Insurer lines up pounds 500 windfall

Norwich Union is set to offer members a share handout this week as it seeks to join the exodus from mutual status. Steve Lodge reports

Insurer Norwich Union is expected to announce a free shares windfall this week worth an average of pounds 500 to up to 3 million of its policyholders.

The free shares would be given out by early next summer if policyholders agree to the insurer's plan to shed its mutual status and join the stock market, where its total value might be close to pounds 4bn.

The NU customers most likely to qualify for the bonanza are holders of "with profits"-style endowment, life insurance and pension policies. Customers with "unit linked" pension and life insurance savings plans and even basic life insurance policies may also be eligible because they are considered "members" of the mutual insurer.

But the 2 million holders of other Norwich Union insurance policies - including motor, house, contents and private medical - or Norwich Union tax-free PEPs or unit trusts are expected to be excluded.

People who take out policies between now and the expected announcement may qualify for the free shares. Equally it may even be possible after the announcement to take out a policy and qualify.

But the Norwich, which refused to confirm that an announcement would come this week, warned against "carpetbagging" - taking out a policy simply for a windfall.

An NU spokeswoman said: "This is not like putting a few hundred pounds in a building society. These are long-term policies; we are talking about paying in pounds 50 a month for 25 years."

The insurer recommends people take financial advice before taking out a policy. To get a windfall from a pension or life insurance savings plan requires a longer and more serious financial commitment than with a building society savings account. In addition, windfall hunters should bear in mind that policies from different insurers can produce markedly different performances and that many life policies are poor choices as investments. Most people are better off with a PEP than an endowment, for example.

The expected announcement should make clear whether entitlements to free shares will be related to how much money someone has with the NU, as well as how long they have been a member, and whether policies that have recently matured or that will mature over coming months will qualify.

In addition, while NU may leave open the door to carpetbaggers, it will have the right to close the door in future if it thinks too many people are taking out policies for the "wrong" reasons.

Norwich Union had already announced that it was considering demutualisation, and a formal decision has been expected for some time. Other insurers are likely to follow.

One other route that remains open for people wanting free NU shares - or to speculate on other potential windfalls - is to buy a "second hand" policy in the traded endowment market. Here you buy a policy that the original holder no longer wants, take over paying the premiums, and then collect the payout when the policy matures or the original holder dies, if first. The trouble for buyers is that prices of NU policies have in many cases risen to reflect the expectation of a windfall announcement by the insurer. In addition such policies are likely to mean an upfront investment of thousands of pounds.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent