Prudential has announced that its plans to return part of its £8.7 billion with-profits surplus to life insurance policyholders and shareholders are being shelved.

Around 4.5 million policyholders could have benefited from the reattribution of the company’s so-called inherited estate, which has accrued because Prudential has held back a proportion of its investment returns during profitable years, to cover payouts during years when returns are poor.

The company’s chief executive, Nick Prettejohn, said that the decision had been made after comprehensive and extremely complex analysis that was not directly related to the credit crisis. He added that windfalls for policyholders would have been relatively small and the money would instead be used to strengthen the fund and protect the interests of future policyholders.

During recent negotiations over Norwich Union’s proposed reattribution of its £2.6 billion inherited estate, consumer groups and the policyholder advocate, Clare Spottiswoode, declared that the current rules favour shareholders.