Standard Life chiefs could pocket millions despite cutting payouts

Standard Life is braced for a row over executive pay after it emerged that its directors could bank multi-million pound bonuses over the next few years. The news came just weeks after the UK's biggest mutual insurance company slashed payouts for its policyholders.

Standard Life, which lost £4.5bn in the equity market in the past year, will reveal details of the bonus payments due to its executive directors in its annual report and accounts at the end of this month.

Three directors – Iain Lumsden, the chief executive, Alexander Crombie, his deputy, and Scott Bell, his former deputy – are set to share up to £1m in bonuses for 2002.

Reports over the weekend suggested that Mr Lumsden and Mr Crombie could receive up to £1m apiece more by the end of 2004.

The company said directors' bonus payments depend on the performance of the group's with-profit fund, the running costs associated with the business and its new business figures. Bonuses are calculated on a three-year rolling period and the payment for the year to November 2002 will cover the period from 1998 to 2001.

Since January 2001, the bear market has wiped around £10bn off Standard Life's with-profits fund. Its heavy investment losses have forced the group to cut payouts for its 2.1 million with-profits policyholders by an average of 15 per cent. Since October, when the group last reviewed its payouts, the value of a 25-year pension policy maturing today has crashed to £500,414 from £586,959.

Standard Life faces a capital crunch from the costs of financing high volumes of new business and from guarantees worth more than £1bn that it must pay out to a third of its with-profits policies. A spokes-woman said reports that the group may be forced to sell its loss-making banking arm, Standard Life Bank, were "rubbish".