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A firm set up to boost incomes for people who live longer than average has shut down after only one year.
Life Trust, financially backed by Royal Bank of Scotland, JP Morgan and US hedge fund DE Shaw, today said it had closed to new business, blaming the recession.
The firm will offer existing customers the return of their investments along with an ex gratia payment equal to 5% of their money.
Life Trust Holdings offered a unique finance scheme which insured planholders against "living too long".
Its Longevity Income Plan was complex but purchasers, believed to be a few hundred although Life Trust refused to disclose the numbers, invested a lump sum during their 60s and 70s which started to pay out if they lived longer than the average 80 to 82.
With anyone now aged 35 having a one in seven chance of living to 100, the firm had hoped to attract customers looking to boost their pension income in retirement.
Life Trust said it was a victim of "a very deep recession of unknown duration", which was hampering sales.
Initial sales were slower than expected – some financial advisers said the plan was expensive while others found it difficult to understand.
Life Trust's chief executive, Andy Briscoe, said: "We want to treat everyone fairly. We are offering everyone their money back plus 5%. We expect all will take this offer.
"One investor whose £100,000 has shrunk to £60,000 over the past few months due to the stockmarket collapse will now get his money back with interest."
Briscoe said Life Trust would have had to have raised fresh capital to continue and "in the current economic climate this has proved impossible".
He added: "We are taking this action having explored every avenue available to us and we believe this is the right decision for the planholders and the most responsible course of action."
Parent company Life Trust Holdings will continue to develop "innovative longevity products" that it "hopes can be brought to market when more favourable economic conditions return".
An independently financed Life Trust Foundation will continue to promote awareness of the "challenges surrounding financing longer lives".
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