Aviva cuts with-profits payouts by £400m as fund value plummets

AVIVA, the insurance giant previously known as Norwich Union, announced plans yesterday to pay a £400 million windfall to its with-profits customers – about half the amount it had originally offered.

One million policyholders are being offered the cash in exchange for giving up their rights to any future redistribution of surplus assets.

The pay-out will see 90 per cent of eligible policyholders receive between £200 and £1,150, with the remaining 10 per cent getting more.

The group had originally hoped to pay out a minimum of at least £400 per person, but pulled the offer in February due to steep stock market falls. The surplus assets in the with-profit fund, known as the inherited estate, was valued at £2.1 billion in June last year, shortly before the offer was announced.but the figure has now fallen to £1.4bn.

The pay-outs outlined yesterday are based on the fund being valued at £1.2bn, but the final amount policyholders will receive will be calculated according to the average value of the inherited estate during the three months between June and August.