04 August 2008
Life insurer Norwich Union has agreed to offer payouts to nearly
a million policyholders to a total of £1bn.
The windfall follows long negotiations between the company and
an appointed representative of Norwich Union's with-profits
policyholders to distribute a surplus that has built up in these
funds. The offer is only for investors in two of Norwich Union's
oldest funds - CGNU Life and CULAC with-profits funds - and only
those holding qualifying policies on 21 Nov 2006 are eligible.
These are mainly customers with endowment policies, pension
policies and with-profits bonds.
Norwich Union, in common with other insurance companies that run
with-profits investment funds, has to set aside a certain amount of
profits to cushion the fund against financial downturns, to ensure
it can continue to invest. Financial services regulator the FSA
sets the guidelines for how large this cushion should be - Norwich
Union has set aside more money than it needs for this purpose and
is returning the surplus to investors.
As Norwich Union is not a mutual society, that opens the way for
a tussle between policyholders and shareholders as to who should
share in the surplus.
The deal, if accepted, is expected to mean payouts for about
700,000 people of between £400 and £1,000, and another
220,000 could get up to £3,500. In return, policyholders will
have to give up the right to future claims on the reserve, which is
known as the "inherited estate". Any policyholders can choose to
reject the offer, and keep the right to claim on the inherited
estate in the future.
NU will be writing to the relevant policyholders later on this
year to outline the actual amount offered, and it's anticipated
that NU will start payments next summer.
