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Last Updated: Friday, 14 May, 2004, 14:39 GMT 15:39 UK
400m deal for lost work pensions
A pensions march last year
Workers protesting over pensions
The government is to offer 400m of public money to compensate workers who have lost their pensions.

The government said it would table an amendment on Friday to the Pensions Bill, paving the way for the compensation deal.

As many as 60,000 workers are believed to have lost some or all of their pension when their employers went bust.

There has been growing disquiet over the plight of those affected, with MPs threatening a revolt over the issue.

It is unclear how the money would be distributed, but if it was shared by 60,000 people it would amount to 6,666 each or 350 a year.

The government said the 400m would be paid in instalments over 20 years, and possibly topped up with "contributions from industry".

Previous estimates have suggested between 55m and 75m a year would be needed to compensate the workers - far more than the 20m a year the government's package equates to.

The government is taking a pick and mix approach to compensation
Steve Webb, Liberal Democrats
Secretary of State for Work and Pensions Andrew Smith MP said further details of the fund's operation would be worked out through consultation, and will be reviewed in three years time.

Later the Department for Work and Pensions told BBC News Online that its "current thinking" was to apply the fund to schemes which started winding up after April 1997.

This date coincides with the introduction of the 1995 Pension Act, which is the current basis for UK pensions law.

A spokesman also said it would not be limiting eligibility to people who had joined the scheme before 1988, when workers were legally obliged to join their occupational pension scheme.

Amicus and ISTC, two unions that have been campaigning for compensation, welcomed the government's intervention.

Derek Simpson, Amicus General Secretary, said: "The threat of having little or nothing to live on after 30 or 40 years has been lifted by the establishment of this fund.

"Amicus and the ISTC shall be working with the government on the details of how the fund will operate. We also call upon the pensions industry to fulfil its moral obligation by contributing to the fund."

Some criticism

Liberal Democrat work and pensions spokesman Steve Webb labelled the move as a "last-minute amendment" that had "all the signs of panic".

"The government is taking a pick and mix approach to compensation and offering an extremely limited package which could amount to little more than a tenth of what workers have lost," he said.

The Pensions Advisory Service (Opas), which has been advising many of the workers, welcomed the move - but said many questions remained.

It is less than half of what we are looking for...at the moment it's certainly not making me happy

Pensions victim Willie Riggans

"It is good news that something is being done, but it is a question now about who it will cover and what level of compensation this will provide," Opas' technical director Des Hamilton told BBC News Online.

"Given the figures being bandied around of from 55m to 75m a year, this may be adequate - it may be not. We need to know the details."

Government u-turn

The previous version of the bill envisaged a Pension Protection Fund to bail out pension schemes if firms went bust - but there were no provisions for people who had already lost out.

Two Early Day Motions (EDMs) calling on the government to compensate workers who have already lost their company pension attracted the signatures of more than 500 MPs.

I think everybody in the House wants to deal with this problem
Peter Hain, Leader of the House of Commons

And a group of cross-party MPs have tabled an amendment to ensure workers - some of whom lost out just months before they retired - are compensated.

Hopes among campaigners have been rising in recent weeks, reaching almost fever pitch on Thursday when Leader of the House of Commons Peter Hain dropped a heavy hint that the government was going to act.

Mr Hain told the House of Commons on Thursday: "I think everybody in the House wants to deal with this problem, including the government.

"We're only too well aware in the Cabinet that there is an amendment down, and there is a lot of support for that amendment, and we want to proceed on an all-party basis."

Strike warning

Brendan Barber, general secretary of the TUC, warned employers at the NAPF conference on Friday that workers were ready to strike if company schemes were closed down or cut back.

Mr Barber's speech comes a week before a leading transport union is to announce whether members at Network Rail will strike over pension cuts.

The small, but powerful Rail Maritime and Transport union (RMT) is contesting the decision by Network Rail to close its final salary scheme to new members from 1 April 2004.

The ballot's result is expected on Thursday 20 May.

"I warn today that staff will no longer meekly accept a cut in their pension rights. They understand that the pension is part of their pay packet," Mr Barber said.

The BBC's Evan Davis
"MPs were threatening a rebellion"


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