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In her damning report on Equitable Life, which was published today (17 July), Parliamentary and Health Service Ombudsman (PHSO) Ann Abraham said injustice had resulted from maladministration.

The report, which has taken four years to complete, recommends a compensation scheme be established to assess individual cases of Equitable Life's current and former policyholders, with a view to paying compensation to remedy any financial losses.

Abraham goes on to suggest this scheme be established within six months of any decision by government and parliament to do so and, once operational, should complete its work within two years.

Referring to the compensation scheme, the PHSO report calls on the government to consider the issues raised and to reflect further on a response, considering the substantial cost to the public purse.

Abraham said regulatory failings surrounding Equitable Life shared similarities with Northern Rock, illustrating the need for clarity as to what can and cannot be expected from financial regulation and the limits this offers to investors.

She said: "The failings I have identified in this case were not failures of the system of regulation that was in place at the relevant time.

"Parliament gave those operating that system robust and wide-ranging powers which the regulators were under a duty to consider using where appropriate.

"The regulators at the time said they would deliver regulation in a proactive and vigorous way. That singularly failed to happen in the case of Equitable."

Abraham said she had found evidence of severe maladministration on the part of the former Department of Trade and Industry, the government actuary's department and the Financial Services Authority (FSA).

She said: "I recognise my recommendations raise questions which are now properly one for Parliament and government together to consider.

"I stand willing to assist in their consideration of the issues raised by my report and of the recommendations which I have made."