Victims of the Equitable Life collapse are furious after the government announced they may receive as little as £250 each in compensation. This follows recommendations made by the Sir John Chadwick Report released this week.

Almost 1.5 million policy holders invested their retirement savings into pension plans with the firm but the minimum payment guarantees they were promised could not be met – the changes in interest rates and inflation during the 1990s made the annuity returns too expensive to pay out.

The report may be taken into consideration by the independent commission launched by Mark Hoban, financial secretary to the Treasury. The commission will establish how the £400 million compensation figure will be divided.

Mr Hoban said: “This government has always made it clear that Sir John’s review is just one of the building blocks in resolving what is a complex matter and that there are other judgments to be made in determining the final shape of the scheme”.

He continued: “The government is also aware that some of his findings are contentious and because of this, and the complexity of the methodology, it will reflect on his report and will listen to representations by interested parties ahead of the Autumn Spending Review”.

“I would like to end the plight of policyholders as soon as possible and I aim to begin making payments in the middle of next year”, said Mr Hoban.

The Equitable Members Action Group had expected £1 billion in compensation and feels let down by the report recommendations. Members have said that they are determined to fight on in hopes of receiving a larger sum.

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