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Last Updated: Tuesday, 6 June 2006, 19:39 GMT 20:39 UK
Government rejects pension payout
Ann Abraham
Ann Abraham has had her recommendations rejected
The government has explained why it will not offer compensation to about 85,000 people who lost part of their pensions between 1997 and 2005.

The Parliamentary Ombudsman, Ann Abraham, decided in March that the government was guilty on three counts of maladministration.

She called for compensation to be paid to those who had lost money when their pension schemes went bust.

But the government has said it was not responsible for their losses.

No link

After a long enquiry, the ombudsman claimed that the government was partly to blame for pension scheme members losing money when their schemes collapsed or were closed by their employers because:

  • Official information in leaflets and parliamentary statements about the likely security of occupational pension schemes was inaccurate and potentially misleading.

  • The government failed in 2001 to review the information it was publishing about pension scheme security.

  • It acted wrongly in 2002 by adjusting an important method of valuing the solvency of pension schemes, called the Minimum Funding Requirement (MFR).

However, the government replied that there was no causal link between the alleged maladministration and the individual losses that were suffered.

"It (the government) does not believe that there is a link between that information and the actions taken, nor that scheme members would necessarily have acted differently had the official information been worded in another manner" said the Department for Work and Pensions (DWP).

Fundamental responsibility

Elaborating on its initial rejection of the ombudsman's recommendations, the DWP said that it was never the policy of the government to guarantee the safety of pension schemes.

The government does not accept the finding that this information was potentially misleading and, thus, maladministrative
Department of Work and Pensions

Nor was the MFR intended to guarantee that schemes could pay out the members' benefits in full if they were wound up.

The DWP said that in fact it was the fundamental responsibility of scheme trustees, their employers and their advisors to provide full and accurate information about individual pension schemes.

It also argued that leaflets and guides published by the DWP and the then Occupational Pensions Regulatory Authority (OPRA) were only general guides and not a complete statement of the law.

It concluded: "Information which the government provided in its leaflets was intended only to provide basic information and its limitations were made clear.

"The government does not accept the finding that this information was potentially misleading and, thus, maladministrative."

Unacceptable

The DWP's reply calculates that the cost of the full compensation suggested by the ombudsman might be 15bn over the next 60 years.

Liberal Democrat Shadow Work and Pensions Secretary, David Laws, was unimpressed by the government's response.

"It is unacceptable for the government to so comprehensively reject the ombudsman's findings of maladministration and subsequent recommendations," he said.

"There seems little point in having a parliamentary ombudsman if the government slams a report such as this and disregards its recommendations simply because it raises difficult questions."




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