THOUSANDS of policyholders at mutual life assurer Scottish Provident could be set for £5,000 windfalls with Abbey National expected to confirm later this week a £2bn takeover of the group.

Early indications say the deal could trigger the generous windfalls for the Edinburgh-based group's 300,000 with-profits policyholders.

An acquisition would also bring to an end five months of speculation about Scottish Provident's future, following the insurer's announcement in April that it was reviewing its mutual status.

Analysts said the potential takeover was "not unexpected", and described the speculated £2 bn price tag a "full price".

The figure compares to original estimates which five months ago hinted the mutual could fetch around £1.25 bn.

City analysts did not expect another bidder to gatecrash the deal, as the mutual had been on the market for some time, giving rival buyers plenty of opportunity to take a look at the target.

Other bidders who were also thought to be interested in snapping up the life assurer were Royal London and Liverpool & Victoria.

An acquisition of Scottish Provident would add to Abbey's existing insurer Scottish Mutual, based in Glasgow, which it purchased back in 1992.

The deal is understood to have been struck over the weekend, but neither company was available to comment on the proposed plans.

It is thought Abbey would be keen to keep the Scottish Provident brand to sell protection products.

It still uses the Scottish Mutual name, but it is likely that it will continually to only sell Abbey National branded life assurance products through its branches.

Its life brands are expected only to be marketed to independent financial advisers.