The payments will be made in cash or added as bonuses to members' policies. In addition, the company said terminal bonuses averaging a further pounds 470 each would be added to policies when they matured.
The proposal, hammered out in discussions with Prudential, involves payments totalling pounds 1.6bn, which includes distributing the assets of ScotAm's with- profits fund to policyholders. ScotAm said details of the likely payouts would be mailed to members in the coming week. Policyholders will vote on the deal at a special meeting on Friday 27 June.
Sandy Stewart, chairman of ScotAm, said: "Members now have the opportunity to vote for a package which will provide additional financial security and the prospect of improved future investments returns leading to enhanced payouts.
"With-profits policyholders will also receive an immediate cash lump sum as compensation for the loss of membership and substantial additional bonuses on their lump sums."
ScotAm's announcement brings to an end months of speculation over the scale of likely payouts in the wake of its acceptance of Prudential's bid for the company. Prudential's intervention followed the decision by the ScotAm board in January to propose a complicated two-stage flotation process under which members would have received a one-off payment worth pounds 75m plus a further bonus of up to pounds 450m after three or four years.
However, the proposals sparked widespread unease after it was revealed in the Independent that key members of the board had also allotted themselves a maximum of up to pounds 14.4m in cash and shares if they were able to grow the company significantly over those years.
ScotAm's proposals triggered a rival pounds 1.4bn bid for the firm by Abbey National, only for the bank to be outbid by Prudential at an auction which included AMP, the Australian insurer.
The present proposals include a minimum cash payment of pounds 250 to all eligible policyholders. In addition, further payments will be made depending on the number of years a policy has been held for and its sum assured.
For example, a 25-year endowment started in 1987 to meet a pounds 50,000 mortgage, with a sum assured of pounds 17,500, would trigger a automatic cash payment of pounds 250 plus a further payment of pounds 420 to make pounds 670 in total. In addition, an extra pounds 1,100 would be attached to the policy as a special bonus and a terminal bonus added at maturity.
The scale of the payouts rests on the fact that Prudential is closing down the ScotAm life fund, ensuring policyholders get the benefits.
Gavin Stewart, general manager at ScotAm, said: "This is a very good deal for policyholders. They are doing very much better because of the particular way the deal is structured, unlike previous life company takeovers."Reuse content