Last Updated: 30 July 2008

One million Norwich Union policyholders are in line for windfalls of up to £3,500 following an agreement to reallocate surplus assets held by two of its with-profit funds.

The deal - known as reattribution - means that policyholders in the CGNU Life and CULAC funds will be able to choose whether to receive a cash payment now in return for giving up their right to receive any possible future payouts from the funds' inherited estates.

The 'inherited estate' is part of the with-profits fund. Generally, it is that part of the with-profits fund over and above the part required to meet realistic liabilities that the firm retains for commercial reasons.

Clare Spottiswoode, the policy advocate charged with ensuring policyholders got a fair deal, said that the deal that 'is in the interests of the great majority of policyholders'.

She said: "This has been a long and difficult process. I have challenged many aspects of the rules of the with-profits industry to try to ensure that policyholders receive the best deal possible.

"There is a substantial amount of cash on offer and it provides a fair return to shareholders.

"Policyholders who are entitled to the payout will receive a letter later this year from Norwich Union telling them the value of their individual payout.

Each payment will depend on the size of the policy and how long it has left to run. Around 700,000 people can expect to receive between £400 and £1,000 if they accept the offer. A further 220,000 will receive between £1,000 and £3,500.

The cash payments will not depend upon a majority vote and will be paid in the summer of 2009 if accepted.

All policyholders, regardless of whether they accept the cash offer, will continue to receive their normal bonuses and the payment will have no impact on the security or performance of their investment.

Negotiations have been going on for more than a year and a half.

At one stage Aviva – NU’s parent company- threatened to walk away from talks over how to share a windfall between its customers and shareholders amid mounting tensions between the insurance giant and Spottiswoode.

At least 200 meetings took place between the insurer and Spottiswoode, the former head of gas regulator Ofgem.

Mark Hodges, chief executive of Norwich Union Life, said: "This is a great offer. We believe that it represents good value for 99pc of policyholders and almost all of the cash payments will be tax-free.

"Most importantly, we recognise that policyholders have a choice and everyone will be entirely free to make their own decision on whether or not to accept the offer."

To view Norwich Union announcement, please visit the following address:             

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