DAVID Nish chief executive of Standard Life, was challenged to say what he would have done without the bumper bonus he earned last year while the company was criticised for its treatment of some policyholders.

However, the chairman of the life and pensions giant, Gerry Grimstone, said the executive team led by Mr Nish had earned their pay by delivering great results and policyholders had been well served.

The pay policies followed by Edinburgh-based Standard Life came under scrutiny at yesterday's general meeting in the city when a private shareholder expressed unhappiness about the £5 million package earned by Mr Nish in 2012. This was almost double the £2.6m he took in the previous year.

Chief executive since January 2010, Mr Nish received a basic salary of £775,000 last year and secured an annual bonus of £1.2m. The shareholder asked Mr Nish: "Isn't a huge salary enough incentive?"

He asked Mr Nish to explain what he would have done differently had he not had the incentive of the bonus.

Mr Grimstone, who fielded the question, told the meeting no analysts had thought the executive team would be able to achieve the transformation required to trigger the awards when the pay scheme was put in place.

Before the meeting he said: "We put in a new management team three years ago and we wanted to incentivise them to change the business because the board thought the business had huge potential."

He added: "The year we brought them in, the profits were at £399m and the year that has just finished the profits were £900m.

"The share price went up from £2.17 at the start of that to £3.32 at the end of last year and pretty much £4 today."

Mr Grimstone noted the pay plan had been introduced with the agreement of shareholders.

Including votes lodged at yesterday's meeting, the relevant resolution won the support of 95.94% of those cast.

The shareholder who criticised the remuneration policy said he was also unhappy about the way Standard Life had been treating holders of its with-profits savings policies.

He noted the company cut bonuses on its unit life plan in January although the heritage fund used to support the policies had achieved strong returns.

Some 600,000 with-profits customers were affected when Standard Life halved bonuses on unitised life and pension plans to 0.25%.

The sub-fund used to back the policies returned 9.8% last year, while the overall with-profits heritage fund, which is ring-fenced from Standard Life plc, returned 7.9%.

"I believe ethically we are failing. The biggest risk takers are those with savings policies. I'm not at risk," the shareholder said.

However, Mr Grimstone said lots of money would need to be reserved to meet bonus commitments made during a period of very low interest rates.

He insisted the cut in bonuses gave Standard Life the investment freedom required to maximise returns for policyholders in the long term.

Asked by another shareholder if the company's demutualisation in 2006 had been bad news for policy-holders, Mr Grimstone said: "I give you an absolute assurance that nothing has happened since demutualisation that has in any way adversely affected policyholders."

He said Standard Life was well placed to capitalise on the Retail Distribution Review, which this year barred commission payments to advisers, and auto-enrolment into some company pension schemes.

The company might need to respond to future market changes but further job cuts are not planned.

Asked before the meeting if Standard Life had any concerns about Scotland possibly voting for independence in the referendum set for September 2014, he said: "We don't know enough about what the consequences are going to be to be able to have a firm view yet."

He added: "The main thing for Standard Life is we want Scotland to be a competitive place from which to do business."