BOSSES at Britain’s biggest insurer, Norwich Union, have been criticised for accepting huge salary rises at a time when payouts from its with-profits fund have slumped.

It is also under fire over plans to divide up the fund’s £5 billion of surplus assets.

Over the past five years, maturity payouts to savers who have endowments, pensions and bonds with Norwich Union – part of Aviva – have dropped by nearly half.

A typical £50-a-month, 25-year endowment policy with Commercial Union, which is also owned by Aviva, will now pay out £40,737. This is a 42% drop from the £69,932 paid five years ago.

Over that same period the stock market has soared by 64%, leaving many policyholders baffled and angry, especially as the insurer’s directors have been enjoying hefty pay rises as payouts have fallen.

Aviva’s recently appointed chief executive Andrew Moss benefited from a total package, including salary and bonuses, of £2.1m in 2007, according to figures published last week. That’s 91% more than the £1.1m awarded to his predecessor five years previously, a period when average earnings have risen just 22%. Finance director Philip Scott is earning 72% more than his predecessor in the role back in 2003 at £1.3m last year.

Even these numbers play down the huge jump in pay enjoyed by the top dogs at Aviva. Moss and Scott have only been in their jobs since July.

Aviva said its top bosses have to be paid so well in a competitive marketplace. An increasing proportion of remuneration is performance-related and it can be argued that, even if savers in its with-profits fund have been suffering, overall business has been booming: Aviva made a £3.3 billion profit last year.

However, it is not just disappointing returns that have angered policyholders. Norwich Union is under fire for its plans to unlock £5 billion in surplus cash from its with-profits fund.

The board wants to grab a large chunk of the cash to fund new business and benefit shareholders, which includes the top bosses. Moss holds 143,607 Aviva shares, worth £880,000 at Friday’s closing price of 612.50p, while Scott owns another 370,436, worth £2.2m.

Norwich Union announced last month that it would pay about £2.1 billion of its excess capital to policyholders as a special bonus. However, its plans to stage the payments over three years have provoked fury as tens of thousands of policyholders will miss out.

Garry Barker, 54, a policyholder from West Malling in Kent, took out a pension policy with Commercial Union 20 years ago. His policy is now worth about £85,000 and he was planning to cash it in later this year.

However, he will miss out on thousands of pounds if he does, because he will not qualify for the next two years’ bonuses.

He said: “Norwich Union has the money now so I don’t understand why it has to stagger the payments; it’s very upsetting.

“Some of these salary rises are quite obscene. I understand that executives have to be paid well but there seems no justification for such big pay rises.”

Dominic Lindley at Which?, the consumer group, said: “Pay should take into account measures of fair treatment and customer satisfaction. It is time for the industry to revisit the recommendations made by the Treasury select committee in 2004.”

The select committee took the insurance bosses of Aviva, Legal & General, Prudential, Royal & Sun Alliance and Standard Life to task over their hefty pay rises at a time when many customers had seen the value of their endowment mortgages sink.

In a stinging attack, John McFall, the chairman of the Commons Treasury select committee, said: “At a time when people are suffering and feeling the pinch, it seems that this is way out of line.” Since the report, endowment savers at the five firms have watched as maturity payouts continue to drop while the bosses have pocketed pay rises averaging 73%.

Consumer groups have expressed concerns over the independence of the committees appointed to oversee remuneration and the management of with-profits funds; some say they are dominated by insurance insiders.

John Howard, chairman of the Financial Services Consumer Panel, the watchdog, said: “Some committees are not as independent as they could be.” Norwich Union said: “The remuneration committee’s role is to ensure our executive team are paid competitively, and that the total package reflects the achievement of the company’s annual business plan. It does take customer satisfaction into account.”

Times Recommends

• How to profit from your holiday
• Is there anywhere left to make money?
• 10 sites that could change your life