Policyholders with Standard Life have less than two weeks to decide whether to let the insurance company remain as a mutual organisation or convert it into a public company. The deadline for postal votes in the ballot is 23 June, and the final vote will be taken on 27 June.

As members prepare to vote, we summarise the arguments of the firm's management which believes passionately that the organisation should retain its current status, alongside the case of Fred Woollard, the wealthy policyholder who wants the insurer to convert. To assist readers in making their decision we also set out the views of insurance analysts and experts.

Fred Woollard

• Standard Life policyholders will receive average windfalls of between £5,000 and £6,300 if the company floats on the stock exchange.

• Mortgage shortfalls would be made up by demutualisation gains.

• Every existing policy will receive free shares worth more than any possible loss caused by a change of status.

• Policyholders would benefit from any growth in the value of shares as well as dividends.

• The Standard Life Members' Action Group proposes that in a conversion charities would receive 1 per cent of the shares, worth more than £120 million, while 1.5 per cent would go to Standard Life staff.

• The management is not as accountable to its policyholders as it would be if the company was a public one.

Standard Life

• Demutualisation would require the management to divert profits to shareholders. Conversion would mean lower returns on future policies and top-ups to existing policies.

• Chief executive Scott Bell says that while some policyholders will 'clearly be better off by taking a windfall' those who top up pensions will lose outas will future policyholders.

• Standard Life's performance record for pensions and life insurance policies over the past 15 years is 9 per cent better than the average for 'proprietary' companies.

• The insurer is owned and run solely for the benefit of policyholders.

• Half the 2.3 million existing policyholders would get less than £2,500 in windfalls, assuming a stock market valuation of £12 billion.

• The windfalls would not be instant. It could take two years to prepare the company for flotation.

• Standard Life does not need Plc status to expand its business; it has launched a bank that now has £5bn of loans and last week launched the UK's first 25-year capped rate loan.

• Reports about endowment 'shortfalls' have exaggerated the possible problem with loans backed by Standard Life policies.

The experts

• John Russell, of HSBC bank, predicts that the management will win the vote. He says it is 'grossly misleading' to suggest that windfalls would average £6,100 because many policies have only been running for short periods of time.

• Janet Walford, editor of Money Management Magazine, says that for 25-year endowments Standard Life has appeared in top 10 tables for 29 of the last 30 years. But looking at policies running over 10, 15, 20 and 25 years, measured over the last decade, it has achieved 24 top ten places out of a possible 40.

• David Nisbet at Deutsche Bank says members will benefit from conversion but the decision is a fine one because the insurer has performed well for them.

• Paul Greenwell of William M. Mercer says people whose policies have a long way to run should vote no, while those near maturity should vote yes.

Comment: Give Standard a new mutual life

Many Standard Life policyholders will find the temptation to vote for demutualisation almost irresistible. The admission by the insurer's own management that 'steps would be taken' to ensure that no existing policyholders lost out through conversion makes it seem an open and shut case.

But it is not. Returns to people topping up pensions with the company will worsen, and given that pensions accounted for 70 per cent of its new business last year, newer policyholders will do worse than they expected. It is impossible to know whether their windfalls would make up for this, but they may not, especially if, as Standard Life suggests, payouts to newer clients will be relatively modest. It is also unlikely that the flotation windfalls would be as attractive for many as pro-conversion campaigner Fred Woollard's figures suggest.

Future returns would be lower than past ones. Voting to protect people you don't know, or who are not yet born, is an act of goodwill. But if you take a highly principled view of investment issues, this will matter.

Standard Life deserves a second chance as a mutual, so policyholders should vote no - this time. If the management wins, and it will be close, it must do much more to promote the value of its mutual status.

Yes, Standard Life has a strong performance record but it could be doing better on pensions (see above). It was among the first insurers to improve surrender and transfer values on endowments and pensions and we should see more of this.It should offer a guarantee on endowments to clients at risk of shortfalls. The management has refused to consider special bonuses before the vote to avoid accusations of bribery, but abstract talk about mutuality will not be enough in future.

The insurer could also take a lead in promoting ethical selling in an industry where few organisations are trusted.

Maria Scott



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