The troubled life insurer, Equitable Life, has announced plans to offer compensation to former policyholders who may have been mis-sold pension and investment policies.

Up to 70,000 former policyholders of Equitable Life may be in line for compensation, the insurer has said.

Equitable said the total amount of compensation could be in the region of �40m to �75m in total.

It added that 70,000 non-guaranteed annuity rate policyholders, who left before February 2002, would be offered a new "compromise deal".

Policyholders cases would be dealt with on a "case-by-case basis" by the insurer and, those who were compensated would be required to give up their right to any future legal claim against the society.

In order to qualify for compensation policyholders must prove that they were mis-sold their policy.

If it did face further trouble Equitable would be as likely simply to make further cuts in the value of members' policies

Andrew Verity, BBC personal finance reporter

A spokesman said the move was aimed at bringing some "finality" to claims.

Compensation case

Thousands of customers left Equitable before the start of this year so they could keep the right to sue the society for failing to warn them of its financial problems.

A large number of these people are believed to have a strong legal case for compensation since an independent report into the company's problems ruled the Financial Services Authority failed to spot what was happening quickly enough.

On Monday, Equitable published a report by B&W Deloitte setting out exactly how much policyholders have lost and how much compensation it may have to pay out.

Equitable has already set aside �120m to cover mis-selling.

The insurer said the compensation scheme would be similar to the compromise deal agreed earlier this year between policyholders.

Meanwhile the company has dismissed suggestions it is filing for insolvency.

The BBC's Personal Finance Reporter, Andrew Verity, explained: "Like other companies, it has considered going into administration as one of a number of options should its finances deteriorate.

"But there's been no approach to an administrator.

"If it did face further trouble Equitable would be as likely simply to make further cuts in the value of members' policies."

Court battle

Equitable's problems began in 1999 when it found that it could no longer afford to pay long-standing policyholders the pension they had originally been promised when interest rates were higher.

The policyholders took the company to court when it tried to back out of its previous commitments.

Equitable Life lost the court battle and was left with huge legal bills, as well as being forced to pay the policyholders more than it said it could afford.

As a result, it was forced to close to new business in December 2000 and sold part of its business to the Halifax - now part of HBOS - last February.