Standard Life windfall

Standard Life windfall

	Published : Sat, 01 Jul 2006 12:05 By : James Rowe Print this Story

LONDON - Many holders of Standard Life policies that can get them a windfall are looking to cash them. It is estimated that an average windfall could net people as much as £1,540. Standard Life has already put aside £19 million in order to fund these policies, but would like people to hold onto them.

Standard Life is encouraging such policyholders to hang on since their for-profits policies could be used to "pension pot, pay off a mortgage or simply accumulate savings." However investors are bound to be cautious especially after the 2002-03 debacle, which took the polish off such initiatives. Although the returns are attractive for-profits scripps such as that of Standard Life, they fail to enthuse because of the singular lack of transparency. This provision enabled some shrewd providers to plug holes in their other investment portfolios.

Analysts agree that the lack of transparency is something that should be looked into. Nicholas O’Shea, a director of Pharon said, “You can see the asset allocation but you don’t know how the investments are broken down within each sector. You also don’t know what they are charging." But he said that investors couldn’t see how the fund is invested. “With-profits funds are often seen as being a low-risk investment. But in my opinion they are not, because of the degree of control that the actuaries have over valuations," he added.

Standard Life is also offering a discount of 5 percent on its shares when the insurer demutualises on July 10. But this discount is valid only to amounts up to £50,000. Experts say investors need to be wary and not be hooked by the discount policy. “The discount is a nice incentive, but it will only truly benefit wealthy investors who can buy a lot of shares and sell quickly for an instant 5 per cent return," said Justin Modray, of Bestinvest, the independent financial adviser (IFA). "Investors with only a few shares who hold them for many years are less likely to see the benefits of the lower purchase price.”

The first thing that a investor needs to do is analyze what is the requirement. If the intention is to build up a pension pot then the best way to go forward needs to be thought about. “If there is a reasonable term still to go I would be looking to switch to good equity-based investments, either direct or through managed funds," O'Shea said, adding that the time-period is critical.