Quote: me happy

By Danny Cox | 11 Aug, 2008 

Norwich Union, sorry Aviva, have announced that they are going to distribute £1bn to around 1m with profits policyholders. This is a reattribution process meaning that shareholders pay policyholders from shareholder funds, so that orphan assets can be used as working capital within the with profits fund. In exchange for this payment, the policyholders waive their rights to bonuses payable from the orphan assets. These orphan assets have accumulated over many years and build up from unclaimed policies that people have forgotten about over the years and the owners cannot be traced.

In order to be able to do this Aviva had to appoint a policyholder advocate and get approval from their regulator, the FSA. 

You may remember that the Prudential were undergoing a similar exercise until recently which was stopped.

The estimate is that around 700,000 policyholders will receive between £400 and £1,000 and a further 220,000 policyholders between £1,000 and £3,500. The plan is to pay this in the summer of 2009. If you have an Aviva (Norwich Union) with profits policy you can call the eligibility line 0800 051 1300 to check if you are entitled. You will need to quote your policy number and hopefully they will be able to quote you happy in return.

This is all well and good and a decent outcome. Consumer organisation Which? is reasonably happy. The problem for me is that with profits funds generally have performed terribly over the last 6 or 7 years, and in many cases a payout of £400 to £1,000, as welcome as it is, is unlikely to make up for the poor performance. That said, a with profits policy may have stood up better than funds exposed directly to markets in this last 12 months.

This would seem to me to be a good time to blow the dust off any old policies or investments that you hold and check whether they are still doing what they say they should be doing. Most people are very good at buying investments but less good at selling them.