Victims of Equitable Life's near collapse have been told by the company's CEO they should accept a government payout of half that recommended by officials.
Chris Wiscarson said the economic climate meant a payout of £2bn would be a "great start".
Parliamentary Ombudsman Ann Abraham recently said previous proposals of payouts of between £400m and £500m were far too low and that a sum of between £4bn-£4.8bn would be more acceptable.
However, speaking to Sky News, Wiscarson indicated a smaller payout should be taken by policyholders.
"If we take the number of £4bn-£4.8bn and go to the lower end of that, £4bn, what can the Government really afford?
"I have said that they are announcing 75% - or at least 25% reductions - in other Government departments.
"So that must be a good starting point. However, if you look at the £4bn, what's the right thing that Government must do? I think if you start off going: £2bn, minimum £2bn for policyholders - that would be a great start."
The Equitable Life (Payments) Bill is currently going through parliament and gets its second reading in the House of Commons today.
What made financial headlines over the weekend?
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000