Aviva today did half the decent thing by its policyholders. Campaign groups such as Which? have argued that the surplus assets in Norwich Union’s massive with-profits funds should be distributed on the 90-10 principle; that is 90 per cent to policyholders and 10 per cent to shareholders.
Given that this money came into existence from policyholder contributions dating from before the 1970s, it was the right thing to do, particularly as nine out of every ten endowment mortgages with Norwich Union currently face a shortfall. However, the debate over the reattribution of the remaining estimated £3.2 billion of the inherited estate is still to be resolved. Aviva should not be given too much credit until it does the right thing by policyholders on the balance of this estate as well.
Questions also have to be asked as to why Aviva has decided to pay out the surplus assets in three instalments. If this money really is surplus to requirements, as Aviva suggests, then there is no reason to delay paying out the full amount straight away. Perhaps Aviva is worried that paying it all out in one go will trigger a massive exodus from its with-profits funds?
Yet despite these concerns, today is a good day for Norwich Union policyholders A generous settlement for policyholders on the reattribution should also prove a sound long-term strategy by going some way to restore confidence in with-profits policies, which has been destroyed by mis-selling and underperformance.