EXPECTATIONS have been raised of a multi-billion pound payout to more than a million Equitable Life victims, after the new government promised a "fair and transparent" settlement for all.
Campaigners have been fighting for a decade for 5.8 billion compensation to cover what they claim they lost, when the UK's most trusted insurance company collapsed. Both the Conservatives and Lib Dems supported their activities when in opposition and, as one of their first moves in office, promised money would be forthcoming.
But after initial euphoria, investors are becoming increasingly nervous about what precisely the coalition has in mind, and at the lack of detail accompanying the government's statement.
Treasury secretary Mark Hoban has guaranteed that a new bill will be forthcoming, establishing a scheme of compensation. He also pledged that payments would not be means tested, and the thousands who have died since the scandal broke, will not be shortchanged. Their estates will be credited with any redress due.
These two issues were major points of contention with the last government, which had set up a commission under Sir John Chadwick with a specific and tightly worded remit.
Now, however, some campaigners are concerned that investors' hopes may have been raised prematurely, given the caveats in a letter from Hoban, in which he also stresses "the impact of any scheme on the public purse must be taken into account".
More worryingly, although the government has pledged to set up an independent commission, which will determine the design of the payment scheme, there are concerns it may all but rubber stamp the findings of Chadwick, who was appointed by the previous government.
His brief, at that time, was to concentrate on those who had been "disproportionately impacted". In other words compensation would be paid according to need, not justice.
Donald Scott, an East Scotland representative of the Equitable Members Action Group, said: "I am concerned, because I am not sure where we are going from here. The parliamentary Ombudsman said we should be compensated according to rules drawn up by an independent commission. Chadwick was commissioned by the Treasury, so we don't see him as being independent at all. We felt he was discredited. "
Not only individual policyholders were badly hit by the collapse. Around 600,000 employees had some part of their company pension invested with Equitable.
Andy Scott of P S Independent Trustees said: "Working out how compensation will be paid to these individuals will be very complex. We have wound up schemes which had AVCs with Equitable. How will that be resolved?
"I'm glad the government has promised fair and transparent compensation but what it thinks is fair and transparent may not be what the policyholders have in mind."
The Equitable saga has been a long and bitter wrangle, which began when the insurance company got its sums wrong over a number of years until it reached a point where it could not pay the pensions it had promised.
It attempted to stay afloat by wriggling out of certain guarantees. It tried to renege on its promises by using different calculations when working out the pensions owed to different groups of policyholders. Investors protested and the matter went to court ending up in the House of Lords, where law lords ruled this approach unlawful. The company was forced to close its doors to new business shortly afterwards in 2000, with a view to leaving the fund to run off, winding down over the years as investors' policies matured.
But the insurer was bankrupt, and to stop the fund collapsing and the liquidators being called, policyholders were forced to accept cuts to the value of their contracts of between 25 per cent and 60 per cent.
Among the worst affected were those who made substantial lump sum investments shortly before the company imploded. Many were furious that they were assured the future looked bright in order to persuade them to invest, even though the management was being warned by its advisers that its plight was looking increasingly precarious.
Also badly hit were with-profit annuitants, who were forced to watch helplessly as the regular income from their pensions was cut in stages, a process which came to be known as "death by a thousand cuts".
A series of investigations pointed to failure by the company's management and the regulators, who were supposed to keep them in check. These culminated in the final verdict of the parliamentary Ombudsman, Ann Abraham, who found the government guilty of maladministration, and said victims should be compensated for their losses via a scheme of redress established by an independent commission.
This recommendation was rejected by the last government, which instead appointed Chadwick, with a limited remit. There followed long delays as Chadwick published three interim reports. His final recommendations are due in about a month.