MPs urging pensions compensation

Up to 125,000 people lost parts of their final salary pensions

The government must help compensate the thousands of people whose pension schemes collapsed after it failed to warn them of the risks, MPs have said.

The public administration committee backed a report by the parliamentary watchdog which found official explanatory leaflets "unclear".

An estimated 85,000 lost major parts of final salary pensions when schemes were wound up with insufficient funds.

The government said the leaflets had been meant only for general guidance.

Parliamentary ombudsman Ann Abraham's report, published in March, found the official information "inaccurate, incomplete, unclear and inconsistent".

But speaking at the time, Work and Pensions Secretary John Hutton said the leaflets had not been intended to give "a full explanation of the law".

Compensation rejected

He rejected Ms Abraham's call for the government to offer financial help to those who had lost out, after it was claimed such compensation could cost the taxpayer £17bn.

It was entirely reasonable for people to put trust in government information on the safety of their occupational pensions Committee chairman Tony Wright

Ms Abraham's findings have been backed by the committee's report, which said the government's stance on the leaflets had been "at best naive and at worst misleading".

Readers of the leaflet could have expected "all the important points" to be covered, the MPs said.

"It was entirely reasonable for people to put trust in government information on the safety of their occupational pensions," committee chairman Tony Wright said.

"The pension leaflets neglected to warn of a substantial risk. People have lost significant sums of money."

The government had clearly been guilty of maladministration, he added.

"The government should stop quibbling over this and act to find an acceptable solution for the thousands affected."

In the report, the MPs also warn ministers that if they repeatedly ignore the ombudsman's recommendations a constitutional crisis could be sparked.