Around 8,800 pension savers and others with millions of pounds trapped in a failed investment scheme will be paid approximately £120 million from the Government.
The Treasury said that investors in London Capital & Finance (LCF) would be able to claim back up to 80% of the money they had invested in the collapsed scheme, after a review found that authorities had failed to properly protect consumers.
Payments will be capped at £68,000, meaning that approximately 97% of LCF investors will get the full 80% that the compensation scheme offers.
“This has been a very difficult time for LCF bondholders, many of whom are elderly and have lost their hard-earned savings,” said Economic Secretary to the Treasury John Glen.
“However, the situation regarding LCF is unique and exceptional and the Government has decided to establish a compensation scheme for LCF bondholders in this instance.
“The scheme appropriately balances the interests of both bondholders and the taxpayer and will ensure that all LCF bondholders receive a fair level of compensation in respect of the financial loss they have suffered.”
The Government had said in December that it was considering a scheme which would help compensate some of the small investors who were left out of pocket when LCF collapsed in January 2019.
It made the promise after a report by former High Court judge Dame Elizabeth Gloster, who criticised failures at the Financial Conduct Authority.
Investments of around £237 million owned by 11,625 bondholders were trapped in 2019 when LCF collapsed.
Investors were first told they would be ineligible to claim any money from the Financial Services Compensation Scheme (FSCS) which protects some retail investments.
However officials at the FSCS later re-assessed and found that some of the investors might be eligible to get up to £80,000 back.
After a long process, which left many investors in limbo, FSCS has now paid out more than £57 million to around 2,800 investors.
The new Treasury scheme will help those who were not covered by FSCS.