The troubled mutual insurer has written to 16,000 former policyholders asking them to sign a waiver clearing Equitable of claims of mis-selling, negligence or fraud.

Equitable is anxious to draw a line under the mis-selling scandal which brought it to the brink of financial collapse.

The company reached a compromise settlement last year with more than a million policyholders, who all signed a similar waiver.

Rejection call

But the 16,000 so-called "late-joiners" believe they have a stronger legal claim against the company.

This group joined Equitable Life after September 1998, by which time the company's board had received legal advice on the extent of its financial troubles.

The late-joiners' action group is expected to tell its members to reject Equitable's compensation offer, which would see them receiving about 5% of their investment.

This means some former policyholders stand to lose thousands of pounds, leaving them little alternative but to take Equitable to court, the action group says.

Legal action

But a spokesman for Equitable Life said the late-joiners should consider the firm's offer carefully.

"They have to consider whether they want a fair offer now - and draw a line under it.

"Or whether they want to go to the huge expense - and the time it would take - to bring a case to court.

"There is no guarantee they would win - and we would fight it tooth and nail," he told the BBC.

He said Equitable's offer was a fair one which had been drawn up with the full knowledge of the Financial Services Authority.

He also claimed there were no legal grounds for a fraud action against the company.

Unimpressed

But Paul Weir, vice chairman of the Equitable Life Late Joiners Action Group, said he was not impressed with the insurer's offer.

"I don't think that getting back less than a fifth of what I have lost is a fair offer," he told BBC Radio 4's Today programme.

"I'd like my capital back, let alone any loss of bonuses or interest."

Equitable has set aside �75m for the settlement, but Mr Weir said he thought the total liability would be nearer �400m.

"I'm sure it wouldn't help (Equitable's financial position) at all, but the money's been taken from us and it's not our problem as to how they fund it," he said.

Ombudsman

Last month Equitable lost five lead cases at the Financial Ombudsman relating to late-joiners.

The troubled mutual was found to have misrepresented to the consumers the possible impact of meeting all its liabilities to Guaranteed Annuity Rate (GAR) investors.

In one case a representative of the Equitable, acting under advice from bosses, estimated the cost of meeting GAR claims to be only �50m.

However, the Equitable's own lawyers had put the potential liability at closer to �1.5bn.

Your comments:

Equitable has not been totally honest and should pay back the money taken from us with interest. Why is the goverment and the FSA not being more forceful in making them honour their obligations to policy holders??
Gordon Cameron, Scotland

I am a late-joiner with a with-profits Annuity. I was deceived by Equitable life. I would prefer the company to go into liquidation. I would then get the guaranteed minimum repayment from the ABI or whatever the association of life assurance companies is called.
Peter McAnena, UK

The offer from Equitable is totally unsatisfactory under the circumstances. They have to come up with a fair and reasonable offer to the many victims of mis-selling
Walter Gilmour, UK

I'm pleased to see that at last EL is admitting liability. Clearly the 5% offer is not enough, I can't see many people accepting anything less than the return of their original capital. The longer that EL spins it out the more people will get entrenched to go after the interest. Delaying does not fool anyone.
Percy Sledge, England

Their offer does not adequately compensate me for my loss of �287,243. This represents 33% of my investment in an Income Drawdown policy on Nov 28th, 1998 of ��869,717. Within 2 months of the plan start I received an official notification from Equitable of their intention to take High Court Action. This was the first time I heard of a GAR situation !
John Howard, UK

As a WP late-joiner (mid '99) who opted out of the, so far, successful litigation and signed The Compromise, losing my right to sue, I have great sympathy with the LJAG as I too was faced with losing 20 percent original capital on surrender. I chose the "fingers crossed" route and current litigants must know that whatever increase in compensation they are awarded must come out of the pockets of all those of us left in Equitable jail who accepted the Compromise Scheme - without whose action the good ship E. would definititely be sunk by now! Selfish, therefore. The way forward should be to redress via the POI for regulatory authorities negligence.
G. Munt, Thailand