Up to 100,000 savers who earn up to 16 per cent from Lloyds Banking Group on former building society shares have been thrown a lifeline by the Supreme Court.

The holders of what are now Lloyds Enhanced Capital Notes (ECNs)faced having the bonds redeemed yesterday, losing their income and receiving only return of their capital.

But after a 14-month battle by a bondholders’ group, the Supreme Court yesterday gave leave to appeal against a decision by the Court of Appeal in December that the bank was within its rights to cancel the bonds.

Lloyds argued that when the bonds were issued in 2009, replacing other forms of capital including permanent interest-bearing shares (Pibs) in former building societies acquired by Lloyds, the terms allowed redemption if they were no longer needed as core capital.

The notes were issued as part of the bank’s £22.5bn capital raising, but have since lost much of their regulatory capital value as new rules have been implemented.

The Prudential Regulation Authority, and then the Court of Appeal, backed the bank’s right, though campaigners pointed out that the court had admitted the bond conditions were not clear, concluding that it was “clear what a reasonable person would have understood that particular clause to mean”.

The bank launched a tender offer on January 29 for £2.6bn of bonds, offering holders a buyback at a premium to face value, and yesterday extended the offer period by three days until the end of tomorrow. But excluded from the offer were £700m of bonds which include the former Pibs held by small savers, many of them pensioners. Those were due to have been redeemed at face value yesterday.

Mark Taber, who has led the bondholders’ campaign, said: “The directors at Lloyds really do need to wake up and start acting with integrity here. The High Court found it did not have the right to redeem and now the Supreme Court has granted leave to appeal, so Lloyds should put redemption on hold pending the outcome of the appeal.”

Lloyds said: “ The group continues to seek to balance the interests of all stakeholders in this matter and has previously confirmed that, if the Supreme Court were to determine that a CDE (capital disqualification event) had not occurred in relation to the ECNs, it would compensate fairly the holders of the ECNs ....for losses suffered as a result of such early redemption.”