No cash for Scottish Life members

A wealth of windfalls could be on the horizon if a number of rumoured insurance company takeovers come to fruition - but policyholders of Scottish Life hoping for big cash payouts look set to be disappointed.

The rumours as to who is planning to take over who reached fever pitch this week. It looks pretty certain that Scottish Life will be bought - probably by either Liverpool Victoria, the UK's biggest friendly society, or insurer Royal London, both of which are also mutuals.

A takeover would mean windfalls to many Scottish Life policyholders but most of this money would probably be paid out in the form of a longer-term enhancement of their policies.

Liverpool Victoria's plans could be derailed because there has been speculation that it, too, might be taken over. One company said to be interested in acquiring Liverpool Victoria, which has 1m members, is Dutch insurer Aegon, which is also rumoured to be contemplating bidding for Equitable Life.

Trying to work out exactly what policyholders would re ceive in the event of a Scottish Life takeover is no easy task because of its fiendishly complex company structure.

In essence, the 275,000 with-profits policyholders can expect to receive a variable amount of "compensation" following a takeover. How much they get will depend on the type, size and age of the policy. However, they would probably not get this variable compensation as a cash payment - it would be paid out over time in the form of enhanced policy bonuses.

But those with-profits policyholders who are also mem bers of the company can expect a separate flat-rate cash payment for "loss of membership rights" which might be in the region of £500.

However, quite a large chunk of the with-profits people - including those in Scottish Life occupational pension schemes, people with personal pensions written under trust, and those with endowment policies that have been assigned to their building society - aren't company members and so wouldn't get this payment.