Q & A: Ombudsman's pension report

Up to 85,000 workers may have lost their pensions

The Parliamentary Ombudsman has been investigating whether the government misled workers over the safety of occupational pension schemes.

With the Ombudsman due to report soon, BBC News explains the significance of the investigation.

What prompted the Ombudsman's investigation?

In November 2004, Ann Abraham, the Parliamentary Ombudsman, launched the inquiry after receiving 100 complaints from members of pension schemes.

Complainants included former employees of companies which are now insolvent and whose schemes have been wound up, schemes that were in administration or from people whose pension schemes were in doubt.

The Ombudsman was urged to investigate whether government leaflets and statements played down the risks of investing in an occupational pension.

How major an inquiry is it?

Ms Abraham's inquiry has taken more than a year and encompassed some key government departments.

The government departments being investigated include:

• Department for Work and Pensions (DWP)
• Occupational Pensions Regulatory Authority (OPRA)
• HM Treasury
• National Insurance Contributions Office, part of HM Revenue & Customs.

Ms Abraham is believed to have looked back to at least 1997.

However, the Ombudsman will not be investigating the role of the City watchdog the Financial Services Authority (FSA).

The FSA has been criticised for issuing leaflets which until relatively recently described employer pension promises as "guaranteed".

But Ms Abrahams has said the actions of the FSA were outside her jurisdiction.

How many people have been hit by the collapse of occupational pension schemes?

An estimated 85,000 UK workers have lost their pensions following the collapse of their pension schemes.

Under previous pension wind-up rules, the assets of these schemes had to be used to guarantee the pensions of retired members.

Those scheme members who have not yet retired have to make do with whatever is left and as a result many have lost all or part of their pension.

Groups such as the Pensions Action Group (PAG) claim that if they had been aware of the risks of occupational pensions many of these 85,000 would not have invested in the first place.

What powers does the Ombudsman have?

The Parliamentary Ombudsman can recommend that those who have lost their pensions are properly compensated.

However, in what is set to be a long and complex report it is unlikely - although not impossible - that the Ombudsman will make such a clear cut decision.

But the Ombudsman has access to all levels of government and the report may have the potential to embarrass policymakers.

Once published the report may have the effect of increasing the calls for more to be done for victims of pension wind-ups.

What help is available at the moment to those who have lost their pension?

In May 2004, the government set up as an interim measure the Financial Assistance Scheme (FAS).

The FAS was set up to help workers who lost their pensions when schemes went bust before April 2005.

Since then protection has been offered by the Pension Protection Fund.

The government promised £400m would be made available to the FAS over the next 20 years.

However, in January it was revealed that to date 13 people had received help from the FAS.

The DWP said this was just a start and others who had lost out could expect help from the FAS soon.

But PAG has criticised the FAS on the grounds that it is inadequately funded and is too restrictive.

Under FAS rules, only people who were within three years of scheme pension age are entitled to claim and payouts are capped at £12,000 a year.