[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Wednesday, 31 March, 2004, 16:58 GMT 17:58 UK
Standard Life to dump mutual status
Standard Life headquarters
Standard Life said demutualisation was inevitable
Standard Life, the Edinburgh-based insurer, is to abandon its mutual status and seek a stock market listing.

A listing would mean many of its customers would be in line for windfall payouts of cash or shares.

It would also give the company access to fresh funding, helping it meet tougher new solvency requirements.

The 179-year-old mutual - hit by stock market falls and a declining market for its with-profits policies - is also cutting 1,000 jobs to lower costs.

A proposal to demutualise will be put to 2.6 million customers by 2006, Standard Life said.

The job cuts come weeks after it was announced that 360 UK sales staff were to lose their jobs.

The firm will also close its defined-benefit staff pension scheme to new entrants from November 2004.

Bonuses cut

Group chief executive Sandy Crombie said: "While being a mutual has been a key part of Standard Life's success in the past, we now believe that raising further capital by way of demutualisation is likely to be in the best interests of the company and its policyholders."

Standard Life: Key facts
4.6bn realistic surplus
90bn funds under management
Since 15 November 2003: Equity exposure reduced by 7.5bn
1,000 jobs to be cut in 2004
20% of new business sales are with-profits products, compared to 40% two years ago
16 November 2004: Defined benefit staff pension scheme to close
6 April 2004: AGM in Edinburgh
"There is an inevitability about demutualisation as a consequence of with-profits shrinking as a proportion of the whole business."

With-profits policyholders have experienced a series of cuts in the bonuses paid on their policies, as the company has coped with declining investment values and tighter requirements imposed on it by the Financial Services Authority.

With-profits products, such as endowments and some types of pensions, are designed to smooth out the peaks and troughs of stock market volatility.

Profits made in good years are kept in reserve to pay investors an annual bonus even when the stock market performs badly.

But the policies have come in for public criticism in recent years and many funds have struggled to recover from the stock market's fall between 2000 and 2003.

Standard Life said its sales of new with-profits products had halved within two years to 20% of new business sales.

Despite the difficult times of recent years, senior figures in the company have continued to receive large bonuses.

Mr Crombie earned more than 600,000 last year, an increase of 15.9% on the year before, of which bonuses made up 135,000.

Mutual process

By abandoning its mutual status, members would be likely to receive a windfall of cash or shares but would retain a say in the running of the company only if they owned shares.

PREVIOUS CASE HISTORIES*
Scottish Widows: Floated on 3 March 2000; 1.6m policyholders received 500 minimum payouts; 6,000 was average payout
Friends Provident: Demutualised on 9 July 2001; 1.7m members received 200 free shares; with-profits policyholders received additional shares
Norwich Union: Floated on 16 June 1997; 2.9m qualifying members received on average 300 shares; non-profit members received fixed 150 shares
*Source: Norwich Union, Scottish Widows and Friends Provident
Standard Life declined to comment on the potential size of windfalls and said it would be "misleading to suggest a figure".

Tom McPhail, head of pensions research at Hargreaves Lansdown, said he was not expecting large payouts.

"Giving there is some surplus capital and that they would raise some extra cash through the demutualisation it would be reasonable to expect most people could receive a few hundreds of pounds," he told BBC News Online.

"But I don't expect the bumper windfalls that we saw back in the mid-1990s when other life insurance companies demutualised."

Waiver rules

Usually, not all policyholders benefit because insurers impose restrictions on who qualifies.

New policyholders at Standard Life since February 2000 have been required to sign a three-year waiver, which signs away their rights to a windfall and to vote on the company's status, if the company demutualises within three years.

The loss of so many jobs is terrible news for the workforce and their families
Donald Anderson, Edinburgh council leader

Standard Life said any with-profits policyholder who has signed one of these prior to 31 March 2004, would now be eligible for a windfall and could vote on demutualisation.

But it said anyone who signed up from Wednesday, following the announcement, would not qualify for a period of three years.

Non with-profits policyholders, such as customers with mortgages, retail savings, mutual funds and healthcare products will not be eligible to vote or for any windfall benefits, it said.


Are you a Standard Life policyholder? Would you vote for demutualisation, or are you against the move?

I have mixed feelings about the proposed demutualisation. I can see both sides of the arguments but am likely to vote for the demutualisation on the grounds that it will partially redress the shortfall in the maturity value of the with profits policy that I hold.
Vernon Levy, Leeds, UK

I am totally opposed to the move to demutualisation
Roger Brailsford, Barrow in Furness

Demutualisation won't mean much to most policyholders like me. Rather than handing out cash windfalls to all policyholders, Standard Life should set up a fund to help those facing significant endowment arrears. That would be a positive move.
PC, Oslo, Norway

Although I would be sad to see the loss of Mutual Status I feel that, for at least the medium term future, it is the correct decision so as to foster a greater degree of stability.
William Ziegler, Ringwood, Hampshire

I will vote against it. I joined Standard Life because of its mutuality to benefit from greater growth potential. I will probably look to move my pension away from them if demutualisation occurs.
Alistair, London, UK

Any extra cash after demutualisation, should be used to compensate those unfortunate individuals who are facing large shortfalls on endowment policies.
Keith

I have held a "with profits" pension with them for a number of years. Only if windfalls were in the thousands (at least 5,000 to 10,000) would I vote to demutualise. For hundreds of pounds it isn't worth it. The company will only adopt an unpleasant ruthless attitude if it becomes a PLC, and that will ultimately benefit only major shareholders like directors - not those of us with pensions.
Steve, Worcester, UK

We would be several thousand pounds better off if it had gone through when the issue was last raised
Pete Weller, UK
I wish the value of my Pension had grown by 15.9% last year in line with Mr Crombie's pay rise.
Richard Hearn, Dorking, Surrey

I'd vote yes and maybe gain back what's been lost by under-performing policies.
Dave, Liverpool, UK

I see demutualisation as the only way of recouping at least some of the losses incurred on the with profits policies. Performance of the policies could not get any worse.
Chris Tolley, Derby, UK

Should have done it years ago.
John Coleman, Lymington, UK

Yes I would vote for demutualisation.
Dennis Kilbey, Romford, Essex

I am and I would. I like Standard life and the principal of mutuality. I am however disappointed at the high level of remuneration for some senior staff given it's recent performance. If they become a PLC then these remuneration levels will at least face the same level of scrutiny that other PLCs face.
Alistair, Lancaster, UK

I think that policyholders will be better able to exert influence as shareholders than as policy holders and welcome this move to demutualise.
Robert Russell, London, UK

I am totally opposed to the move to demutualisation. I have an endowment policy that, on current trends will not produce enough revenue to fully pay off my mortgage. Standard Life promised people like me that, providing they remained mutual, they would make good any shortfall. It would now appear that this promise will be reneged upon. Another good piece of PR for the financial service industry...Not!!
Roger Brailsford, Barrow in Furness

Yes, I would vote for demutualisation. The only reason being for the last three to four years I have been told my policies will not pay off my endowment. Therefore I may as well take some money now to help pay off the shortfall.
David Robson, Bradford, England

The reality of mutual ownership was an absence of effective control of the company by policyholders. It is interesting to ponder whether had SL in the past effective owner supervision by shareholders, they would be in their current situation. Individuals should be called to account for the destruction of policyholder value that has occurred, and the impending loss of jobs. At next week's AGM members of the company have an opportunity to vote against the directors' remuneration.
Sunni, Edinburgh, UK

I wanted this years ago...We would be several thousand pounds better off if it had gone through when the issue was last raised. Standard Life claimed we would be better off as a mutual, they were wrong.
Pete Weller, UK

This is not just about margins and realistic surpluses and windfall bonus payments - it's also about real people
Name withheld, Edinburgh
I will vote against demutualisation. A company cannot serve two masters and shareholders will inevitably have priority over with-profits policy holders if they hold all the voting rights. A payment of a few hundred pounds will be poor compensation for the money I am likely to lose in the long term if this goes ahead.
Paul Ryan, Swindon, Wiltshire

Yes, I would take my money and run although I voted against demutualisation last time round.
Brian Macleod, Stornoway, Isle of Lewis

How much of policyholders' money have they wasted in financial advisers' fees etc. in defending against the carpetbaggers' case for demutualisation a couple of years back, and now doing an about-turn and proposing it themselves as if it were their own idea.
DT, London EC2

Equitable Life is a mutual society. Can someone remind me what good it has done for the company and its members?
V Hope, Shepperton, Middlesex

This country is always critical of large pay rises for directors, quoting as the value of our pension falls "how can a 15.9% pay rise be justified". As lay-people we cannot know all the facts and as such the falls we have experienced may have been much worse without Mr Crombie at the helm. Let's not condemn until we know all the facts, he is not personally responsible for the stock market crashes around the world. It may be that we should be thanking him
Andrew, Sale, UK

Standard Life are currently spending (our) millions on an advertising campaign proclaiming, "I like Standard Life". How can we like them when they only decide to demutualise when it suits them and we will get less money as a result, and when they write to us telling us our endowment policies are like to fall many thousands of pounds short?
Chris Badley, Bristol, England

Members voting to demutualise would be turkeys voting for Christmas
Gordon Nardell, London, UK
I'm not a Standard Life policyholder, but my girlfriend is an employee. She told me this morning that a quarter of marketing staff will be made redundant within the month. She has a mortgage and many other commitments. Many others have families. This is not just about margins and realistic surpluses and windfall bonus payments - it's also about real people who now face enforced entry into an uncertain jobs market, many with highly specific skills and knowledge and who have showed great loyalty to an employer whom they believed had principles beyond simply the bottom line. They now feel badly let down and greatly concerned about the future. To avoid recrimination against my girlfriend I have asked for my name to be withheld.
Name withheld, Edinburgh, Scotland

I voted against demutualisation the first time, even though we were promised large windfalls, and I shall do so again. Becoming a PLC means that some profits get creamed off to pay shareholders, why not stay mutual and keep all the money for policy holders? There must be other ways to raise money that going PLC
Phillip McCarthy, Edinburgh

What a joke! They spent millions of our money fighting off previous carpetbaggers when we may have had chance receiving decent windfalls...Now a prospective demutualisation that is likely to realise only a fraction of the windfalls we could have previously expected.
Paul, London, UK

People seem to have short memories. It is not that long ago that Standard Life made a spirited stand against demutualisation and won, arguing that mutual status is best for its policyholders. No I would not vote for demutualisation. The present lack lustre performance of the world markets cannot last and will improve. Mutual status would be better for the policyholders to share the benefits when the upturn comes. 2006 perhaps?
David Thubron, Stoke Hammond, England

Supporters of demututalisation seem to have forgotten that the society's troubles result precisely from the problems of the stock market over the past few years. To float the whole Society, and make people's pensions and assurances a plaything of the markets, could only worsen matters. Every penny paid to an outside shareholder in dividends is a penny less paid to policyholders. Members voting to demutualise would be turkeys voting for Christmas. Keep mutuality, and make it work.
Gordon Nardell, London UK

The falling stock market returns are not their fault, and existing Standard Life policies are still better than most others. No-one has "lost" money because their endowments may fall short, they just won't get as much as they expected. Did everyone take action to bolster their falling endowment returns with some of the monies they have saved on their mortgage repayments halving over the last ten years? I don't think so.
Andy Wilson, Lincoln, UK

Whilst I feel sympathy for those that have lost money on their endowments, I don't agree with those who say windfalls should be used to subsidise those people. I have a with-profits pension that has also lost money, and I doubt any endowment policy holders with spare cash in the bank would volunteer to top up my pension for me.
Mike, London, UK

I had four endowment policies with Standard Life for 25 years, all have now matured, the last one in Dec 2003. Standard Life should have done this years ago then I and many others would have not lost so much on the final mature value. This was very bad management and policy holders should be compensated for these errors.
Mike, , Fleet, Hants




WATCH AND LISTEN
The BBC's Rory Cellan-Jones
"There will be plenty of debate about what this troubled business is worth"



SEE ALSO:
Q&A: Standard Life demutualisation
31 Mar 04  |  Business
Dismay at Standard Life job cuts
31 Mar 04  |  Scotland
Standard Life to cut sales jobs
04 Mar 04  |  Scotland
Standard Life sees healthier 2004
18 Feb 04  |  Business
Standard Life cuts bonus payouts
29 Jan 04  |  Business
Standard Life considers flotation
13 Jan 04  |  Business


RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific