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Last Updated: Wednesday, 15 March 2006, 09:22 GMT
Q&A: Ombudsman's pension report
Pensioners say they lost money after being misled
The Parliamentary Ombudsman Ann Abraham has called on the government to compensate people who lost money when their pension schemes went bust between 1997 and 2005. But the government has rejected the ombudsman's findings.

Who complained to the ombudsman?

More than 200 pension scheme members said they had lost part or even all of their pension entitlements when their employers went bust leaving their pension schemes under funded.

It is thought that this had happened to about 400 schemes with about 85,000 members altogether. In a few cases the schemes had been wound up with a deficit by solvent employers, something that changes to the law have now prevented.

The complainers were typically members of the schemes who had not yet retired. In some cases they lost all their expected pensions.

The ombudsman looked at four of them in detail as examples of the others.

What did they claim?

The central complaint revolved around something called the Minimum Funding Requirement (MFR). This was a policy for pension schemes that the government introduced in 1995 to make schemes more secure.

The MFR said the schemes should target a particular minimum level of funding. But it was never intended to provide absolute security in the event of the company going bust.

However, the complainers argued that in fact that was exactly what government information and literature did say.

Thus, they claimed, they and the trustees of their pension schemes were comprehensively misled by the government into believing their schemes and pensions were safe when they were not.

As a result they lost money and were deprived of the chance to save for their pensions in some other form.

What did the ombudsman decide?

Ann Abraham agreed with the complainers and upheld most elements of the complaints. She said the government, in particular the Department of Work & Pensions, was guilty of maladministration and that this had led to injustice.

She ruled that the department and other government bodies such as the former Occupational Pensions Regulatory Authority had provided information that was inaccurate, incomplete, unclear and inconsistent.

Ms Abraham called on the government to compensate those who lost money to restore their pensions. She also called for extra payments to cover their distress and outrage.

What will happen next?

The government has dismissed the findings. It says the facts simply do not support the idea that it was guilty of maladministration.

Instead, the government blames the employers who allowed their schemes to become insolvent, the scheme trustees who were meant to oversee things and their advisers.

The ombudsman has no power to enforce her recommendations. But the pensioners concerned intend to keep up their campaign and hope that MPs will come to their aid and demand the government changes its policy.

The chairman of the Public Administration Select Committee has already said his committee will take up the matter.

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