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Advisers back advocate in NU £3bn cash split

Advisers have backed Aviva policyholder advocate Clare Spottiswoode in an angry row over policyholder rights to Norwich Union’s £5.5bn inherited estate.

Norwich Union said this week it will pay £2.3bn in special bonuses to with-profits policyholders but that policyholders do not have an automatic right to the remaining £3.2bn.

The life company says this is because policyholders are agreeing to give up the rights to any future payouts from the estate by accepting a payout from shareholders under the reattribution process.

NU says £2.1bn of special bonuses will be paid over a three-year period to 1.1 million policyholders in the CGNU Life and CULAC with-profits funds, an average payout of £1,900 each, and £230m will be divided among shareholders.

Spottiswoode is arguing that the majority of the remaining £3.2bn rightfully belongs to policyholders and, under the reattribution process, it should be split, with 90 per cent going to policyholders and 10 per cent to shareholders. But Aviva says the size of the fund is not relevant to payouts that policyholders may get if a reattribution deal is agreed. It has made an undisclosed offer to Spottiswoode which she must reply to within a month.

When asked if the remainder of the inherited estate would be distributed to policyholders, Norwich Union chief actuary John Lister says: “No, the remainder of the money is needed to provide the capital to protect against adverse circumstances, such as stockmarket falls, smoothing and the capital to support new business.

“The size of the estate is not really relevant. We will not comment on the potential size of the payouts.”

Spottiswoode says: “The figure of £3.2bn is totally relevant. This is policyholders’ money that shareholders will own. This is real money which would have gone to policyholders in the future.”

Informed Choice managing director Nick Bamford says: “If the special bonus is being paid on a 90/10 basis, then why aren’t they applying the same theory to the other part of the fund? That would seem fair as it is policyholders’ money.”

Hargreaves Lansdown head of financial practitioners Danny Cox says: “This sounds unfair and the money should be distributed to policyholders.”

Which? personal finance campaigner Dominic Lindley says: “It is clear to us that Norwich Union is trying to exploit the weak regulatory framework to get more than 10 per cent for its shareholders.”

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