Aviva, the UK’s biggest insurer, could announce as early as Wednesday a deal to free up about £5bn of surplus in its life funds, delivering windfalls to more than 1m policyholders.

Aviva, which reports interim results on Wednesday, has been negotiating with Clare Spottiswoode, policyholder advocate, who has been representing policyholders, on a deal to carve up the surplus between shareholders and policyholders, for more than two years.