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Government to pay £1.5bn compensation on Equitable Life

Equitable's near collapse ten years ago is estimated to have affected about 1.5 million savers.

The UK government will announce a compensation of £1.5bn for those affected by the near-collapse of mutual insurer Equitable Life, say reports.

The figure is more than three times that recommended by the government-commissioned Chadwick review released earlier this year, but only about a third of the compensation (£4-5bn) recommended by the Parliamentary Ombudsman in 2008.

The details of the reparation will be revealed as part of the government's Comprehensive Spending Review on Wednesday.

Equitable's near collapse ten years ago, after it failed to build up sufficient funds for guaranteed payouts on some of its pensions, is estimated to have affected about 1.5 million savers.

The Telegraph reports that although the compensation to be announced would not come close to the estimated loss of between £4bn and £4.8bn for policyholders, it will be targeted in order to give higher returns to savers rather than wealthy investors.

About £1bn of the compensation is expected to be allocated as up front payments immediately following the spending review, while £500m will be reserved for with-profit annuity holders, to be paid over time.