Officials admitted the mistake at a Public Accounts Committee inquiry into the failed insurance company yesterday, the Telegraph reports.

However, officials also defended their efforts to trace and compensate savers who lost more than £1.5bn when the insurer almost went under about 13 years ago.

Paul Weir, of the Equitable Members’ Action Group, said: “The Treasury officials told the Public Accounts Committee they had shredded the disk we gave them because it was not encrypted and they were worried about the Data Protection Act.

“The Treasury seems to be more interested in closing the compensation scheme than tracing people who are entitled to receive compensation.”

The National Audit Office criticised the Treasury’s compensation efforts in a damning report last month.