By Jonathan Fry
Independent financial adviser
The demutualisation of Standard Life will almost certainly be approved by the vote of members currently taking place.
It will offer policyholders a welcome but not life-changing windfall of shares.
Each member who took out a with-profits policy before 31 March 2004, will receive a fixed allocation of 185 shares, with additional shares being issued depending upon the length of time they have held the policy and its value.
With a forecast flotation price of between 240p and 290p per share, the average value of the windfall is expected to be about £1,700.
With the majority of policyholders not being at the high end of the investment scale, it is likely that half will receive between £500 and £1,000.
Those who invested six-figure sums in Standard Life with-profits products five or ten years ago can expect to receive shares worth about £3,000 if a mid-range flotation price is realised.
Even at the top end this is fairly small beer - well below the windfalls of £5,000 to £6,000 which were suggested when members rejected demutualisation six years ago.
Since then, of course, Standard Life has endured a turbulent existence during which its loyalty to downward-spiralling stock market investments cost the company - and its members - dearly.
This has manifested itself in dramatically-reduced policy maturity forecasts.
Not surprisingly, many members may see demutualisation as a chance to get something back to offset the shortfalls they are going to suffer in their with-profits pension or endowment policies - not that the offer of shares should be seen in any way as compensation for under-performing policies.
It is purely a carrot to members to get them to agree to Standard Life's demutualisation, which will see in excess of £1bn of additional funds brought into the company through the issue of shares to external investors.
The members, who currently own 100% of the company, will effectively see their share and influence diminish as new, institutional stakeholders buy in.
In the recent past members have seen that as too high a price to pay and there is likely to be a significant minority who continue to oppose demutualisation because of the dilution of ownership it will bring.
The windfalls on offer certainly offer fairly poor compensation for allowing Standard Life to sell some of the family silver.
Sell or hold?
Whether to sell quickly or to hold on to shares should be a personal choice based upon your most urgent needs.
If the cash would help towards one of life's essentials, such as household maintenance, university fees, even a holiday, take the money and enjoy.
Just be wary of triggering Capital Gains Tax if you've already made or are planning killings worth in total more than £8,800 on your investments in the financial year 2006-7.
More considered decisions need to be taken if the windfall is to be held as an investment.
Standard Life has offered members the chance to buy additional shares at a price discounted from the flotation price if they hold on to their shares - and those retaining shares for a year will get one free share per 20 held.
The merit of such an offer depends upon the fairly unpredictable short to medium-term performance of the company on the stock market, although there is no reason to doubt that Standard Life will keep pace with the steady growth of the FTSE since its low of March 2003.
Financial consultants, however, generally advise clients not to have too many of their investment portfolio eggs in one basket, and there might be merit in spreading the investment across a wider range of holdings in order to offset the impact of a potentially volatile market.
What about my policy?
Whether to hold on to your with-profits policies after demutualisation requires even more careful thought.
The windfall is being offered in compensation for a likely reduction in the level of profit from the total Standard Life business - currently 100% - which goes towards with-profits policies.
Much will depend in this instance on the penalties, called 'market value adjusters', that might be imposed on the surrender of policies, so beware.
Those considering transfers of with-profits policies really should consult a professional adviser to ensure the long-term stability of their savings and future payments before signing on the dotted line.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.