Report may back Equitable pay-outs

According to the Daily Telegraph, the report by Parliamentary Ombudsman Ann Abraham will say that watchdog bodies were guilty of maladministration and will point the finger of blame at the Treasury, Financial Services Authority and Government Actuary's Department.

The Ombudsman's office confirmed that the report will be published next week, but declined to discuss its contents or to confirm or deny the Telegraph's account of its conclusions.

The newspaper said that it had seen a draft copy of Ms Abraham's report, which concludes that the Government's failure to regulate the mutual insurer correctly has led to injustice for policyholders.

More than one million customers lost up to 50% of their savings and pensions when the world's oldest insurance company collapsed in 2000.

If Government departments or agencies are found to be at fault in Ms Abraham's report, some of those who lost out are likely to pursue court cases to recover of their money. Estimates of the potential cost to the public purse range as high as £4 billion.

Pensions campaign Ros Altmann told the Telegraph: "If the Government is found to have failed in some way and be held responsible for the losses that people have suffered, then it should comply with what the Parliamentary Ombudsman says as quickly as possible, rather than make people wait for more years.

"If the Government can find billions of pounds to bail out savers in Northern Rock - who should have and could have been well aware of what the compensation terms were if that company failed - then how can it deny treating fairly people who have suffered losses from failure of the Government itself?"

The Treasury declined to comment on the report.

The Penrose Report of 2004, commissioned by the Treasury, found that regulatory failures were "secondary matters" in the demise of Equitable Life. Lord Penrose found the company was the "author of its own misfortunes" as it had made over-generous payouts to policyholders.