Standard Life De-mutualisation

tinman_4

I've just won a red alert letter from Standard Life. The kitchen table is now strewn with scribbled calculations but all I've succeeded in doing is making my head hurt.

Can anyone shed any light on the amount policy holders might expect as a windfall bonus?

Apologies if this topic has already been covered

gillykins

Hi tinman,

I won one of those last week. I've read somewhere that it will be the poxy sum of £1400. A lot of people are now considering is it worth holding onto their policies until 2006 when the payout is due. My policy now has a shortfall of £7000. It's all very worrying, I've not slept properly for days with worry.

dunstonh

It will likely be somewhere between £300 and £30,000. Most being at the lower end. It would be guesswork at this time but i reckon 3-5% of your policy value (with profits only) wouldnt be a bad bet.

You should check the red letter carefully. There have been cases with the 4% projection figure is the same or lower than the guaranteed minimum return (which isnt possible). Also SL seem to be altering final bonus on maturity an current maturities of long term endowments are still paying surpluses even though the same people were getting shortfall letters in the last few years.

There can be good reasons to stay but there can also be good reasons to go. There is also quite a lot of unknown in the SL situation. You views on the "unknown" will often lead you to make your own decision. i.e., if you think there will be a mass surrender of policies after demutualisation then returns are likely to be hit for those that stay.

EdInvestor

Hi DH

dunstonh wrote:

It will likely be somewhere between £300 and £30,000. Most being at the lower end. It would be guesswork at this time but i reckon 3-5% of your policy value (with profits only) wouldnt be a bad bet.....if you think there will be a mass surrender of policies after demutualisation then returns are likely to be hit for those that stay.

Perhaps you could advise the broad source of these views?

No large mutual, particularly of the size of Standard Life has given a flat rate basic windfall of less that 500 pounds in the past,I think, for a start?

And with a mutual which has listed on the stockmarket and paid out in free shares - eg Friends Prov in 2001 - the minimum woindfall even for a relatively recent joiner was around 10% of policy value ( in addition to the flat rate of 500 quid)?

Do you really think that Standard Life will pay out at a lower level that Friends Provident? If you do, I'd be interested to hear your reasons. :eek: :eek:

dunstonh

I have no sources specifically. I just get the impression that it will be lower than those in the past. Most commentators have suggested it will be lower but its not something you can put a figure on. I just took the 10% average that was paid out on Norwich Union and consider SL to be that much weaker than NU at that time, so halved it to get the 5%.

FP is considered to be financially stronger than SL and in a better position all round.

As I said in my post and the bit you quote. Its guesswork at this time.

Gaz-R

What exactly is this all about.

I have policies with SL and have been sent statements (and one is failing to secure the payout expected )but have no idea what your saying regarding windfalls ?

Gaz

dunstonh

Standard Life is probably going to demutualise some time in the next 18 months. If you hold an investment in the with profits fund with them you are a member and there will be a potential windfall. (legally, they dont actually need to pay anything to the members but that hasnt happened with any of the others).

carnet

Gaz-R wrote:

What exactly is this all about.

I have policies with SL and have been sent statements (and one is failing to secure the payout expected )but have no idea what your saying regarding windfalls ?

Gaz

The plan is that SL will shed its mutual status and float on the Stock Exchange sometime after its 2006 AGM. As long as it gets the 75% agreement it requires from its voting With Profits policyholders - and is not bought by another firm beforehand.

If all goes through, WP policyholders will be entitled to either cash or shares for loss of their voting rights ( this has, in recent times, been a flat rate of £500 per member from other demutualising Life Cos.) PLUS a VARIABLE rate based on the value of their WP policy(ies) at some, as yet unknown, date AND the length of time they have held these policies.

No-one yet knows how much this will be (probably including SL), but suggestions I've seen have ranged from 3% to 20% of policy values.

EdInvestor

Hi DH

dunstonh wrote:

I just get the impression that it will be lower than those in the past. I just took the 10% average that was paid out on Norwich Union and consider SL to be that much weaker than NU at that time, so halved it to get the 5%.FP is considered to be financially stronger than SL and in a better position all round.

I wonder if there is some confusion here. Most certainly Std Life windfalls will be lower than they would have been in the past (such as at the DM attempt in 2000, when windfalls were estimated at 40% of policy value). But lower than other companies's DM Bonuses in the past? I doubt that.

You have to look at a number of factors to estimate the DM bonus, of which the state of the stock market is a very important one: so is the state of the company, its size, its global reach, its sales,and its embedded value/financial strength (the latter has suffered at StdL because of the loss of a big chunk of free assets, but not I think to the extent that it's worth less than Friends Prov!)

It seems reasonable to suggest that if Std was to float right now, it's market capitalisation would be in roughtly the same area as Legal and General. That's double the forecast 18 months ago , and about half of the 2000 estimate.Virtually all of this improvement is down to the rise in the stockmarket. Standard will be valued by comparison with the its peers, the other big life companies - Aviva (NU), Legal and General and the Pru.

The market perceives that the life assurers are in recovery mode.And so they seem to me. All except Standard showed healthy increases in sales last year, and Standard managed to minimise the damage from the crisis at the beginning of the year. Now a turnaround is under way.

Sales comparison:
Aviva 2.5bn
Pru 1.85bn
Std Life 1.4bn
Legal and Gen 1bn
Friends Prov 434m

Standard is a bigger company than L and G (and dwarfs Friends Prov) and would thus normally attract a higher valuation.But of course it has lost a big chunk of its capital, whereas L&G is strong. Thus they are probably worth much the same now. If so, such a valuation would work out at an average of 3000 pounds per member (there are 2.5m members).

BUT we have to give some of the capital that will be raised to the company to replace what was lost, so that Standard life plc (of which we will be the shareholders) can be a successful business after the float.How much? At least 2-3 bn probably.So that would knock the windfall back to an average of 2k.

Still, that's double what we could have expected a year ago when the DM was announced. And there is room to hope that if the management turnaround goes well - they have some very good people in place now - and the stock market goes up, we could get more.

rchddap1

If I get anything I'm going to consider it a bonus. I'm not going to plan what to do with it, or even think about it. If it happens, it happens and I will be happy. If I don't count on it then it doesn't matter if its £300, £3k or £0.30.

In all honesty we won't know until it actually happens and anything we say now is purely speculation....and yes I know its only for with profits holders...and yes I am one.

Kantankrus_Mare

I'm pretty new to this site but have been following the endowment threads with interest as I am in the middle of a complaint myself.
We have two policies with standard life to pay off our 35,000 mortgage in 2013. Both are showing a potential shortfall of 7,000 each.

Our first policy was sold by Nationwide and we have received a letter saying they agree that the policy was mis sold.....will find out in 2 weeks what they are offering but not holdong my breath.

The second was sold by Halifax and still in process of sending info back and forth.

My worry is that when compo..if any has been received and ive paid it off my capital....also any payout from demutualisation of standard life is paid off the capital...what do i then do??

Stick with Standard Life as i only have 8 yrs remaining and hope for the best? Or try to sell policies and transfer any remainder onto repayment mortgage?

Reading all different peoples ideas on here can be very confusing but and advice would be appreciated. (be gentle with me.... lol its my first ever posting!!)