Equitable Life victims face long delays to get compensation and many will get nothing at all, critics of the government’s response have said.

Chief secretary to the Treasury, Yvette Cooper, announced yesterday to parliament that the regulatory authorities had failed in their duties to Equitable Life and promised compensation to policyholders who lost out.

However, the government rejected the recommendation from the Parliamentary Ombudsman that all of the one million claimants should receive compensation, which could cost up to £4.5 billion, insisting payments would be made only to those worst-affected.

A tribunal will be appointed to decide who should get what and Equitable Life must hand over details of all the affected policy holders, under the auspices of the former Lord Justice of the Court of Appeal, Sir John Chadwick.

The process will be complicated and Ms Cooper admitted that it could take “significantly longer” than two years.

Equitable Life, which continued to operate under new management but closed to new business after its near collapse nine years ago, raised concerns over the decision.

In a statement, the group said: “The board welcomes early payment to those suffering financial hardship.

“However, the society rejects any suggestion that policyholders should only receive compensation in the event that they are suffering financial hardship and is seeking urgent clarification as to Sir John’s precise terms of reference.

“The board of Equitable Life does not understand what the minister meant by ‘disproportionate impact’ and cannot accept any means testing.”

Dr Ros Altmann, an economist and policy adviser, said this is the “start of yet another chapter in the fight for compensation, rather than a conclusion”.

“The bottom line of this announcement is that none of those who have lost out know how much help they might get, when they might get it, or indeed whether they will get anything at all! Once again, justice delayed is justice denied,” Dr Altmann added.

Campaigners from the Equitable Members Action Group (EMAG) have branded the decision as a “cynical manoeuvre” that will ensure more pensioners die without being recompensed.

Around 15 Equitable Life victims die every day, according to the group.