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Take a look at it from the other side of the fence

It is not surprising that the complexity of life company constitutions and membership regulations can cause confusion for IFAs and their clients despite the best endeavours of the life company to provide open and clear information to everyone.

Several points in the article entitled, Advisers tell clients to snub Scotlife takeover vote (Money Marketing, October 19) may benefit from some explanation and clarification before people get unnecess-arily worked up.

There are two distinct ways in which policyholders may benefit financially form the proposed agreement between Royal London and Scottish Life.

First, all members will receive a flat rate compensation of £500 for loss of membership rights.

Second, with-profits policyholders will receive additional reversionary and final bonuses with an average value (in today&#39s terms) of around £3,500. This is not dependent on whether or not the policyholder is a member.

The membership regulations of Scottish Life are set by an Act of Parliament. As this is a legal document, it is not something which can be ignored or adjusted to suit particular circumstances.

However, it is worth pointing out that the benefits to with-profits policyholders – which amount to £989m (or 90 per cent) of the £1.1bn price – will be paid by Royal London.

These benefits are available to all with-profits policyholders at the relevant dates, irrespective of whether or not they meet the requirements of the membership regulations.

IFAs will have recommended their clients to take out a Scottish Life policy for a number of reasons, including the flexibility and range of product features, the strength and consistency of our investment performance, the quality of our service and the overall value our policies offer.

None of that has chan-ged. If it was good adviceto recommend Scottish Lifeat that time, it will remain good advice.

But, in addition, with-profits policyholders may now look forward to even better returns from their policies. Members will receive £500 that few, if any, would have anticipated getting when they took out their policy.

We have already written with details of the proposals to all our policyholders and all IFAs. We will continue to do our best to explain the situation by responding to any individual enquiries, by further mailings and through the main trade publications.

The process we have now started includes a report by an independent actuary, approval by the tax and regulatory authorities, an extraordinary general meeting at which 75 per cent of the members voting have to be in favour and approval of the Court of Session in Edinburgh.

All this is designed to ensure that the interests of policyholders and members are properly considered and fully protected.

As a mutual company, this is clearly of paramount importance. There is no potential conflict of interests in this situation between policyholders and shareholders.

The proposal from Royal London is a great deal for Scottish Life as it gives us the financial muscle to develop our business aggressively, to ensure we will be even more successful in future. This is in the long-term interests of our policyholders.

But even more, the proposal represents a great deal for our policyholders and members. At the very least, they will receive the benefits of the policy recommended by their IFA.

The majority will get even more than that.


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