Pressure mounts on government to pay £15bn in compensation to workers who lost occupational pensions

The government is facing increasing pressure to pay up to £15bn in compensation to workers who lost their pensions after it was heavily criticised by an influential group of MPs.

A report by the public administration select committee has concluded that the government misled employees over the security of occupational pension schemes and has since been more concerned with denials than compensation.

The committee gave its full backing to similar conclusions by the parliamentary ombudsman, Ann Abraham, who investigated the plight of 85,000 workers who lost pensions when their employers folded.

Her report, published in March, concluded government maladministration had meant workers were not fully aware of risks and called for victims to be fully compensated for lost pensions and to be awarded damages for their suffering.

Ministers refused to accept her findings and said they would not use taxpayers’ cash to compensate workers.

The committee said ministers’ rejection of the ombudsman’s findings raised “fundamental constitutional issues”.

“The government has been far too ready to dismiss the ombudsman’s findings of maladministration,” the committee said. “We trust that this report will act as a warning.”

It said better payouts were urgently needed for tens of thousands of workers who lost some or all of their pensions after their companies went bust.

The Department for Work and Pensions said that enacting recommendations by the ombudsman could cost the government some £15bn over the long term.

“We do not agree that the government acted with maladministration or that there is a link between the general, introductory information we published and the loss of people’s pensions,” a spokesman told the Guardian.

“We do, of course, have the utmost sympathy for the plight of people in this situation, which is why we recently extended the financial assistance scheme with a commitment of £2bn.”

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