One million policyholders in two of Norwich Union Life's with-profit funds will be offered an average cash payment of £1,000, parent company Aviva announced today.
In a so-called reattribution process, policyholders in the CGNU Life and CULAC funds will be given the choice between a cash payment in return for relinquishing their right to future payouts from the funds' inherited estates and their status quo – knowing that further distributions are highly unlikely in the next few years.
Depending on the size and term of their Norwich Union with-profits policy
, around 700,000 policyholders can expect a windfall of between £400 and £1,000 pounds, while a further 220,000 could receive between £1,000 and £3,500.
Mark Hodges, chief executive of Norwich Union Life, said: "This is a great offer. We believe that it represents good value for 99 per cent 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."
The payments are offered on top of previously announced distributions of £2.1billion and are not dependent on a majority vote. Normal bonuses will still be paid out as usually, whether the policyholder accepts the offer or not, and their decision will have no impact on the performance or security of their investment
, which revealed a 12 per cent increase in profits for the last six months, will draw the money used for the reattribution from its shareholder funds in order to keep the with-profits funds and the inherited estate intact, to make sure the funds remain financially strong.
Independent Policyholder Advocate, Clare Spottiswoode, who represents the interests of the policyholders and has negotiated the payout said: "I'm delighted that we have a deal that is in the interests of the vast majority of policyholders. There is a substantial amount of cash available for them and this offer also provides a fair return to shareholders. This deal is good in all respects."
The reattribution is subject to Board and High Court approvals and will also need to be fully reviewed by the Financial Services Authority (FSA) which, in a preliminary review, has already concluded the offer is fair.
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