Anger at Standard Life chiefs' bonuses

STANDARD Life sparked anger today when it was revealed that its top two executives shared bonuses of almost £500,000 last year, despite heavy cuts to policyholders’ bonuses and warnings of shortfalls among endowment policies.

Iain Lumsden, chief executive of the Edinburgh-based life and pensions giant, was awarded a performance-related bonus of 136,000 for 2002, up from 119,000 the previous year, taking his total pay package up to 619,000. He also received 124,000 under the company’s long-term incentive plan.

Deputy chief executive Sandy Crombie saw his total salary rise to 520,000, from 433,000 in 2001, after enjoying a 12 per cent rise in his performance-related bonus to 122,000. Under the long-term incentive plan he received 66,000.

But last month millions of savers with Standard Life were told their bonuses had been cut for the third time in a year, with some payouts slashed by more than 50 per cent in some cases.

Plunging share prices have wiped an estimated 4.2 billion off the value of Standard Life’s with-profits fund in the past year, and the insurer took the drastic action to shore up its cash reserves. Payouts for Standard Life’s 2.1 million with-profits policyholders will be reduced by 15 per cent overall, but bonuses on the group’s endowment life policies have been slashed from 3.5 per cent to just 1.5 per cent.

Bonuses on endowment pensions policies were cut from three per cent to 1.25 per cent because of the "background of extremely difficult investment conditions", according to Standard Life's finance director, John Hylands.

Just weeks later, thousands of policyholders were told their endowment policies had fallen in value and will not be sufficient to pay off their mortgages. Standard Life admitted there had been a sharp rise in the number of amber and red warnings over its endowment policies.

An amber warning means the endowment is unlikely to pay off the mortgage, while a red letter means it certainly will not, unless the policyholder tops it up with extra savings. Last year, Standard Life claimed it had one of the industry’s lowest proportions of red and amber letters - 13 per cent - but that figure has jumped sharply this year.

Edinburgh policyholder June Russell said she received warning letters for both her endowments, and has been told she faces a combined shortfall of up to 10,000. Ms Russell reacted angrily to news of the directors’ bonuses, and said: "This company is very greedy and not interested in the welfare of the people who keep them in business."

"Forget about any bonuses to directors - let us have what we’re entitled to ."

But Marcia Campbell, company secretary at Standard Life, said the company made a number of achievements last year, with new business rising 24 per cent and new business premiums increasing 24 per cent to over 10bn.

She defended the directors’ remuneration, saying the total board cost actually fell from 3 million to 2.4m last year, and claimed it was well below the costs of rivals such as Prudential and Aviva.

"I would argue that our members are getting good value from our board," she said.