Decision day is coming home at Standard Life

As ballot papers hit the doormats, what are the choices for the mutual's 2.4 million voters?

Pity the postmen.

Standard Life's plans to abandon its status as a mutual insurer and float on the London Stock Exchange prompted a mass mailshot - one of the Royal Mail's biggest - to more than four million members and policyholders last week.

With each pack weighing nearly a third of a kilogram, the nation's army of posties would have good reason for groaning.

Standard Life policyholders might also have been forgiven their own groans at the sight of all that paperwork. But they at least have hope of a reward - in the shape of a shares windfall of £500 to £1,000 or more.

The company has sent ballot papers to 2.4 million eligible members to try to gain their support for its demutualisation. (Other policyholders got literature explaining what is happening.)

At present, Standard Life is a mutual company owned by its with-profits policy investors (or member customers). These are the people - holding investment bonds, endowments or pensions - who bear the risks and rewards of the group.

If Standard Life demutualises - and to do so, it needs 75 per cent of policyholders to back it - they will surrender their rights as owners and be offered shares in the company instead.

The City and most industry specialists argue that Standard Life has no option other than to demutualise, since staying as a mutual limits its capacity to raise money for expansion. The Board hopes that most of its members will agree. With momentum behind the proposed float, the question of what to do with their shares in the new public company will likely become a pressing issue for millions.

Standard Life released more details last Tuesday of what it plans to do after going public. Each eligible with-profits policyholder - anyone who invested before 31 March 2004 - will receive a fixed allocation for their loss of membership of 185 shares, expected to be worth between 240p and 290p each. Most will also get a variable allocation of shares - based on how long they've had their policy and its size.

Half of these policyholders could get windfalls of between £500 and £1,000, it is estimated that, while the rest could be on course for more than £1,000 worth of shares - although all depends on the share price when Standard Life floats.

If you are one of the many recipients of the shares, you may be at a loss whether to cash them in immediately or retain them and hope they prove a decent long-term investment.

For its part, Standard Life is trying to encourage former members to hold on to the shares by offering a loyalty bonus of one free share for every 20 held during a 12-month period from the date of flotation.

Other carrots are being dangled: in the event of a "yes" vote, Standard Life will write to all its customers - including those not entitled to windfalls - and offer more shares at a discounted rate.

But investment specialists say the decision facing potential shareholders is not an easy one.

"If Standard Life does perform well as a business in the future, then shareholders should benefit via healthy dividends and a rising share price," says Justin Modray from independent financial adviser (IFA) Bestinvest.

"The company is reasonably diverse, with a prominent presence in the insurance, investment management, pension and banking markets - this helps reduce risk."

But owning shares in an individual company can itself be a high-risk strategy compared with investing in funds that put your money into a basket of shares, he warns.

What you choose to do with any shares you receive will depend largely on your financial health, other investments and how much debt you have, as well as on your age and your financial goals. Some members may also simply want to cash in their shares, Mr Modray adds, if they don't believe in the insurer's prospects.

With more competition in the protection (critical illness, income protection and life cover) industry from supermarkets - as well as new arrivals in the pensions industry - there are concerns over how life companies will fare in the future. "If we experience an economic downturn or falling stock markets, a financial company such as Standard Life could suffer the most," Mr Modray says.

Anna Bowes from IFA Chase de Vere urges people not to make a "knee-jerk reaction" on the basis that the insurer will definitely demutualise: "There is still no guarantee this will happen - it's a case of wait and see." But should the float go ahead, she says: "If you don't have a lot of money, you may be better off selling the shares and putting the money into a more appropriate investment [such as a unit trust fundor savings account]."

The appeal for investors in mutuals such as Standard Life has long been that financial rewards go directly to the customer as the company is working for them and not the shareholders.

"This should avoid a corporate 'fat cat' culture and encourage management to make sensible long-term decisions rather than short-sighted ones simply to appease shareholders," says Mr Modray.

However, in the case of Standard Life, its need to expand as a player in the UK market appears to be outweighing these advantages.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Life and Style
Living for the moment: Julianne Moore playing Alzheimer’s sufferer Alice
Jay Z
businessJay-Z's bid for Spotify rival could be blocked
The spider makes its break for freedom
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United player ratings
Arts and Entertainment
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Christine McCleave: FP&A Analyst

    £36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Day In a Page

    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
    Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

    What is it like to live with Alzheimer's?

    Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
    The Internet of Things: Meet the British salesman who gave real-world items a virtual life

    Setting in motion the Internet of Things

    British salesman Kevin Ashton gave real-world items a virtual life
    Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

    Election 2015: A dead heat between Mr Bean and Dick Dastardly!

    Lord Ashcroft reveals latest polling – and which character voters associate with each leader
    Audiences queue up for 'true stories told live' as cult competition The Moth goes global

    Cult competition The Moth goes global

    The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
    Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

    Pakistani women come out fighting

    Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
    Leonora Carrington transcended her stolid background to become an avant garde star

    Surreal deal: Leonora Carrington

    The artist transcended her stolid background to become an avant garde star
    LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

    Education: LGBT History Month

    Pupils have been discussing topics from Sappho to same-sex marriage
    11 best gel eyeliners

    Go bold this season: 11 best gel eyeliners

    Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
    Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

    Cricket World Cup runs riot to make the event more hit than miss...

    The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
    Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

    Katarina Johnson-Thompson: Ready to jump at first major title

    After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot