Windfalls of £1,700 on offer to Standard Life policyholders

The document laid bare the scale of Standard Life's financial problems in 2004 when it made a pre-tax loss of £340m, though it notched up a £152m profit the following year, aided by a cost-cutting drive that has seen more than 3,000 jobs lost over the past two years.

The planned demutualisation will cost an estimated £158m, not including some of the costs relating to the share offers. It is likely to set up a share plan for its executive directors but was quick to point out that they would not be receiving any rewards for demutualising the company. Some members may feel the directors have already been amply rewarded. The proposal document reveals that three directors - chief executive Sandy Crombie, life and pensions boss Trevor Matthews and head of investments Keith Skeoch, each received pay and benefits packages totalling well over £1m last year. Mr Crombie's £656,000 salary was boosted by a £686,000 bonus. He also had £1.6m added to his pension pot, taking it to £8.3m.

How to vote, when to sell?

The windfalls may not be large enough to compensate disgruntled policyholders for what they feel they have lost, but most experts reckon Standard Life's members will do the board's bidding and approve the flotation.

Tom McPhail at independent financial adviser Hargreaves Lansdown said policyholders should vote in favour as "standing still" was not an option. "The reality of what is being put in front of policyholders is that if they choose not to vote in favour of this deal, Standard Life will start going backwards ... I haven't heard a single voice putting forward an argument in favour of remaining a mutual." He added that it was therefore "slightly academic" to talk about whether the estimated windfalls were big enough.

Assuming it is approved, members are likely to receive their windfalls a short time after the flotation, planned for July. As to whether they should keep their shares or sell them via the dealing service that will be set up, that would depend on their view people of the company's prospects and their own attitude to risk, said Patrick Connolly at IFA firm JS&P. He added that in general, "most people are better off with collective investments than individual shares".

The insurer will offer members and customers excluded from windfalls the opportunity to buy shares at a discount. But it will not outline the level of the discount until June, making it difficult to assess just how tempting this is. Policyholders receiving windfalls will only be able to take part in this so-called "preferential offer" if they retain their free shares.