SAVERS in Equitable Life’s ailing with-profits fund have been warned payouts are unlikely to improve any time soon. The life insurer said last week it was inviting bids from rivals that could offer a better outlook for policyholders.

Equitable admitted it was “at a crossroads” and said it had moved closer to selling its £6.8 billion with-profits fund. Chairman Vanni Treves said: “If one or more third parties can provide a better outlook for our policyholders than we can ourselves, then we will recommend the best approach to our members.”

Although this could mean better returns for the 400,000 still invested in its with-profits fund, the company said any deals were unlikely to be announced before autumn. A transfer to another firm is not likely to take place until next year at the earliest.

The with-profits fund grew by only 1.9% last year, a lower return than from cash. Returns have been poor since Equitable was forced to close to new business in 2000 as more than three-quarters of the fund is invested in less volatile bonds.

Even if a sale went ahead, experience suggests it could take time for payouts to be turned round. Millions of savers stuck in with-profits schemes once owned by the likes of Royal & Sun Alliance and NPI are still suffering, years after the schemes were sold off to “zombie” fund managers Resolution and Pearl.

However, fresh hopes have been raised of compensation for some losses. The parliamentary ombudsman is expected to publish a report soon into the regulation of the mutual insurance company.

Equitable said it will be “in the forefront of those calling on the government to do the right thing” if the ombudsman recommends government compensation.