaster should be watching their backs
So as a simple and unsophisticated investor all I can see is that Standard Life are selling my own shares to give me back my own money which is something I neither wanted,asked for or voted for then there is the matter of the reduced dividend
It seems to me that they used the sale of the Canadian company to lead shareholders such as me to believe that I would be receiving a windfall much the same as when they gave me one a short while before because profits were so good and that part of the money from the sale would be reinvested in the company and some returned to shareholder as a windfall. That is how the letter read to me
To me it is as if I hold £500 worth of premium bonds and I am told that I have won £100 and that is sent to me but then I find out that ns&i have reduced my holding to £400 meaning I only have £400 going into the next draw and in fact they have only returned my own money to me and it wasn't a win at all. I find that a better analogy that cakes and trees so Sir Alan Sugar should watch his back too
Simples as the meerkats say
Although I am sure some in here will reply trying to make me feel simple

Chris75

I tend to agree with a previous post that expressed surprise that the default position wasn't the capital option rather than the income option. A lot of Standard Life shareholders were given their shares just because they help policies with Standard Life rather than that they actually purchased them. Many of these individuals will not be experienced investors. In this situation it is unlikely that they would have used their CGT option but I would have thought less unlikely that they could find themselves as higher rate income tax payers.


I am a standard rate income tax payer but haven't used any of my CGT allowance. I have opted for the B Capital distribution. I don't think that I have made a mistake but if I have please tell me.

Chris75

babyj3 wrote: »

I feel misled/misinformed by Standard Life when they wanted my vote in Septenber 2014 - end of story
There are a few posters on here who are obviously much more intelligent and have vast knowledge of investments that is far beyond me and I bow to their superior knowledge
There have been examples of cakes and trees - Mary Berry and Roy Lancaster should be watching their backs
So as a simple and unsophisticated investor all I can see is that Standard Life are selling my own shares to give me back my own money which is something I neither wanted,asked for or voted for then there is the matter of the reduced dividend
It seems to me that they used the sale of the Canadian company to lead shareholders such as me to believe that I would be receiving a windfall much the same as when they gave me one a short while before because profits were so good and that part of the money from the sale would be reinvested in the company and some returned to shareholder as a windfall. That is how the letter read to me
To me it is as if I hold £500 worth of premium bonds and I am told that I have won £100 and that is sent to me but then I find out that ns&i have reduced my holding to £400 meaning I only have £400 going into the next draw and in fact they have only returned my own money to me and it wasn't a win at all. I find that a better analogy that cakes and trees so Sir Alan Sugar should watch his back too
Simples as the meerkats say
Although I am sure some in here will reply trying to make me feel simple

See my reply post 71. The company will generate the same profit using less of your money.


Standard life explained exactly what they intended to do when the issue of the sale was first discussed. They have misled nobody.


http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCYQFjAA&url=http%3A%2F%2Fwww.standardlife.com%2Fstatic%2Fdocs%2F2014%2Fkeyqa.pdf&ei=XHzoVMK8BM_saIqegqAH&usg=AFQjCNHNk0I3Dr_TPsflJowuheO4gY6oig&bvm=bv.86475890,d.d2s

HarryD

babyj3 wrote: »

Although I am sure some in here will reply trying to make me feel simple

No, no. You are quite correct when you say SL are returning your own money to you.

Can you quote from the SL communication in September the passage that lead you to believe you were going to get a "windfall" from SL?

As said previously, if you'd rather have SL shares than cash, use the cash to buy some more SL shares.

Still, could be worse: if Standard Life were to be bought by another company you could find all of your shares translated into cash!

EnglishMohican

Chris75 wrote: »

I am a standard rate income tax payer but haven't used any of my CGT allowance. I have opted for the B Capital distribution. I don't think that I have made a mistake but if I have please tell me.

I do not believe you have made a mistake but most probably you have gone to some (minor) effort to change to B when it is very unlikely to make any difference. Lets say you have 1000 shares, then you will get £730 pounds whichever option you choose and you will not have to pay any extra tax in either case unless you happen to earn enough money for the £730 extra income to make you a higher rate tax payer - which it might but from what you say, probably does not.

bowlhead99

babyj3 wrote: »

To me it is as if I hold £500 worth of premium bonds and I am told that I have won £100 and that is sent to me but then I find out that ns&i have reduced my holding to £400 meaning I only have £400 going into the next draw and in fact they have only returned my own money to me and it wasn't a win at all. I find that a better analogy

OK perfect, something you can relate to. Let's use that.

Let's say you hold £500 of premium bonds. Imagine if you could vote to decide on a one off special event.

If you vote yes, you win a one off £100 and the standard win rate of premium bonds will increase from an a return of 1.35% a year to 1.5% per year going forwards, but you will be distributed £200 of cash from your premium bond account .

Would you like that? As the £100 'win' represents many many years of normal returns, and you prefer better win rates, and you can always reinvest the cash if you want it in the premium bond account instead of in your hand, you would be mad not to vote 'yes please' on your voting slip.

So, there are two events that follow.

Firstly you get the one-off credit which increases the value of your PB account from £500 to £600. A great thing, because at the usual average rate of return it would take more than a decade to turn £500 of premium bonds to £600 by simply waiting for normal wins.

Then secondly, they physically give you £200 from your premium bonds account. So your premium bond balance goes down from £600 to £400. With only £400 invested, you will not receive quite so many wins going forwards, as when you had £500. The wins will be a slightly better rate of return than they used to be, because the rate has gone up to 1.5% from 1.35%. But the total amount of money you have now got invested in your PB account is only 80% of what it was, so your total returns from that investment will not be as many pounds a year as they were.

So, by voting for that special one off event, you turned a £500 premium bond account that was returning 1.35% a year, into a £400 premium bond account returning 1.5% a year plus £200 of cash in your hand. That seems like a pretty good deal. If you would prefer to have more than £400 in the PB account, you can put some more cash into it and have less cash in your hand.

This is the same as your SL situation:

1) You had a vote whether to carry out a business transaction which increased the overall value of the company you own, increased its profitability rate going forwards, and gave you some cash back in your own hand. You accepted it.

2) The company you own increased in value, a great thing.

3) Then you are being sent the cash that they said you would be sent, which is a slice of the value you held in the company

Now you are complaining because the action of physically being sent the cash in stage 3 did not increase your profits going forwards. They are just sending you your own money. That is not a valid complaint or a reason why you shouldn't have passed the vote in step one.

That is like saying that taking money out of a premium bond account is rubbish because it is just your own money and you'll receive less going forward. You're right, taking money out of your investment does not in itself make or lose money. But taking money out which you can put back in is neither here nor there.

What is relevant to your overall net worth is the profitability/ win rate going forward and the total amount of money you have inside and outside the account. If you are given an opportunity to vote for the total amount of money to increase and the win rate to improve going forward, you should vote for it. 99.66% of investors voted for it.

killerkev

I think for a lot of SL customers who hold shares will have no idea of the working of the stock market (I only have a basic knowledge)
I have collected 1000's of shares over the years have never taken the dividend content it leave it to grow .

I don't think SL has explained from the start what it is doing very well

It confused me at first but I think for most taking the cash as income is the best option (C shares) is the best option.

1 SL has sold parts of the company
2 SL now has lots of spare cash
3 SL will now give some back to those who own shares
4 SL is doing it in a way that will mean for most no tax will be payable
5 SL is now worth less so to keep the shares at approx same value 11 shares become 9 if 1 share is £4.20 before consolidation should still be worth approx same after consolidation
6 Shareholders new shares + cash = same as old holding (no loss)
7 Everyone free to sell new shares at market value if the wish

For those that received their shares free you now have cash in hand + shares which will hopefully continue to grow and pay dividends, of course they could also become worthless!! (the risk of the stock market)
If you wish can buy more shares with your cash and may-be even end up with more shares than you had before !!!

I think all that is correct???? experts will correct me I'm sure
But for me I am now happy with the proposal even if I misunderstood it at first!

gt94sss2

Spidernick wrote: »

All in all, I still maintain that the default position should be capital and I really cannot see why it was not set up as such. I'll advise when I hear back from Standard Life on this.

Argue while you can - from April companies won't be able to offer a choice between income and capital for such payments as they do now.

Regards
Sunil

danegee

My aunt has 1,517 shares.

I basically understand the gist of B/C share options. However, I have no experience in shares.
My aunt was given the shares and has asked me for advice.
After reading through this is the conclusion I make.


Would I be correct in assuming that if she takes c share option she will receive a cash payment of £11,007.41p which is taxable at 10%?
Meaning she would receive a cash payment of around £9,906.

If she takes b share option the dividend will be paid in shares and treated as capital receipt.

here are some questions I have on some points I am not too sure about.

She is a basic taxpayer, retired. Would it be wise for her to take the cash dividend.

What happens to her existing 1517 shares valued at 401.5 if she does takes the cash option?
would she then have fewer shares ( around 1,227) valued at 401.5 and of course NOT receive the B/C share scheme proceeds ( which makes the value post B/C share scheme the same as her existing ordinary share value pre scheme).

So, basically would her 1517 odd shares valued at around 6,090.75 will now be around 1,227 shares valued at about £4,950 ( excuse the quick off the head math) if she takes the cash payment.

Whereas they will be fewer but be worth more & have the same value if she chooses B share option

Thanks in advance