Equitable Life with-profts annuitants (WPAs) will be paid in full from a £1.5bn compensation pay-out, with the first payments coming next year.
The government will cover the cost of the total relative loss suffered by WPAs, estimated at £620m.
WPAs will receive this in the form of regular payments, based on their full loss.
A total of £1bn will be allocated to the Equitable Life Payments Scheme in this Spending Review period, which will cover both the initial costs of the first three years of WPA regular payments, and all payments to other policyholders.
The government expects the total amount of funding for the scheme to be "in the region of £1.5bn".
Two thirds of this will be found in the current spending review period.
In the detailed breakdown of the Spending Review, Equitable life payments for 2011-12 are £520m, followed by £315m for 2012-13, then £210m for 2013/14 and £100m for 2014-15.
In his speech to the House of Commons Chancellor George Osborne said: "For Equitable Life policy holders the fair amount to pay out in total is in region of £1.5bn."
However victims of the decade long Equitable Life debacle has criticised the payout level - which was leaked last week - as too low.
The government pledged in the Coalition Agreement to make fair and transparent payments to Equitable Life policyholders, based on the Parliamentary Ombudsman's report, for their relative loss as a consequence of regulatory failure.
The Parliamentary Ombudsman has said: "It is appropriate to consider the
potential impact on the public purse of any payment of compensation in this case", and the government has carefully considered the amount of funding to be made available to the Payments Scheme in this Spending Review.
Osborne said today he has "accepted the Ombudsman's ruling in full".
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