More than 2.4 million members of Standard Life due to receive free shares in the insurer later this month will lose their right to bonus shares in a year's time if they transfer their windfalls into a tax-free individual savings account.
Standard, which is due to demutualise and float on the stock market on 10 July, has confirmed that any member who moves their shares into an ISA will lose the right to the bonus stock it plans to issue next July.
Members who keep their free shares for 12 months have been promised a further allocation worth 5 per cent of their original holding, as the insurer attempts to prevent a mass sell-off of its stock.
However, HM Revenue and Customs rules require investors who want to hold shares within an ISA to sell them and then buy them back within the tax shelter. Standard said this would count as a disposal and prevent members from claiming their free shares in 12 months' time.
A spokesman for Standard said its lawyers had tried to find a way round the issue, but failed to do so. "There is no way you can move your shares into an ISA and still claim the free allocation next July," he warned.
The insurer will instead advise people to wait a year to move their stock into an ISA, though this means investors will not be able to use their 2006-07 allowance for Standard shares.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said investors would now have to choose between protecting their windfall shares from tax within an ISA and receiving the free shares next year. "Given that Standard Life is one of the UK's leading insurers it's unfortunate that it has not been able to help private investors to make the most of the tax saving opportunities."
Standard has also warned that investors who move their shares into a self-invested personal pension (Sipp) will be hit by a similar problem.
Although it is possible to transfer shares directly into a Sipp without selling them, the pension fund would then become the "beneficial" owner. The change would disqualify investors from next year's free shares.Reuse content