Lords blow for Nat Mutual windfalls

INSURER National Mutual outlined the handouts to its with-profits members from its planned sale to US giant GE Capital - and disclosed they would have been £80m higher, but for annuity guarantees.

The 150,000 members will each get £500 cash, plus two sets of top-ups on their policies. The holder of a 10-year policy worth £20,000 could gain £2,500.

National, which once insured Winston Churchill, can congratulate itself on the timing. The sale was agreed in June. Today, the price might be much lower.

An extraordinary general meeting has been called for 20 November at Lord's Cricket Ground to vote on the deal. It looks the only one in town since National has been up for sale since March. GE is putting up £435m; £90m for the cash handout, £200m 'capital support' and a £145m loan to strengthen National's funds.

That will enable National to distribute its £280m 'estate' of accumulated reserves to the with-profits members. This would have been £360m but, after the House of Lords ruling on Equitable Life, National had to apply guaranteed annuity rates to its entire life fund.

After the £500 cash, each with-profits member will get an immediate policy top-up worth 0.5% a year, up to a maximum 5%, and a long term top-up, also worth 0.5% a year, with no maximum.

Other small life groups face similar pressures to demutualise. The latest target for windfall-chasers is farmers' group NFU Mutual.