Provident reveals pounds 25m inducement for GA deal
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.NIC CICUTTI
More than 200,000 policyholders with Provident Mutual were told yesterday how much they will get in return for agreeing to a takeover by General Accident.
They were among investors in the life assurance company - based at Stevenage, Herts - sent details of the pounds 25m bonus payments agreed with the Scottish insurer last month.
General Accident's offer is part of an overall pounds 170m deal aimed at adding Provident Mutual to its own group of companies. Before it can do so, it must win the approval of at least 75 per cent of Provident's policyholders voting at a general meeting in November. Proxy votes are also allowed.
About pounds 145m of GA's money goes towards paying for 10 per cent of the future profits from the Provident Mutual life fund, using calculations described as reasonable by Tillinghast, consulting actuaries.
To sweeten the deal, investors in a range of Provident Mutual life and pension policies will receive 0.4 per cent per year, or slightly more in some cases, of the total amount they have so far saved, including investment gains. Those who have annuities with Provident Mutual will get an increase in annual retirement income of 0.5 per cent.
In practice, someone paying pounds 30 a month into a 25-year with-profits endowment started in 1985 will have pounds 75 added to their policy over three years. A personal pension plan holder whose fund is worth pounds 8,000 will have pounds 100 added to their account overall.
The company said yesterday that, although a one-off, the payment would be included in the calculation of future bonuses and was therefore likely to increase over the lifetime of that policy. The full amount will only be paid if the policy is maintained until December 1998.
Of the total of 500,000 policyholders, about 300,000 are not classed as members and will not be in line for a payout from General Accident.
A spokesman for Provident Mutual said: "One important point is that while the payments are for our with-profits savers, our unit-linked policyholders will also gain.
"They will benefit from the fact that charges levied on most funds will not go up beyond the cost of living for 10 years. There will also be a cap on discretionary expenses for unit-linked policies.
"This is significant, because the charges levied by the company on policyholders' funds, both with-profits and unit-linked, are well below the industry average already."
He added that unless the deal with GA was agreed, Provident Mutual would not be able to attract new business profitably, leading to a cut in returns for policyholders
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments