Consumers who were hit by the collapse of split investment trusts are to receive just 40 per cent of the money they lost as compensation.

Fund Distribution, which was set up by the industry to pay redress, said it was making an initial payout of £115.2 million to 25,000 qualifying investors.

It said the average person would receive compensation of £4,560, having lost £11,400 through the products.

Split capital investment trusts have different classes of shareholders, with some investing for income and some for growth.

But the sector ran into problems due to stock market falls, high levels of borrowing and large cross-holdings in other splits.

Some estimates claim investors may have lost as much as £600 million through the products, but only people who invested in so-called zero preference shares, which were sold as low-risk investments and were supposed to pay out a pre-determined sum at a set date, are eligible for compensation.

The fund has £142.6 million available for distribution, but it will use just £115.2 million for the first round of compensation, although it expects to make a second payout using any remaining money later in the year.

It said people receiving the compensation held an average of 1.8 splits each and suffered total losses of £290.7 million.

It was initially thought that as many as 50,000 people could be eligible for compensation, but only 39,000 applied for it.

Among these 25,000 met the criteria for a payout, with other claims rejected because the investment did not qualify or was not held during the qualifying period, or the losses were less than £250, or gains were made.

Investors offered compensation need to formally accept it by 4.30pm on May 15, otherwise they will lose it. People who accept the money also waive their rights to pursue their product provider for compensation elsewhere.

The fund hopes to distribute the money to people four weeks after receiving their acceptance.

Mike Ellis, fund commissioner, said: "Our overriding objective has been to help as many qualifying investors as possible to benefit from the fund."

The compensation fund was set up by 18 firms in 2004 as part of a settlement with City watchdog the Financial Services Authority following a critical report by the Treasury Select Committee.

Philippa Gee, investments director at Torquil Clark, said: "The best situation would be to compensate and then we can draw a line under the matter, instead this offer is on the low side of what we expected.

"There are around 15,000 investors who will not even benefit from this paltry sum, so it will be interesting to see what happens in the next six weeks that investors have to decide whether or not to accept the deal."

A spokeswoman for the Association of Investment Trust Companies said: "We are delighted investors now have the information available to help them make the right decision for them." ..SUPL: