The Equitable Life payments scheme (ELPS), which was set up to compensates investors who suffered losses as a result of the maladministration of Equitable Life, has so far paid out £734m to more than half a million policyholders.

The scheme was due to close in April 2014, however it will now run for an additional 12 months. Meanwhile, annuitants will continue to be paid for the duration of their annuity.

The government also plans to run a national advertising scheme to encourage more investors to sign up to the scheme.

It said it has faced difficulties in tracing down eligible claimants because addresses registered with the scheme were up to 20 years old while more than 400,000 policies were supplied without contact addresses altogether.

Financial secretary to the treasury Sajid Javid said: “This government has allocated up to £1.5bn to help the policyholders of Equitable Life who suffered an injustice, with hundreds of thousands of policy holders receiving over £700m in payments since 2011.

“We’ve made strong progress, but we want to maximise the number of people who will eventually receive payments, which is why we are extending the Equitable Life Payment Scheme to mid-2015.”

The latest payment scheme progress report showed that it was paying out about £1m a day to policyholders, who had been tracked down through electronic address checking – the checking of credit histories, the electoral roll and the phone book – and writing to the last known address the scheme holds.

Earlier in the year the National Audit Office alleged that the scheme had been hit by severe delays and had spent 72% of its original administration budget on only 35% of cases.

The ELPS only covers policies issued after 1 September 1992 and holders of older policies should have received a letter from the treasury outlining how they will be compensated, as announced in the 2013 Budget.