Government digs in as Labour MPs join attack over pensions

'Democracy in danger' as department rejects criticism of both select committee and Ombudsman
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The Government comes under fierce attack today from an influential committee of MPs accusing it of "misleading" up to 125,000 people who lost their retirement nest eggs. Yet the department responsible is still refusing to take any blame for the company pensions scandal.

Tens of thousands of workers lost their pensions when their employers wound up their final salary schemes between 1997 and 2004. The Government has already rejected a damning report from the Ombudsman, Ann Abraham. She accused it of maladministration for encouraging people to contribute to company pension schemes without clearly spelling out the risks if the schemes were wound up.

The Public Administration Select Committee, a Labour-dominated committee of MPs, has today strongly backed the Ombudsman's criticism. But the Department of Work and Pensions, headed by John Hutton, rejected the committee's verdict.

The highly critical committee report attacked the Government for being "naive at best, misleading at worst" in the advice it gave workers. The Government leaflets gave the impression that the schemes were safe, it said.

The report added: "By concentrating its energy on denying [the Ombudsman's] findings of maladministration, rather than considering what remedies might be practical and proportionate, the Government has caused further distress to complainants."

The Pensions Action Group (PAG), a campaigning body for those who have lost their pensions, is seeking a High Court hearing to try to obtain a judicial review of the Government's role in the scandal.

Ros Altmann, a former adviser to Downing Street who is working with the PAG, said the group's case would be strengthened if the Government ignored the committee's report: "The report, in effect, is saying the Government is not telling the truth."

Lord Oakeshott, the Liberal Democrat spokesman in the House of Lords, said the strength of the language used in this weekend's report was unprecedented: "Democracy is in danger if the Government ignores both the Ombudsman's report and this report."

But a spokesman for the DWP said: "We have great respect for the office of the Ombudsman and considered her report carefully. We will, obviously, consider carefully the conclusions of the select committee.

"However, we do not agree that the Government acted with maladministration or that there is a link between the general, introductory advice we published and the loss of people's pensions."