Standard Life Maturing Policy - Maturity Bond or Not?

jrh2254

My Standard Life low cost endowment matures next month. As expected it is significantly short of the target amount. Standard Life says :

" an option allows me to reinvest with Standard Life through a Maturity With Profits Bond. However, membership in respect of my old plan will stop at maturity. If I reinvest through a Maturity With Profits Bond, membership starts when the new plan starts. There is no continuous membership of the Company."

So is it worth it for a possible windfall next year?, and if so, do I have to invest all the proceeds of the old policy?, + how do I arrange it?

Many thanks.

ReportInvestor

Hi jrh 2254,

This is a fraught area for your first post. Sorting this out and publishing a profit figure are the two things I would most like to happen at Standard.

No-one can advise you on this. My own instinct would be to put a small proportion of your investment into a Standard Life Bond in the hope of collecting a possible £500 windfall. But there is no guarantee of getting anything. - Could you let us know what the minimum investment is in such a policy and what the RIY (Reduction in Yield) is on any quotation? My other gut instinct is that a large investment in the With Profits Bond would not yield up a proportionately larger windfall because - even if you turned out to be eligible for A windfall - the short investment time period would count against you. This seemed to be the approach of Standard's appointed actuary, Mike Arnold, when he sorted out the Friends Provident demutualisation.

The size of the basic windfall and your eligibility for it are not clear. Standard Life can't be expected to address the first, but they should have a policy on eligibility already in place to help investors like you.

That they do not, in spite of questions at the AGM, is clear from these extracts from a Scotsman article of June 2005.

Scotsman
".....Standard Life officials have always maintained it will treat those whose policies have matured between when it announced its intention to shed its mutual status, and the likely flotation next summer, as "fairly" as possible. That has never been fully explained.

Between 150,000 and 180,000 with-profits policies will have matured during the two-year gestation period.

But many policyholders could be left completely out of the calculations.....

Pressure is now expected to mount on officials to clarify one of the key details as the firm heads towards privatisation.

One disgruntled member from Inverness, who did not want to be named, told The Scotsman: "I'm one of those unfortunate people whose policy matures in October [2005]. Standard Life had said I'd be treated 'fairly', but now I have been told: 'If you don't have a policy at the time of demutualisation, you don't get a penny. It's as simple as that'............."

"........A spokesman for Standard Life said yesterday details of the demutualisation scheme were not yet set. But he added: "If you take a very black and white view, if your policy has matured before the change in status, the natural train of thought is that you've exited from that organisation before the change in ownership rights........"

I'm afraid you have been left hanging in limbo .

Looking on the bright side, at least one advantage of your policy maturing when it did is that you may not suffer from any future falls in policy values . Read Mark Atherton in the Saturday Times Money section for the grisly details of why policy returns across a range of companies may not recover in a hurry. Times link - With Profits; Full of empty promises

I do suggest that you write to Standard to ask them to spell out where you are on windfall eligibility. The more people that address this question, the sooner they may come up with an answer.

The latest news appears to be that they may possibly offer all 7 million customers the chance to purchase shares on preferential terms (to be decided). Don't confuse these with free windfall shares based on your with profits holding. But they could be worth considering if you keep some form of link to Standard Life between now and DM (demutualisation).

Would you be considering a with profits bond at Standard Life if there wasn't a windfall prospect? I suspect not. But Standard has a good investment record in other areas, e.g. commercial property.

dh may appear to give his thoughts on the Standard Life WP Bond tomorrow. I will leave you with the thought that it comes without an MVR free exit date, should there be a stock market fall - so it should be a long term commitment (10 years +).

EdInvestor

Hi jrh

....without an MVR free exit date


This is the problem IMHO. Let's say you invested a small amount of your maturing endowment into a WP bond, in order to keep membership and get a 500 quid windfall.

What happens if millions of people want to exit the WP fund after the DM, creating a "run" on the fund? This would normally lead to them slapping on an MVR exit penalty.

Standard know there will be a lot of people wanting to leave then and they have said they will organise an orderly withdrawal - possible a penalty free access to another non-WP product. In your case,a similar product would be another type of investment bond where the money is not invested in WP which you could then exit from without penalty (maybe!).

But if they renege on this (and they reneged on the mortgage promise, remember) then your money could be stuck in there, and the exit penalty could wipe out the windfall.

The company needs to be a lot clearer in the way it is treating people like you. :mad:

jrh2254

Thanks for your clarifying the clack of clarity on this issue! I will ask Standard life what the minimum investment is in the Maturity With Profits Bond. If its low enough I might just take a chance.

I will also ask them where I get the Maturity With Profits Bond forms - direct from Standard Life or do I have to go through a Financial Advisor?

The position I am in is made worse by the fact that around 6 months ago I lost my misselling case on what I believe to be a technicality. The Financial Ombudsman said that I would have won my case had I not re-mortgaged 4 years ago. I was time barred!!

So I receive my first red letter from Standard Life and complain immediately but because I re-mortaged 4 years prior to this I am time barred (3 year rule) - essentially I should have known the risks and complained at that time!

I naively thought the 28th Sept 2000 endowment promise applied to me. I even registered to view my policy on-line and downloaded periodically since 2000 all the forecast projections showing my policy on plan to beat the target amount (even at the lowest % projection) until the day I receive my red letter. I feel totally mislead. I wonder if Standard Life deliberately delayed letting people know the full extent of their problems to catch people in this trap, so that more misselling complaints failed?

I will let you know the outcome of my intended e-mail correspondence with standard Life.

Thanks again.

ReportInvestor

Thanks. That will be both interesting and useful :beer: .

Scotland on Sunday - The latest - A "must read" for jrh2254

A further concern about putting new money in the Standard Life With Profits Fund via its WP Bond is the relatively low free asset ratio [6.3%], which means that they can't invest so much in equities (thereby limiting future returns).

However one result of demutualisation is that Standard will raise new capital - so this may change for the better. But this in turn depends on what Standard chooses to do with the capital.

carnet

jrh2254 wrote:

I will ask Standard life what the minimum investment is in the Maturity With Profits Bond. If its low enough I might just take a chance.

The usual minimum investment into a StdL. WP Bond is £10,000 but this is reduced to £5000 for those rolling-over some or all of the proceeds of a maturing WP policy.

I did one of these roll-overs about 3 years ago and, by going through a discount broker, gained a total enhancement of 8.42 % (broker's gifted commission of 6.3% plus StdL's usual 2% enhancement of the total amount invested ).

After 3 years it is now up 12.8% on the net amount invested - the MVR has gone down from its near 8.5% in June 2003 to its present virtually NIL level .

The one great uncertainty is, of course, will members with WP policies maturing now, who roll-over all or some of their maturity proceeds, still be eligible for a (albeit much reduced ) windfall, ie the likely few hundred for loss of voting rights + perhaps a pound or two more in respect of their policy value/length of time in the WP Bond ?

As membership ceases upon maturity of the WP policy and starts again when the WP Bond is taken out - even if both events happen consecutively on the same date - I would, sadly, suspect not .

jrh2254

It was reported by Standard Life on Money Box yesterday that the cut-off for maturing policies was the 18th October 2005. So I read this as meaning that if your policy matures between 19th October 2005 and the date of demutilisation then you remain a member and get the windfall!
Mine matured in August 2005 :mad: