Aviva has backtracked on plans to distribute £1 billion to Norwich Union with-profit policyholders this summer.
Last year, Aviva announced it would pay one-off bonuses of around £1,000 to 1.1 million Norwich Union with-profits policyholders. This ‘reattribution’ would have seen policyholders given the option to receive a share of surplus funds in Norwich Union’s inherited estate, in return for relinquishing the right to receive any future payouts.
Originally payments were expected to be received by policyholders in summer 2009. However, Aviva says these will now be delayed as a result of stockmarket turbulence. It will also update policyholders about the situation within the next few months.
Aviva made the original reattribution deal after consultations with policyholder advocate, Clare Spottiswoode, last July. It now claims that the value of the inheritated estate, which is used as a buffer during turbulent economic conditions to smooth the returns on with-profit funds, has fallen significantly.
The inherited estate was worth as estimated £2.1 billion in July 2008 but the current value of the estate has not been disclosed by the insurance giant.
The news was announced alongside the insurer posting record new business figures, with life and pension sales of £11.9 billion.
Peter Vicary-Smith, chief executive of Which?, says: "This caps a miserable few months for Aviva’s with-profits policyholders in which they’ve seen bonuses slashed and transfer penalties introduced. We must avoid a situation where policyholders take all the risk only for Aviva to get all the benefit from any upside in the value of the estate.”