Rachel Stevenson: When a mutual loses £4.7bn, why pay directors such huge bonuses?

Standard Life's annual report this week, plus accusations of years of accounting malpractice at Equitable Life, beg serious questions on the merits of mutuality.

In principle, mutuality is not something to malign, passing on all profits to policyholders without carving off a slice to shareholders is one to trumpet, and mutuals have historically been at the top of the payout tables as a result. We have all seen how badly policyholders are done by from such as Prudential, whose policyholders have effectively compensated themselves for being mis-sold through the with-profits fund.

But policyholders of Standard, stalwart of mutuality, must be furious with the huge bonuses paid to its directors for 2002, when the company lost £4.7bn. Policyholder bonuses have been slashed to keep the company above its regulatory solvency margin, and appear to be continuing their downward spiral. Thousands of mortgage endowment customers are being told their policy will not pay off their mortgage.

One of Iain Lumsden's bonuses did come down to £124,000 last year, but this was on top of a £136,000 "performance-related" bonus. For calling the bottom of the market at 5,000 and keeping the with-profits fund overweight in equities, one presumes.

Policyholders should be interested in the pensions Standard pays to its staff. Scott Bell, who defended mutuality in 2000 when the company had £12bn of spare capital, retired with a £824,000 bonus and a pension of £410,000 a year.

All staff have are entitled to a final-salary pension without having to make any contributions. The fund is, alarmingly, still 80 per cent invested in equities (note the with-profits fund equity content has come down to just over 50 per cent) and has a deficit, under the FRS17 accounting standard, of £200m. But who pays for the staff's comfort and security in retirement? Policyholders, of course.

In return, they should enjoy all the profits of the company, but where are they? Does anyone know? How much of its record-breaking sales growth last year has been profitable? When will the millions invested in Standard Life Bank start to pay off?

¿ This week, a group of pension policymakers met in Whitehall to discuss the regulation of equity-release products. These allow you to take cash out of the value of your home to fund your retirement without having to move out. As pensions funds dwindle, and property values rocket, many people are asset-rich, but cash-poor. This makes equity release attractive.

But regulation of these products, which could leave you not only out of pocket, but out of of home, is essential. Mis-selling would be disastrous. The Government has so far indicated only that it will bring mortgage-based, equity-release products under the governance of the FSA. It has left out home-reversion plans, where you sell your house for a lump sum but you lose the right to any rise in the value of your property.

The call to make all equity-release products regulated is gaining volume. The meeting this week was called by the Conservatives, attended by the Association of British Insurers and companies such as Nationwide and Britannic Retirement Solutions, which has been leading the charge for full regulation. The Liberal Democrats have also given their support. A rather unholy alliance it may be, but the Government should listen to it.

¿ You have until midnight next Saturday to make your Isa application for this tax year. Some providers are staying open up to the deadline for last-minute investors. After another year of dire stock markets, it will be interesting to see where people are putting their money. Have investors called the bottom of the market and piled in to equities, believing them a bargain? Or are we still hiding from the stock market, in favour of cash? Stephen Spurdon on page one this week has weighed up where returns can be found in times of trouble.

It would be a shame to let the opportunity to shelter money from the taxman to slip by not using your Isa allowance. And come on, these guys have given up their Saturday night for this; make it worth their while.

r.stevenson@independent.co.uk

William Kay is away