If they accept, the 234 pensioners will be signing away their right to any compensation that could be won from the society through legal action.
The withdrawal of the offer also comes just ahead of the reconvening of the Commons Treasury and Civil Service Select Committee next month, which is to look at the home income schemes.
The Securities & Investments Board, the chief regulator, has agreed to give evidence to the committee about the role of the West Bromwich in the sale of these plans, based on a critical report compiled by Fimbra, the financial services regulatory organisation.
In a letter sent to 234 West Bromwich income plan borrowers, chief executive Glen Elliott said the basket of measures offered by the society would have to be deemed as 'full and final settlement'. Fifty people have so far accepted the offer.
The offer includes a promise not to repossess or to pursue debt after the death of a borrower, unless there are significant personal assets. It will also abolish the 1.45 per cent extra interest paid on these loans.
Thousands of elderly people lost millions of pounds through these schemes after they were persuaded by financial advisers to remortgage their homes and invest the money in the stock market. They were hit hard when interest rates soared and the stock market fell.
Richard Barnett, a partner with Barnett Sampson, the solicitor acting on behalf of the victims of the home income plans, said that the package of measures offered by the building society was far less than had been offered by other societies.
The Cheltenham & Gloucester, for instance, is offering some of its home income plan people a 5 per cent mortgage for life. It is also giving other home income plan borrowers a pounds 5,000 reduction in their mortgages, plus pounds 1,000 in legal costs.
A spokesman for the West Bromwich said: 'Their case (the C&G's) is entirely different. If people are not happy, they are free to take their case to the ombudsman.'
One investor who took out a home income plan through Fisher Prew Smith is Daisy McLaughlin of Bristol. She now owes the West Bromwich pounds 19,000 with interest rolling up at over 9 per cent a year.
She said: 'We have been advised by our solicitor not to accept the offer. Many of us want more compensation.'
Mr Barnett said borrowers who have outstanding mortgages with West Bromwich are not in a position to know whether they should accept the offer, because the outcome of a legal challenge by the Investors Compensation Scheme (ICS) is not yet known. A recent Court of Appeal case increased the amount the ICS could pay out - to include money the home income plan victims had spent, rather than invested - but this could be overruled in the House of Lords.
Victims of Fisher Prew Smith have already received about pounds 11.2m from the ICS in compensation for the money lost by investing in the stock market. The West Bromwich said withdrawal of its offer would not make any difference to compensation people might receive as a result of the House of Lords case.Reuse content