Norwich Union windfalls - the battle begins

Update: Norwich Union confirms £1,000 windfalls (30 July 2008)

Plus: Norwich Union windfalls Q&A: Is this a good deal? (30 July 2008)

January 14, 2007

The battle lines around those policyholders who will, and those who won't get windfalls, if and when Norwich Union successfully distributes its £4 billion 'inherited estate' - are being drawn.

And, if last week's first public policyholders' meeting on the issue is anything to go by, it's going to get bloody.

Windfalls for some Norwich Union with-profits policyholders are in the offing because the insurer's parent company, Aviva, wants to re-distribute a vast pot of £4 billion 'inherited assets'. For more on the background to this, read here.

It's serious money. It could mean big windfalls (that's thousands of pounds) for many of the estimated 1.2 million eligible policyholders.

But it's not yet clear who will get what. Should policyholders who have put the most into their endowments or bonds or pensions, over the longest period of time, collect the biggest windfall as a reward? Or should it be the newer customers, whose future is tied up with Norwich Union for longer, who get the most, because they have the most to lose over time?

The woman who will play a major part in deciding is policyholder Advocate Clare Spottiswoode, pictured. Last Wednesday she fielded strings of questions from worried and sceptical policyholders in the first of the five national roadshows that she will conduct this month and next. (For details of how to attend, visit Policyholderadvocate.org)

But you can bet that what was on the top of most policyholders' minds was the money. How much they'd get, and when they'd get it.

For now Spottiswoode's job is relatively easy. She can claim, quite reasonably, that she is listening to all policyholders' points of view. But soon her role will get nastier. She will have to tell some groups of policyholders why she has decided that they ought to get less of a windfall than others.

Policyholders last week asked some difficult questions - to which, in some cases, Spottiswoode didn't have answers. Here are two of the most commonly asked:

"If this £4 billion pot of spare assets has been sitting around for so long, why haven't policyholders been given more, and better, bonuses?"

Spottiswoode didn't absolutely know the answer to this. But the gist of what she said - along with help from an actuary who works with her - was that this £4 billion originated largely from policyholders, now dead, who had not been paid out enough money when their policies matured back in the 1960s and 1970s.

The money hasn't been touched since then because Norwich Union's parent company Aviva needs policyholders' permission to use it. That's what this process is all about. But Spottiswoode later told me that she needs to, and will, establish for sure that the money has not been used at all to date to benefit policyholders.

"How do we know that the money is only worth £4 billion. Mightn't it be even more?"

Good question from someone who evidently knows that insurers are as trustworthy as a rope bridge in an Indiana Jones movie. Spottiswoode said: " Don't worry, I'll check. I'm getting the raw data in March, which is when the numbers haved to be filed to the regulator, and with the help of accountants KPMG I will work out whether £4 billion is correct."

Other policyholders asked less crucial questions, for instance about why the Policyholder Advocate's office employed call centre staff based in India. (The answer to that one, predictably, is that it's cheaper.)

No-one asked who was paying Spottiswoode's wages and other costs or how much it would come to. But since there has been some comment on this in the papers, one of Spottiswoode's colleagues explained that if divided among all the eligible policyholders, the bill for Spottiswoode would come to 23p each. If the deal goes through, policyholders will foot the cost.

Keep your comments and questions coming, using the tools below (your email addresses aren't published, and you can post under any name). The Norwich Union windfalls - which if they come at all will not be paid till much later this year - are going to be good news for a lot of people. But much could go awry between now and then.

Me, my colleagues on Financial Mail and those on Thisismoney will, between us, give you the best coverage you'll find anywhere in print or on the web. So do stay tuned.

- Richard Dyson

Comments

[K H FIDDLER]

I think it's wrong that those who have paid the longest and invested the most money should receive less of a windfall than those who have recently become policy holders.

Presumably those recent policy holders have got less money invested and have a longer period to get back on track for their future.

[Margaret Bowker]

Me and my husband have a Flexi-Bond with Norwich Union taken out about 10 years ago. Is this type of policy eligible please

Thank you.

My husband has a Pension with Norwich Union is this eligible also.

Thank you.

[Margaret Bowker]

Me and my husband have a flexi bond with Norwich Union taken out about 8 years ago. Does this qualify please for the windfall.

Also my husband has a pension with Norwich Union is he eligible for the windfall.

You do not say which type of policy is eligible.

Thank you.

[Ismail]

I am confused with the whole things, who will and who won't get windfalls? having an endowment policy with profit with norwich union for the last 20 years + so many like me deserve to be in the distribution pot for loyalty.

[Paul McCormick]

I am in reciept of a Norwich Union pension for my wife who died in 2002. Will I be elogible for a payout ?

[Mal Girling]

Some Norwich Union Endowment policyholders are not getting any payment. I hold a cashsaver/endowment life insurance policy taken out in 1991 and which matures in 2014. I made enquiries last week when the windfall news broke but was told my policy did not qualify. When I asked why, I was told that only certain parts of Norwich Union would be eligible and that I was entitled to nothing. A previous policy (25 years) paid out to me in 2006 provided a great deal less than I was led to believe I would get because of underperformance. So this is the second kick in the teeth I've received from Norwich Union. Never again

[Mrs S farris]

There is talk of shareholders receiving payments out of this £4 billion. I cannot see any justification for this whatsoever plus I agree that new policy holders should receive more than those whose policies are about to mature ( i.e I agree with the "risk" logic).

[anne sheen]

the main consideration in determining windfall payouts should be to recompense loyal customers who have seen their endowment policies fail to provide the expected settlements leaving them with shortfalls of thousands of pounds on policy maturity. Newer customers have the benefit in front of them during the duration of their policies.

[Ian Bainbridge]

extract from a letter (following the completion of the Advocate questionnaire and a further email - neither of which have been acknowledged) comments may prove to no avail but as a policyholder it is of concern that they should be considered.

'As the inherited estate had been built up over many years I thought it
wrong that the distribution should only be to inforce policies. I went on to
say that whilst my matured policies had received a terminal bonus there was
obviously more to pay out and that previous CGNU matured policies should
also be taken into account and receive the benefit of the inherited estate
distribution as they had equally contributed to its growth. I suggested that
policies that had matured in the last 10 years before the closure of the
CGNU fund should benefit.'

Having read some articles in the Sunday Mail, I noted that Claire is reported as commenting that ‘those whose policies have been in force longest may get smaller windfalls than newer savers because they have less to lose in the deal.’ I totally disagree with this stance. I would have thought that those who have had their policies in force the longest should be the ones who have more to gain from the windfall, as it is because of these policies that some of the inherited estate has accumulated and also because it is these policies that have built up the free asset ratio of the CGNU fund that has helped to maintain bonuses to savers. I also believe that rewarding newer policies over older policies is at odds with what has gone before when there have been payouts. Above all else the end result on how payouts are distributed should be fair, and seen to be fair, to all policyholders.

[Jonquil Simons]

Of course those who have had policies the longest should be rewarded for their loyalty with the largest windfalls, particularly where policies are due to mature in the next few years. People who have taken policies recently have a longer time to make up any deficit. I feel this particularly strongly, especially as my personal with-profts pension plan from NU (which I have had for 20+ years) has not had any bonuses added to it for the past three years.

[Paul Fairbrother]

Mrs Spottiswoode should not be making suggestions as to how the assets are distributed . She is there to carry out the wishes of and listen to the members .Her suggestion that newer policy holders gain more is totally out of order and wrong and i question her ability to carry out her task fairly . The longer term policy holders are the ones who have have suffered most with poor returns MVAs etc what planet has she come from presumably 1st class paid for by AVIVA !!

[Mrs M Rice]

I fully agree that windfalls should go to policy holders with the longest standing investment. Also I have to wonder why Norwich did not use the £4 bill. of assets to offset the heavy 'market adjustments' imposed a few years ago when I redeemed my 'with profits'for considerably less than it should have been.

[Alan Bickerton]

Surely policy holders who have contributed the most should receive the larger share.
I have an endowent policy due to mature in 2012, the predicted shortfall is £12000, surely it would be fairer to use the £4bn to reduce these losses.
I also find it hard to believe this company has any new policy holders, investors would get a better return keeping their savings under the mattress.

[Michael Whitehouse]

As a policy holder from Commercial Union days,I will be paying an amount of Clare Spottiswoode fee at the moment it does not look like she is looking after my interests at all. Why does she need to mess about with how the money is going to be distributed and leave alone what is not broke people who have shown loyalty over a 30 year period should have the horses share.

[John Dunn]

Who qualifies and when is a major concern for anyone with a policy maturing this year. If the policy matures before this is settled do they lose out

[K Archer]

Having been misold a NU Endowment we had to fight hard to get it resolved, so we find it immoral that we continue to get warning letters about shortfalls when these funds are sitting there. Surely those who have been and remain policy holders with shortfalls should be given priorities, not new policy holders who must be aware of the risks, unlike us who were sold a policy full of promise with no risks mentioned.The windfalls should be used to cover the shortfalls.

[Ray Morris]

Although I have held and continue to pay into a Norwich Union Endowment Policy with Profits for 20 years. It would appear that my particular policy is not included in the proposed shareout. I consider that this "windfall" should be distributed to all "failing" Norwich Union Endowment Policies. Norwich Union sold these policies on the basis of paying off mortgages and also providing a cash surplus.

They are now going to pay out less than the original minimum figure on maturity , leaving many policyholders with large debts. Norwich Union have ignored the plight of Endowment Policyholders and should look to helping these members who have been betrayed, rather than new members who have signed up with all the facts & safeguards, which were not available to purchasers 20 years ago.

[Dave Wales]

I have been trying to get somebody interested in this topic for several years. Lets hope that now the issue is coming to a head, that the policyholders get their money. This money has been taken from policyholders in order to, in their words " smooth the growth of those policies so that there was something there in the poor return years". If this was true then the money should not be there now as it should have been used in the dire years around 2002 - 2004. This is clear theft from the policy holders as there was no mention that this money would not be returned to the policyholders. If you look at Prudential their pot is even bigger. Also a good way to see if the figure is correct is to study the annual reports for the last five years which clearly shows, in Prudentials case that while offering poor returns in the early 2000s their inherited estate was climbing rapidly. Let Aviva clear all the potential shortfalls on endowment policies then divide the spoils between policyholders and shareholders in the ratio 90% to policy holders and 10% to shareholders. Is there no "No Win No Fee" lawyers out there who would take this on? The fee for winning would be massive.

[Mick Sparks]

I have recieved a letter informing me that i may be entitled to a share of the so called windfall if it happens, so i assume my With Profit Bonds comes into this catagory.
What i would like to know is what constitutes a long term policy and what is a short term policy, i took my policy out in 2004 would this be considered a short term policy

[Maurice Rolfe]

What about NU life insurance policies, would they qualify for a share in the pot?

This is an important consideration for those wishing to change insurers as life policy premiums are falling I am told.

[Ernest Roberts]

Two points to be made. The longevity of holdings should have no relevance to the level of payout as nobody stayed with NU out of loyalty. They stayed either because they could not bother to change their investment or that they hoped returns would improve. Second point. If the split between policy holders and share holders is laid down in the regulations as 90/10 what is there to negotiate? Surely the allocation of the 90% is not a subject for negotiation but should be allocated pro rata to the amount of the basic invested sum.

[T. J. Oswald]

What about policyholders whose policies have recently matured after many years of paying in. As these funds originated many years ago and companies have been dragging their heels over distribution, is it fair that these policyholders are excluded? This applies also to Prudential with whom I had a policy mature some weeks ago.

[Dave D]

In the Mail on Sunday of 21/1 Richard writes about a potential payout of orphan assets by Prudential and other companies. It seems that something is on the move at last. It seems stupid to leave these funds accruing for ever. I guess the money really belongs to people from past years and centuries who have vanished without trace so we shouldn't argue too much about who gets the biggest slice...as long as it isn't the shareholders! One question that I'd like answered... Is it likely that with profits bonds policyolders would benefit or just customers with regular premium policies? (I have had a Prudential Bond for several years). Thanks

[peter trimble]

I had an endowment policy with NU for 25 years 1976 onwards I struggled to pay that in the early years, I guess NU was salting away part of my final payout and now they are to dish it out willy nilly to those people that are investors with current policies. It was not their money that was hidden away in the first instance! So think on NU, it's us not dead investors that gave you the hard earned cash in the first place....

[Richard Dyson]

Hi - thank you all for your comments. I've added another blog, above, which I hope answers some of the easier questions, particularly on eligibilty. But there are a lot of questions to which there simply don't seem to be answers. As for Peter Trimble's point (shared by many), as far as I am aware, it has not yet been decided for certain that former policyholders will not get anything. You may still be in there with a chance. I shall pursue this in coming days, and keep you updated. RICHARD DYSON, FINANCIAL MAIL on SUNDAY

[Dr J Pilkington]

I have created a Policyholders' forum in Google Groups entitled:
"Norwich Union Policyholder (reattribution)", so that the 1.2 million affected Policyholders can discuss the proposed reattribution amongst ourselves, since Norwich Union has effectivelty excluded us all from the procedure, by its undemocratic appointiment of its own paid employee as the Policyholder Advocate.
Please join the forum.

[Mr Dewi Jones]

I have a 25 year Low Cost endowment policy that is due to mature in February 2008. I pay 56 pounds a month and I have not been informed by NU about any winfall! Does that mean my type of policy is not even being considered for any share of such a windfall?

Many thanks

Dewi

[p j english]

i believe that short term policies will lose the most with uncertainty in markets fluctating and the long term have their perks in the bag

[Anne Harrison]

This is all very confusing. Norwich Union state that they have sent letters to those people eligible for reattribution, but they also say they have not decided who is eligible. I have a with-profits occupational pension. Their site states they cannot check the occupational pensions.To be fair all policyholder should receive something.If there is anyone out there with any infor please let me know. Many Thanks

[Sue Dryden]

My husband's NU annuity pension (paid since 2005) was, like many other recently retired persons, extremely disappointing. A share (however small) would seem fair and be most welcome.

[Jackie Martin]

I received a letter concerning the with profits bond in the portfolio bond my husband and I purchased almost 7 years ago It now has over three years to go until maturity date. It appears this may be a qualifying policy and considering that at one point we were shouldering a 20% loss on the shares portion of the bond, I think it is right that I should get a larger bonus than somebody who has just bought a bond. It took almost 6 years for me to get the shares portion of the bond back into profiitability. My husband died nearly three years ago and we were never able to take a penny out of the bond as this would have meant taking capital out.

I also have a traded endowment policy which will mature in April that my husband and I bought with a legacy he received and evidently this is not a qualifying policy. I have had to continue paying this at almost £75 a month just to get back what I have paid in which has been an unwanted burden since my husband died. The bonuses have been negligible over the last 5 years and last year I did not even get a bonus as the policy matures this year. Some of these funds should have been used to give me some sort of return on my investment.

[Alan Smith]

I took out my endowment policy in 1987 and it has a projected shortfall of around £8000 on maturity in 2012. However, it currently has a surrender value of something over £21000. When interest rates reduced from those 15% giddy heights (remember those?)I kept my interest payments at the higher levels and thus reduced the capital sum outstanding. The surrender value would clear the outstanding capital debit with some to spare. If the so called windfall is going to be in the hundreds then I will surrender the policy now. If it is likely to be in the multiple £1000's then I would probably wait - So, does anyone have any clues as to what reattribution levels are likely - no guarantees of course but an educated guess?

[Mrs Terry Cooper]

I have had an endowment policy with Norwich Union since 1987 (because of medical circumstances, an expensive one) why shouldn't those who have been paying in the longest get a decent share, this money has been paid in by policyhoders and is not a business profit so why should it go to the shareholders? It has been admitted that I was missold this policy but because I had been prudent and paid off lump sums off my mortgage the amount of compensation was reduced to take that into account!

[Richard Clark]

I feel that this huge pot of money should be used to wipe out the shortfall on Mortgage Endowment polices. These policies were never fit for purpose from the start and don't let anyone tell you otherwise.

[Don Flagg]

Can we please stop using this totally inapplicable word "windfall". In every case where it has become the norm it is actually a payment in return for giving up some right which is actually worth more than the "windfall".

[Colin Butterworth]

In the MOS on 4 February, reference was made to policyholders with Phoenix enjoying payouts boosted by surplus assets. I had several small with profits policies with Sun Alliance that were acquired by Phoenix some years ago. The latest is about to mature and on a sum assured of £3,277 I have received an Interim Bonus for the last year of £0.59 and no Capital Bonus. Not much "enjoyment" there then!

[Andrew Edgington]

Could everyone with concerns about the actions of NU; FSA; Clare Spottiswoode's office keep asking questions and writing to them demanding answers? Clare's published timetable says that she'll be starting formal negotiations soon and a lot of questions remain unanswered. Policy holders should do everything they can to avoid a repetition of the AXA re-attribution which delivered 45%:55% compared with the FSA rule of 90%:10% for distributions. Examples of letters etc can be found at the google group. Go to google; click on groups and enter 'Norwich Union policyholders (re-attribution) ' in the search field. Then sign up!

[Sue Patterson]

I have held a personal with-profits pension plan with NU, previously Commercial Union, for 25+ years. I have retained all bonus statements during that time and have seen the bonus payment steadily decrease over recent years. I strongly believe that those who have had policies the longest should be rewarded with the largest payout.

My personal with-profits pension policy matures in 2009, however, this policy has not had any bonus added to it for the past three years. How can this make sense with a 4bn excess fund? In my mind, this raises serious questions concerning the competence of the administration of funds. Can NU explain why this 4bn excess was allowed to build up when clearly there were many years when this money could have been used for "smoothing".

[Valerie Blackwell]

I hold 3 endowment policies with Norwich Union dating from 1983 through to 1987. Will I receive a payout and if so when, bearing in mind that the 1983 policy matures next year.
I think that long-standing customers should be rewarded for their loyalty through the 'thin' years of the 90s.

[Gerald Moore]

I understand that these 'Spare Accumulated Profits' are the result of undistributed profits of past years, accumulated from the monies invested by With Profits fund-holders. If correct, then it is equitable that the very largest propotion of these 'Spare Profits' go to the WPfund-holders.

In past years... NU has been one of the first companies to lessen or withdraw bonuses, &/or to inflict MVA penalties. The NU should have smoothed poor results with these accumulated 'Spare Profits'. And with NU being a poor performer for its policies it is scandalous that they try to plunder these 'Spare Profits' created from & with our monies: it is a third world practice.
NU should not be allowed to cream off 'WP fundholders 'profits' at the expense of those fun holders. It is a scandal if they do.

[Anne MacGregor]

I have two policies which mature in 5 years time.I stopped contributing into them because the profits were so low. Will I be included in the windfall ?

[Alex Rose]

I understand that Norwich Union Endowment Policies do not qualify for a payment. What is the meaning of the Term "With-profits" if some of the accumulated profits for the 24 years I have held the Policy do not qualify for distribution?

Any distribution of "surplus" cash should be made to those who have invested hard earned money in under-performing funds for the longest time.

Is the NU stance regarding its own products the result of its public flotation and their belief that policyholders were compensated by the issue of shares at that time?

Answers please!!

[Mrs B Srivastava]

There should be a proper sharing out of the £4 billion between all Norwich Union Customers based on the length of their individual investments and not on the type. My pension was for many years invested in "with profits" (and didn't do very well). As I am now near to retirement, I have switched this to a safer Norwich Union "Building Society account". Should I therefore miss out on the payout? It would be grossly unfair!

[paul gibson]

My information is that Aviva issued some announcement about a windfall in oct2005 and again in feb2006. Policyholders wishing to cash-in their bonds were advised they could miss out, from 26 june 2006.
Being unaware of what was going on I cashed-in my policy in early june2006. So I get no windfall.
Surely Aviva should have advised anyone seeking to cash-in a policy, as soon as information about a windfall was made public?
Weren't they negligent?... there must be hundreds like me. What can we do?

[Rowland Jagger]

As a subscriber to a twenty year endowment policy which is still running until the end of this year and will I have been informed be short on payout of the promised amount. it is only fair that I and others like me should benefit from any other share out of funds

[Jim Mulvenna]

If you have more than one eligible policy are you entitled to an inreased payout?

[MARGARET DRUMMOND]

Having a General Accident policy this company bought them over with no consultation to the policy holders or any payout at the time the word inhereted fund means to me Norwich Union acquired this fund when buying over those companies and should rightly be paid back to General Accident and N.U Policy holders.

[V.Southon]

It is only general accident and commercial union policies that are eligible so no cash for me then as my policies are original n.u.ones and we did get that share windfall a while ago.So those policy holders should get it all as it was in their funds .

[Roy Perry]

I have a current twenty year old with profit (what profit)pension policy with NU. Like everyone else I have not seen my pension grow or any bonus payable for the last three years. Call me a synic but whilst we are constantly reminded of smoothing to the benefit of all it cannot be fair to pay new policy holders effectively in advance when long term holders are paid in arrears.
Could it be that new members are preverable to recieve higher payments so NU can cull the money back over time?

[John Wilkes]

I heard on the radio yesterday morning that the whole 'windfalls' thing may well be shelved (cancelled?) by Norwich Union. What's the truth please?