David Prosser: This government should be ashamed

Just what does it take to force the Government to do the right thing by thousands of people who have lost their pension savings? On Thursday, the European Court of Justice (ECJ) ruled that Britain had failed to properly implement European Union insolvency laws designed to protect the pensions of people whose employers go bust.

The ECJ ruling followed a judgement last year from the Parliamentary Ombudsman, who said the Government had previously - and repeatedly - misadvised savers that their pensions were safe.

Yet, still ministers refuse to offer these victims of injustice proper compensation. Those who lost their pensions before the Pension Protection Fund (PPF) was launched two years ago will get just a few pennies from an emergency fund. And even those who can claim on the PPF are entitled to only 90 per cent of what they're owed, up to a maximum of £26,000.

It's worth a recap of the facts, for anyone who thinks this is a complicated issue. For years, the Government advised people that putting money into a final-salary pension scheme run by their employer was an excellent way to put money by for their old age. For many people, such schemes have provided good benefits, but a sizeable minority have lost out.

Up to 125,000 people, going back 20 years, have lost some or all of their pension savings because their employers failed to properly fund the schemes and then went bust.

It's a simple story with a desperately unfair ending. When the scandal emerged, the Government refused point-blank to consider any compensation for those who had lost out. When Labour MPs threatened the biggest backbench rebellion of the past 10 years, ministers were forced to set up the emergency fund and the PPF. But despite the rulings from the Ombudsman and now the ECJ, the Government will not accept people should be compensated in full.

The longer this row goes on, the greater the number of people who will die without their cases being resolved. Thousands of people who had once been looking forward to a comfortable old age have already spent years of their retirement in poverty.

There's no doubt paying proper compensation would be expensive, but pension experts have presented the Government with several solutions that would spread the cost over many years, reducing the burden on the Treasury's coffers. Some campaigners have even suggested compensation could be funded by money from the unclaimed assets held by banks and other financial services companies.

But the argument about how compensation payments should be funded is a secondary one. The bottom line is that the victims of this scandal have been badly let down by the Government and its predecessors. Any further delays in making proper redress will simply add to ministers' shameful failures.

nnn Still on pensions, think twice about accepting a financial inducement from your employer in return for opting out of its final-salary pension scheme. Despite the lost pension scandal - and as long as you work for a well-run company that isn't heading for failure - a final-salary scheme remains the gold standard when it comes to retirement savings.

However, companies are keen to close them down. The Pensions Regulator has become increasingly concerned about the payments some employers have been offering staff in order to persuade them to withdraw from final-salary plans, particular since HM Revenue & Customs has confirmed the money would be taxable.

The regulator has told employers they need to give staff much clearer information about such deals - and warned employees to take independent financial advice. In an ideal world, employers would pay for this advice.

While the deals may look tempting overall, even after the payment, you may end up worse off by accepting your boss's offer.

d.prosser@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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