Ombudsman calls for pensions compensation

16 March 2006
The government has been accused of failing to warn people of the risks involved in final salary pension schemes.

Parliamentary ombudsman, Ann Abraham, said that tens of thousands of people had been deprived of the opportunity to make an informed choice about planning for their retirement owing to the government's "maladministration".

Ms Abraham said her report into the matter concluded that the necessary compensation for those affected by the collapse of schemes could cost the taxpayer as much as £5 billion.

However, minister for pensions reforms, Stephen Timms, rejected the charge.

"For the report to assert that the taxpayer should make good all such losses - however they arose - is a huge and unsustainable leap of logic," he said.

He said the responsibility lay with the companies themselves and the trustees appointed to safeguard members' interests.

The report concerns approximately 85,000 people whose companies went bust between 1996 and 2004.

The ombudsman found that leaflets sent out by the government failed to provide all the necessary information regarding the possible negative consequences of pension schemes, particularly neglecting the link between their investment and the firms' financial security.

Prime Minister Tony Blair also rejected the scale of the compensation set out in the report, branding it an extraordinary "precedent".

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