Blair overstated cost of pension compensation scheme fivefold

Thousands of workers who lost their life savings when their employers went bust, gained new hope of receiving full compensation yesterday as the Government conceded the cost of restoring their pensions in full would be, at most, £3.7bn - not the £15bn which the Prime Minister stated in March.

Publishing its response to the Parliamentary Ombudsman's report into occupational pensions - which found the Government guilty of maladministration - the Department for Work and Pensions (DWP) said the true cost of implementing the Ombudsman's recommendations would be between £2.9bn and £3.7bn.

Nevertheless, the department reiterated that it did not agree with the Ombudsman's conclusions and recommendation to pay full compensation, holding firm on its refusal to provide anything beyond the Financial Assistance Scheme (FAS), which it set up two years ago.

Although the FAS is providing a limited level of compensation for some of those affected, it is subject to a low cap of £12,000 a year, and has no protection against future increases in inflation. Many victims have also struggled to get access to the fund's resources.

Pension campaigners and MPs from all parties yesterday seized on the Government's new calculations, accusing it of misleading the public with its original wild cost estimates.

The Government insisted that the information it gave was accurate, claiming that its original compensation estimates were based on the full cash cost. It was only now that the DWP had calculated the cost in terms of its present value that its numbers were in line with the estimates of the campaigners.

The Pensions Reform minister, James Purnell, said he had great sympathy for those who had suffered losses, but said it could not be the Government's responsibility to underwrite the private sector. "To assert that individuals should be compensated for all their losses - however they occurred - would effectively mean that the pensions promises of employers were underwritten by the taxpayer. No such taxpayer guarantee ever existed," he said.

Ros Altmann, the former government pensions adviser who took the case to the Ombudsman, said yesterday's report showed the DWP still did not understand what it had done wrong. She said those affected were now taking the Ombudsman's decision to judicial review, but were also hoping to get the issue raised at an opposition day before the end of the parliamentary year.

Ninety Labour MPs have signed an early day motion calling for the Government to adhere to the Ombudsman's recommendations. That is more than enough to secure a victory for the Opposition if it came to a Commons vote.

The Public Administration Select Committee is holding an inquiry into the Government's rejection of the Ombudsman's findings, and is expected to report next month.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Life and Style
Powdered colors are displayed for sale at a market ahead of the Holi festival in Bhopal, India
techHere's what you need to know about the riotous occasion
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable