Better off with a building society

WHEN is a windfall not a windfall? Life insurers could well disappoint yet again.

Announcements about billions of pounds of orphan assets and talk of takeovers might set the City alight. But the excitement factor for policyholders is more debatable.

As we report on page 3, past policyholders, even those with policies maturing now, may well miss out on the sharing out of so-called orphan assets, although it is these customers who have funded the treasure troves.

But current policyholders shouldn't sip too much bubbly either. True, they may get a bonus they weren't otherwise expecting. But pure consumerists might ask why shareholders should get anything.

Furthermore, the policyholders who stand to benefit from these special bonuses are those whose returns are at the discretion of insurers. It remains to be seen whether the magicking up of orphan assets isn't just an accounting exercise as far as returns to individual policyholders go. Might special bonuses be offset by falls in normal bonuses? Might policyholders just be watching their money switch pockets?

Similar questions could be asked about the bonuses likely to flow from some takeovers among insurers.

Moreover, most of these windfalls seem set to come through in bonuses added to existing policies - rather than cash or shares - and therefore are not accessible until you cash in that policy. (Norwich Union's likely flotation may well be an exception.) That and the fact that life insurance policies that might benefit from windfalls tend to be long-term commitments should be good reason for not taking out policies simply in the hope of a windfall.

As ever, the world of life insurance looks as clear as mud. Windfall hunters should stick to building societies.

To help, Members for Conversion, an action group set up by out-of-work butler Michael Hardern to pressure building societies to pay windfalls to their customers, has produced a free-bar-postage Carpetbaggers' Guide which includes contact telephone numbers for 40 societies. Mr Hardern says the hope is to make pounds 20,000 from savings account stakes totalling pounds 4,000. Call 0171-255 1079.

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