Standard Life policyholders in line for cash handouts

Millions of beleaguered savers are in line for windfalls from Standard Life, the life insurer, which yesterday proposed to abandon its staunch adherence to mutuality and convert to a public company.

Millions of beleaguered savers are in line for windfalls from Standard Life, the life insurer, which yesterday proposed to abandon its staunch adherence to mutuality and convert to a public company.

Some 2.6 million policyholders stand to gain payouts in cash and shares of as much as £2,000, if the company is valued at current estimates of about £4bn.

The board's recommendation is a stark U-turn from its previous hardline stance on mutuality. In 2000, it waged a bitter battle against policyholders who were trying to get the company to embrace conversion. The business was then worth about £16bn, which would have given policyholders payouts of about £6,000 each.

"The management came to the conclusion it did then based on the circumstances at that time," said Sandy Crombie, the chief executive of Standard Life, who was deputy chief executive at the time.

The demutualisation proposal will be put to members - but not until 2006 because of the complexity of the legal arrangements. Standard needs the support of 75 per cent to convert the company and yesterday it scrapped the rule banning windfalls for three years from members joining since 2000.

It also announced yesterday that it would axe 1,000 jobs in the UK to cut costs by 20 per cent and also closed its final salary pension scheme to new employees. The job cuts come on top of 360 this year.

Since 2000, Standard has lost billions on the stock market and it ran into trouble in January when regulators introduced new solvency tests. The company was forced to set aside more reserves and has had to dump £7.5bn of shares, cut bonuses and raise charges to customers to meet the new rules. It is also planning to raise £750m, and yesterday said it needed to pull in more capital through a stock market float.

The board said the solvency regime was not behind yesterday's decision. The main reason was that the number of customers buying with-profits policies was dwindling.

The prospect of a windfall will be welcome to many policyholders. Some maturity payouts have been cut by 45 per cent since 2001.David Stonebanks, who collected more than 1,200 signatures supporting demutualisation last year, said yesterday: "I am sorry that the company is now having to recommend demutualisation from a position of weakness rather than strength."

Ronnie Sloan, another policyholder who supported demutualisation in 2000, said yesterday: "Only four years after robustly rejecting a demutualisation campaign, it is surely hasty to present demutualisation as a virtual fait accompli. Who comprises the Standard Life - is it really the with-profits policyholders, or is it just the Board?"