The deal has been struck, and the voting packs have been sent out. But if you are an eligible Aviva with-profits policyholder, should you be voting yes for your cash? And what could happen if you vote no, or do not vote at all?
A vote in favour will see a cash windfall, but Sarah Routledge examines why it could it be worthwhile voting against.
What has happened so far?
Aviva, in line with standard practice for insurers, has been holding back some of the returns on two of its oldest with-profits funds - the CGNU Life and Culac - for years, resulting in a build-up of surplus cash known as the inherited estate (IE).
Policyholders have the right to 90 per cent of any payout from the IE, with the remaining 10 per cent going to shareholders.
Aviva has used the extra cash to 'smooth' returns on the funds - so customers can still expect a return on their investment in the years when the fund has not performed very well - and can also redistribute the money with a 'special bonus' payout.
Three years ago, the insurer proposed shareholders could 'buy out' policyholders from the fund. For a one-off payment, policyholders could share in part of the value of the fund but give up any right to potential future payouts.
In 2008, Aviva announced the terms of the proposal. Valuing the entire inherited estate at £2.1 billion at the end of June, policyholders would be offered £1 billion - giving around 700,000 policyholders between £400 and £1,000, with a further 220,000 receiving between £1,000 and £3,500.
Aviva would then be able to use the entire inherited estate to write new business.
But when stock markets dived over the second half of the year, Aviva withdrew the offer and made a new one in May - effectively halving the payout policyholders can expect - to £500 million.
The latest offer means around 90 per cent of payments are expected to be between £200 and £1,150, with £200 as the minimum anyone will receive.
This means the average payout will now be £600, from £1,000 last year.
Why do I need to vote?
Policyholders who are eligible for a payout have been sent packs explaining their choice and will need to respond with their vote by August 21st, ahead of a High Court hearing in September 2009.
If you vote yes, you will receive a one-off payment from the share of the inherited estate, which will get to you by the autumn.
The size of the payout depends on the value and type of policy held and the time left to run on it.
Your offer letter from Aviva contains the lowest amount you will receive if you vote 'Yes'. It will be higher if the inherited estates are larger than £1.2 billion in the summer of 2009.
However, you give up any right to the inherited estate. If Aviva decides to make future special payouts from the fund, you will not be eligible as you have sold your stake.
If you vote no, you will not get any payout now. However, you retain your right to future payouts made from the inherited estate.
If you do not vote at all, Aviva will consider this a no vote.
This is not a majority vote, it is an individual choice. And the inherited estate will not disappear - there will still be one that can be used to smooth returns, so your investment will not be affected, regardless of how you vote.
All policyholders, regardless of whether they accept the cash offer, will continue to receive their normal bonuses.
Taking the offer
It is fairly straightforward to point out the advantages of allowing Aviva to buy you out by voting yes.
You get a definite cash payout now, instead of an uncertain payout in the future. Aviva has made it clear that "sizeable distributions are unlikely, especially in the next few years".
The policyholder advocate Clare Spottiswoode, appointed by Aviva at the start of the process to be an independent champion for policyholders, claims for the great majority, the offer is worth more than they might be reasonably expected to receive from special distributions over the lifetime of the policy.
Aviva has also said this, although the firm has used the slightly stronger term 'vast majority'.
Ms Spottiswoode says: "I believe that Aviva's proposals are in the interests of all eligible policyholders in that: - you have a cash offer that for the great majority is more than you might reasonably expect to receive from future special distributions from the inherited estates."
It is not exactly a ringing endorsement but she does explain why she thinks most policyholders will be better off taking up the offer.
In addition, the payout offered now will not be subject to tax, whereas future special bonuses will be.
Future payouts in the form of special bonuses are also only going to affect you if you intend to keep the policy for the long-term.
Turning it down
Aviva claims only one per cent of policyholders will be better by not voting for the deal. However, the policyholder advocate claims between five per cent and 25 per cent of policyholders would be better off voting no.
More information on what type of policyholder could benefit more by keeping their right to future distributions - by voting no - can be found in the report from the policyholder advocate.
But there are important reasons for turning the offer down, according to policyholder and activist John Pilkington, who has set up the Norwich Union Policyholders' Action Group (NUPAG) to campaign against the offer.
Mr Pilkington and his colleagues believe the surplus cash should be redistributed to policyholders in a 90:10 split, with the majority going to the policyholders and the remainder to shareholders, as set out in the policy document.
As it stands, the offer entitles policyholders to just 40 per cent of the inherited estate.
"If they can con people into accepting 40 per cent then they have given up their right to the money," Mr Pilkington says.
Andrew Edgington, also a member of the group, says: "Reattribution is a gigantic con-trick, in which Aviva with the full collusion of FSA and Claire Spottiswoode will be effectively bullying policyholders into taking a derisory sum in order to get their hands on the inherited estate, which is policyholders' money.
"It's little more than legalised theft."
Mr Pilkington says: "The booklet from Aviva is a deliberate misrepresentation of the true situation regarding future distributions from the inherited estate.
"Aviva claims that 95 per cent of policyholders would have to wait 25 years to get a distribution, but the FSA's COBS regulations 20.2.21 and 20.2.22, clearly state otherwise. An inherited estate is, by Aviva's own definition, a surplus which is not required therefore those COBS regulations apply now and every year onwards. Therefore, a 90:10 distribution is required now."
Instead of a reattribution, the NUPAG is putting pressure on the firm to make a distribution in the form of a special bonus.
The group intends to campaign for further special bonuses as a fair way of redistributing the money to policyholders.
What else can I do?
Policyholders who are unhappy with the offer can make their feelings known - whether they vote yes or no, says NUPAG.
The policyholder advocate is holding roadshows across the UK to answer questions about the offer and this is an opportunity to raise concerns and meet other policyholders.
In addition, policyholders can object to the offer by lodging a complaint with the high court, which will hear the case before it approves the offer.
Write to Royal Courts of Justice, Chancery Division, Strand, London, WC2A 2LL, citing case Number 13755/09, with your objections by 21st August 21st 2009 at the latest.
Policyholder Advocate's Roadshows will take place at:
23 June London - Novotel St Pancras
24 June Exeter - Thistle
25 June Cardiff - Marriott
29 June Birmingham - MacDonald Burlington
30 June Manchester - The Palace
2 July Jersey - L'Horizon
7 July Newcastle - Marriott
8 July Edinburgh - Sheraton Grand Hotel
14 July Belfast - Hilton
15 July Dublin - Hilton
22 July London - Hotel Russell