Avast Ye Aviva Yes Voters

I was fascinated at the Aviva Adviser Reattribution roadshow to hear the With Profits Actuary explain how the inherited estate is like a treasure chest that the shareholders own, and that the current generation of policyholders is the holder of the key that unlocks the treasure chest. I don't know about you, but when I hear about treasure chests I think of pirates and ill-gotten gains. So the analogy seems appropriate and somewhat brazen.

So how did the pirates Aviva get to build up such a treasure chest? The short and somewhat simplified answer is that they invested 100% of policyholders' money but gave back less than 100%. In Claire Spottiswoode's excellent executive summary she states "KPMG...concludes that the estates are likely to have mostly resulted from payouts to past policyholders having been less than past contributions."

One of the many important questions With Profits policyholders have to ask is what is the chance of getting back less than you ought to? And in the case of Aviva policyholders who hand the key over to Aviva by accepting the reattribution offer, what are the chances that Aviva will play fair by giving you back what's yours rather than keep a bit more for the treasure chest?

Well, there are some fairly decent and robust processes put in place that have been independently assessed. But history shows us that a bountiful treasure chest can be built up through "prudent management".

An important point to consider is that Aviva manage the funds to give you back 100% of your smoothed share of the fund. Smoothing is where they hold back more in the good times to give policyholders who have plans maturing in the bad times some protection against the falls. One might think that the good and bad times even out but actually investments have more good years than they have bad; a consequence of inflation. So arguably it is more often the case that 100% of your smoothed share is less than 100% of your unsmoothed fair share of the fund. Those are the times when a little bit extra stays in the treasure chest.

Wise to this fact, KPMG suggested that Aviva publish unsmoothed asset shares alongside smoothed asset shares so that smoothing can be assessed. They also proposed the smoothing account should be subject to annual independent external review. It's unclear whether these suggestions have been adopted. I hope they have but I suspect they haven't.

Policyholders who accept the reattribution offer need to think very hard about their long term commitment after they have received the payment and the last special bonus due in January. On our website www.reattribution.com we have a free reminder service where we'll remind you in January to get a with profits health check for your policy.

Aviva Reattribution - Be Sure to Vote!

Policyholders in Aviva's CGNU With Profits fund will have now received details of the offer that Aviva shareholders are willing to make to current policyholders in return for giving up the right to any future Special Distributions.

And what a bumper pack of information it is too! As an Independent Financial Adviser I've had a pack consisting of letter, summary sales aid, sample policyholder letter, sample voting form, a summary explaining all the supporting information available to advisers, the "It's your Choice" guide (48 pages), the Adviser Guide to Fund Transfer and Reattribution (32 pages) and the Policyholder Advocate's "Making your Choice" guide (32 pages).

I have to ask whether all that information is really necessary? The level of repetition in the first 10 pages of "It's your Choice" alone makes the prospect of reading any further one of dread for most policyholders I'm sure.

Interested in With Profits as I am, I persevered through the paperwork, read some of Claire Spottiswoode's revealing insights on her website www.policyholderadvocate.org and attended an Aviva Adviser roadshow. All of which was genuinely fascinating, but I'm left wondering just how many eligible policyholders will have opened their envelope, looked at the sheer volume of literature and put it in the "things to get round to soon" pile (like the one sprawling on the left of my home study desk!).

That's a real worry. Many people will have had experience of demutualisations where everyone gets a windfall whether they act or not, but that's not what happens here. For most policyholders it is in their interests to accept the reattribution offer but if they don't vote "yes" in time they will lose out. How many thousands of people will lose out because of information overload?

We've set up a new website at www.reattribution.com which takes policyholders through the key financial planning considerations step by step. We believe that most policyholders will be able to work their way through fairly quickly and make an informed decision whether to vote Yes or No. Depending on answers given, a few policyholders may need independent financial advice to make a truly informed decision but for most it's a fairly simple choice; take the money and then review whether to stay or go.