All 97,000 customers of the Pension Sterling Fund will now be reimbursed
Standard Life is to reimburse 97,000 customers who lost 5% of their money when the value of its Pension Sterling Fund, worth £2.1bn, was cut last month.
The insurer faced a storm of protest from savers and financial advisers who accused it of misleading them about the fund's underlying investments.
Instead of being invested largely in cash, much of the fund is invested in riskier "mortgage-backed" assets.
Standard Life originally planned to reimburse only a few of the customers.
"Standard Life would like to take this opportunity to apologise to any customers who have been affected by the fall in value of this fund, " said John Gill, managing director of customer service at the financial services group.
"In hindsight, some of the literature supporting the fund fell short of our own high standards, and it is important that we put this right."
The company shocked its savers when it announced the cut to the fund's value on 14 January.
It then insisted it had done nothing wrong, and that there were no grounds for compensation, other than to a few people who had invested between 23 December 2008 and 14 January.
Now it has staged a volte-face, which will cost it £100m.
"Having conducted our own review of the literature for the Pension Sterling Fund and listened carefully to what customers and advisers have been saying to us, it is clear that many people were not fully aware of the nature of the fund," Standard Life said.
"Furthermore, some customers would not have anticipated that units in the Pension Sterling Fund could fall by such an amount in one day," it added.
The company will inject the extra cash into the fund to put all the savers back in the position they were in before 14 January.
One financial adviser, Hargreaves Lansdown, had complained formally to Standard Life about the way it had managed the pension fund, and had demanded full compensation.
Tom McPhail, a pensions expert at Hargreaves Lansdown, said he was delighted that the insurer had "capitulated".
But he warned that now was the time for the savers to decide either to stay in the fund, or get out and move their money to a safer option.
"There is a possibility of further falls in the value of this fund's investments, and we won't see Standard Life compensating people a second time," he said.
Standard Life is offering its investors the option of transferring their money into its Managed Cash Fund instead, at no charge, which is invested mainly in bank and building society deposits and short-term government bonds.
It also says that any customers who are still disgruntled and want to complain will have their complaints treated "on a case by case basis and fairly".