Scottish Widows windfall bonus

Scottish Widows was taken over by Lloyds TSB

The new owners of Scottish Widows have announced that policyholders will receive substantially higher windfalls than had been expected.

The average windfall resulting from the life assurer's takeover by Lloyds TSB will rise by 8%, from £5,600 to about £6,050.

The increases have resulted from the fact Scottish Widows has grown in value.

I hope these members will agree that this is a very satisfactory outcome all round."

Mike Ross, Scottish Widows

The Edinburgh-based company was bought by Lloyds TSB late last year.

It was estimated at the time to be worth around £6.7bn. Since then its value has increased and is now thought to be worth £7.3bn.

Of this, £5.8bn is being paid as windfalls by Lloyds TSB to qualifying members of Scottish Widows.

The remaining £1.5bn will be paid out over time as policyholder benefits to eligible with-profits members.

The fixed compensation, with a value of £500 and payable to all 1.6 million qualifying members, remains unchanged.

Mike Ross, chief executive of Scottish Widows said: "I hope these members will agree that this is a very satisfactory outcome all round."

Scottish Widows is based in Edinburgh

However, cheques to the 900,000 with-profits policyholders will not be sent out in June as scheduled, but will be delivered in the second half of August.

Scottish Widows joined a growing number of other mutual life insurers that accepted takeover bids, including Scottish Amicable, Clerical Medical, Scottish Mutual and NPI.

The takeover ended 184 years of independence for the company, set up in 1815 to look after the widows and orphans created by the Napoleonic wars.

The country's sixth largest life assurer sent shockwaves through financial markets when it announced last year its intended link with a leading British bank.

Lloyds TSB, which has climbed to the top of the European financial services industry with a string of acquisitions, had for months been looking for the next deal to maintain its earnings momentum.

Scottish Widows manages funds worth £33.7bn and has a strong presence in the growing independent financial advice market, where Lloyds is relatively weak.