Standard Life returns cash to policyholders

by Gill Montia

Story link: Standard Life returns cash to policyholders

Standard Life is to begin the process of returning some of its surplus cash to policyholders.

The company has a surplus of around £1.3 billion in its with-profits fund and the redistribution should increase the value of some pension plans and endowment policies by several hundred pounds.

Some of the £1.3 billion will be held back as a reserve and the payments to policyholders will be made over an unspecified period, with the life insurer retaining the right to suspend payouts if conditions change.

Standard Life is the latest in a succession of insurers to announce a review of its so-called inherited estate.

The money has been accrued over decades and effectively belongs to policyholders because it is a residue of funds remaining after policyholders have received their entitlements.

From that point of new the redistribution is not good news for shareholders, as they are excluded from any benefit.

Some policyholders may also be disappointed because they will not receive cash. Each policyholder’s entitlement will be added to the value of their policy, so that the money only becomes available when the policy matures or is surrendered.

Standard Life has given the following examples as a guide: a 20-year, £200-a-month pension plan maturing now would benefit by £315 from the surplus. For a 25-year, £50-a-month mortgage endowment maturing now, the figure is £177.

Aviva and Prudential are also taking steps to redistribute their inherited estates.