On the look-out for autumn windfalls

Most City financiers came back from holidays on Monday and the stockmarket promptly shot up, prompting hopes of further recovery in all those telecoms, media and technology stocks which took such a drubbing in the spring. The markets fell away again later in the week, despite the Bank of England's decision to keep interest rates on hold.

Most City financiers came back from holidays on Monday and the stockmarket promptly shot up, prompting hopes of further recovery in all those telecoms, media and technology stocks which took such a drubbing in the spring. The markets fell away again later in the week, despite the Bank of England's decision to keep interest rates on hold.

I must say, despite the mostly benign outlook for the UK economy, I'm wary of the stockmarket, for one simple reason: Oil. Its price has trebled in just over a year to $34 a barrel. Perhaps it's because I remember the 1974 oil shock, when a quadrupling in prices sent the world economy pear-shaped.

Away from the Square Mile, the week has been one for windfalls. Abbey National is paying £1.6bn to members of Scottish Provident as part of its take-over, with £200m injected into the insurance company's with-profit fund.

The bad news is that Scottish Provident's 300,000 customers who hold protection, unit-linked and term assurance policies will get nothing. There are another 125,000 people who hold "not with-profits" policies, such as term assurance, who will get £500. Then come the lucky 325,000 people who have with-profits policies and will receive an average of £4,500 in cash, following completion of the take-over next autumn, plus £1,500 in better payouts on their policies over time.

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I hope the Scottish Provident windfalls go more smoothly than those of the recently acquired mutual Scottish Widows. When the latter was bought by Lloyds TSB last year, it prompted windfalls of £500 to £100,000 for 1.6 million members.

But it appears many have not been paid in the form they requested. Some who asked for loan notes got cheques, and any cheques in excess of this year's capital gains tax allowance of £7,200 will have triggered tax bills for the excess.

Scottish Widows is not entirely to blame for this, since many people did not understand they could get a tax bill if they ticked the box for "cash". Some had no idea their policies were worth so much.

If you have received a cheque and are unhappy, don't cash it, instead write to Scottish Widows asking if you can be paid in your preferred medium.

Talking of unhappy policyholders, the Consumers' Association reckons there could be many of those at AXA Equity & Law. This company became part of AXA Sun Life three years ago, and AXA has now decided it has to do something about £1.7bn of "orphan assets". These represent unclaimed bonuses as well as money held back by AXA to smooth over periods when stockmarkets underperformed,

AXA is proposing to pay some of these orphan assets to AXA Equity & Law's 750,000 policyholders and some to shareholders, in order to boost the company's capital base. The rest will go to pay tax and other long-term liabilities.

Far from being a welcome windfall, the Consumers' Association reckons policyholders are only getting 31 per cent of the "pot", instead of the 90 per cent traditionally recommended by the Government. Under previous Government guidelines, shareholders would only get 10 per cent, whilst they get at least £319m under this deal. The Financial Services Authority (FSA) has allowed the offer to go to a policyholders' vote.

The Consumers Association reckons this is such a bad deal that it is offering to sue AXA on behalf of policyholders to get the terms changed. If you want the association to represent you in this fashion, e-mail it on orphan@which.net, or write to Orphan Assets, Consumers' Association, PO Box 44, Hertford, SG14 1LH. For more information click on www.which.net.

John Willcock is Personal Finance Editor of The Independent.

j.willcock.independent.co.uk