ONE MILLION Norwich Union with-profits policyholders were last week offered windfalls of up to £3,500 — as long as they give up their right to any future payouts.

The offer follows two years’ negotiations between the insurer and Clare Spottiswoode, representing the policyholders, on how the firm could best reallocate £5 billion of surplus assets to shareholders.

The surplus assets, known as the inherited estate, have been built up in Norwich Union’s with-profits funds over the years.

Spottiswoode, who has had more than 100 meetings with Norwich Union to thrash out the terms, claims the deal is “good in all respects” and “in the interests of the great majority of policyholders”.

The Financial Services Authority (FSA) has also deemed it “fair” but consumer lobbyist Which? argues that the payouts are not sufficiently generous and may challenge the offer.

Adviser Towry Law believes that the payments are not necessarily a reason for policyholders to stick with the insurer. Michael Greenwood of Towry Law said: “Those who opt to stay with Norwich Union to receive this payment will continue to be at the behest of the insurer, which can change its policy or introduce exit penalties at any time.

“It is possible that a lot of people will leave the insurer once the payments have been made next year, which is likely to cause it to impose penalties — known as market value adjusters — to encourage the remaining policyholders to stay put.”

So, should you accept the cash, hold out in the hope of more generous future payouts or leave Norwich Union altogether? We answer your questions.

Who is entitled to a payout?

All policyholders in Norwich Union’s CGNU Life and CULAC funds will qualify. Payments will be tax-free and not depend on a vote. Instead, individual policyholders can decide whether to take up the offer. If they accept, they will give up their right to future payouts from the inherited estates.

To be eligible, policies must have been invested in one of the qualifying funds on November 21, 2006 — the date the reattribution programme was announced — and still be in force in summer next year when the payments are to be made.

How much will I get?

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