Standard Life says conversion will cut pensioners' incomes

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Standard Life yesterday stepped up its fight against attempts to force it to demutualise, warning that policyholders' retirement income could be badly hit if it converted to a public limited company.

In a document being sent to its 2.3 million policyholders today, Standard Life warns that if Fred Woollard, the Monaco-based carpetbagger, succeeds in forcing the company to float, the growth potential of retirement funds would be seriously affected over the long term by the need to pay dividends.

Standard Life claims that a policyholder contributing £150 a month to a personal pension over 25 years would see a shortfall of £12,000 from a total retirement pot of £139,620, assuming a deduction of 0.75 per cent from investment returns.

Scott Bell, managing director, said yesterday: "Look at what has happened to the performance of companies that have demutualised - it is not a pretty sight. We have taken a very large sample. It clearly illustrates that we've done much better than average, and we are saying that it is because we are a mutual."

About 70 per cent of policyholders are contributing to pension funds, more than half of which have more than 15 years to run and a quarter more than 25 years to run.

Standard Life claims half of its members would receive windfall shares worth less than £2,500, with fewer than one in five getting the £6,000 average shareholding Mr Woollard has said policyholders could receive.

However, it is assuming a flotation value of £12bn rather than the £15bn Mr Woollard claims Standard Life is worth. Those figures also assume a different payout scheme from the one Mr Woollard has proposed.

Mr Woollard claims no policyholder could lose out because the courts and the independent actuary would not approve a demutualisation scheme that harmed policyholder interests. He says that even if dividend payouts did affect shareholder returns, that would be more than made up for by the value of shares received.

Standard Life plans a further document ahead of its vote on 27 June which will concentrate more on the principled case for remaining mutual.