When the shares were issued, Aviva made it clear it had the right to buy them back at face value, even if they were trading at a price considerably above that. In the company’s recent results statement, it said it was considering taking this action.
This is because under current regulation the preference shares will no longer count as regulatory capital in 2026.
But Mark Wilson, the chief executive of Aviva, said the company had listened to a wide range of views on its plans.
He said: "I am very aware that Aviva is in a position of trust with our customers and investors. To maintain that trust it is critical that we listen to and act on feedback. The reputation of Aviva, and the trust people have in us, is paramount.
"Our announcement today means that preference shareholders can rest secure in their holdings. The board and I have a duty to consider not just the financial implications of our actions. We must consider the impact to Aviva’s wider reputation. I hope our decision today goes some way to restoring that trust."
Aviva has said it will now work towards obtaining regulatory approval for the preference shares, or a suitable substitute, to qualify as capital from 2026 onwards.
If, as 2026 gets nearer, Aviva has to reconsider its position, the company has pledged to do so after taking into account the fair market value of the preference shares at that time.
Pressure had been growing on Aviva since it revealed its plans to buy back the shares at below market value.
Nicky Morgan, chairman of the Treasury Select Committee, wrote to the Financial Conduct Authority asking it to investigate whether Aviva’s actions, which prompted the preference shares of many other companies to fall sharply in value, comply with the regulator's remit to ensure markets work well.
Meanwhile the Personal Investment Management and Financial Advice association (Pimfa) said it was monitoring Aviva’s actions.
Preference shares work like bonds, though are counted as equity, because they pay a fixed income every year, whereas a dividend payment can vary.
The preference shares yield between 8 ad 9 per cent, and trade at a price higher than the par value at which Aviva was considering buying them back.