5 March 2001 - Policyholder Information

Many policyholders have asked for more information about both the deal with the Halifax and the possibility of a GAR compromise scheme.

This section is intended to provide that information.

1. The deal with the Halifax was announced on 5 February 2001. It is summarised in the offer letter from the Halifax dated 28 January 2001. This letter is repeated in its entirety as Appendix 1. As is normal in such cases, it includes clauses requiring the confidentiality of both parties. We are grateful to the Halifax for their agreement to relax this requirement and to allow us to publish this important document. The appendices to the letter remain confidential.

2. When considering the deal, the Board had many factors to take into account. They received advice from the Society's bankers, lawyers, accountants and actuarial advisers and from the Society's actuaries and others.

An important benchmark against which to judge a deal is the option of closing the fund and continuing as an independent entity. This is not a simple comparison as the business risks for the closed fund would have been particularly acute. Likely ranges of values were considered for the components of the business. The advantages and disadvantages of the closed fund route in comparison to the Halifax deal were compared for each component. This analysis is provided in Appendix 2.

3. The consultation document is intended to show how the current value of the GAR liabilities are estimated and to consider the issues which arise regarding how the cost of a GAR compromise scheme could be distributed to the GAR members. Both GAR and non GAR members will need to agree the scheme for it to be adopted. At this stage there is no specific proposal. The Society is collecting feedback from a wide range of clients and other interested parties. The results of this consultation will be used to inform the design of a proposal which will then be the subject of further consultation.