The government had to step in to make available about 120 million pounds ($163.8 million) to compensate about 8,800 investors after LCF collapsed in 2019.

LCF was regulated by the Financial Conduct Authority, but the mini-bonds that it sold were unregulated, leaving most bondholders not eligible for compensation under the Financial Services Compensation Scheme (FSCS).

The ministry said the scheme will pay 80% of bondholders' principal investment in eligible bonds, up to a maximum of 68,000 pounds.

"The scheme is available for bondholders with an outstanding investment with LCF which has not already been compensated by the Financial Services Compensation Scheme," the ministry said.

"FSCS will contact eligible bondholders directly with details of their compensation payment and bondholders do not need to do anything to claim compensation from the scheme."

The FSCS will contact all bondholders with their offer of compensation by April 20, 2022.

($1 = 0.7326 pounds)

(Reporting by Huw Jones)