Aviva policyholders will receive a pay-out of about half of what they were expecting in a scaled-down deal to unlock a surplus built up in two of the insurer’s UK life funds.

The company reached a revised agreement with Clare Spottiswoode, the policyholders’ representative, under which Aviva will pay at least £200 to about 1m policyholders. The deal is half that the company discussed last summer before the worst of the market turmoil.