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Last Updated: Monday, 13 March 2006, 23:56 GMT
Ruling due on pension 'scandal'
Protesting pensioners
Still hoping for some compensation
A ruling on whether the government misled people about the security of company pensions will be made by the Parliamentary Ombudsman on Wednesday.

A complaint argued that the government wrongly told people their final salary pensions were safe if the scheme met the legal Minimum Funding Requirement.

Campaigners say that this incorrect advice led to tens of thousands of pension scheme members losing money.

The Pensions Action Group has called the issue a "national scandal".

Minimum funding

After the Maxwell scandal in the early 1990s, in which the former business tycoon took money from the pension scheme of the Mirror group newspapers, the law was changed to strengthen pension scheme finances.

The Pensions Act 1995 introduced a concept known as a the Minimum Funding Requirement (MFR).

It was designed to ensure that all schemes targeted a minimum level of financing.

But campaigners say that government departments misled pension scheme trustees and their members.

The high level issue is that this is what the government brought in after Maxwell, and said this would protect pensions
Ros Altmann, Pensions Action Group

The campaigners have pointed to publications from the Department of Work and Pensions (DWP) and the former Occupational Pensions Regulatory Authority (OPRA) which, they say, offered unqualified reassurance about schemes that met the MFR.

In fact the MFR standard did not guarantee that pensions would be paid if schemes were wound up, and was never intended to do so.

Ros Altmann of the Pensions Action Group said the government's maladministration was a "national scandal".

"The high level issue is that this is what the government brought in after Maxwell, and said this would protect pensions," she said.

Partly as a result of this negligent advice, say the campaigners, 85,000 pension scheme members lost substantial parts of their pensions in the 1990s and early years of this century when their schemes were closed - even though they conformed to the MFR requirement.

'Worrying gap'

Both the Treasury and the DWP are also accused of maladministration on other issues, for instance for failing to highlight to pension schemes the results of an inquiry into the MFR, carried out and published by the Faculty & Institute of Actuaries in 2000.

This pointed out the "large and worrying gap" between what pension schemes and the public thought the MFR meant and what it could actually deliver, and recommended that schemes and their members should be told about this.

The campaigners say this did not happen.

They also accuse the DWP of twice watering down the assumptions underlying the calculation of the MFR - which is now being phased out - making it even weaker.

The Pensions Action Group believes all this amounts to an injustice because people were misled into staying in their employers pension schemes when they might have been better off leaving them altogether.

The group is demanding full financial compensation for the pension scheme members it claims to have been affected and additional compensation for distress.




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