Labour MPs raise stakes over pensions snub

Some 27 rebel Labour backbenchers - led by the Ayr MP Sandra Osborne and the former social security minister Frank Field - signed a House of Commons early day motion this week, calling on the Government to respect the recommendations of a recent Parliamentary Ombudsman report, which suggests full compensation should be paid to the 85,000.

The backbenchers suggest the Government uses the billions of pounds of unclaimed assets, lying in dormant bank accounts and life insurance policies, to pay the compensation - which is estimated to cost up to £10bn.

Ms Osborne received the backing of more than 100 MPs two years ago when she led a similar assault against the Government on pensions, eventually helping persuade it to establish the Financial Assistance Scheme (FAS), which provides compensation for a small minority of those who lost their pensions.

She now hopes to generate as much support again. "The focus is to put as much pressure on the Government as possible, especially in light of the Ombudsman's report," she said.

The Parliamentary Ombudsman, Ann Abraham, published the results of an 18-month investigation into the occupational pensions sector last week, finding the Government guilty of maladministration in its regulation of the sector between 1994 and 2005. The report called for full compensation to be paid to all those affected but the Government rejected her findings and refused to make any more funds available.

The FAS has been criticised for paying out only a limited income to those who were within three years of retirement in May 2004.

Lord Oakeshott of Seagrove Bay, the Liberal Democrat pensions spokesman, said yesterday the FAS had paid out just £100,000 in compensation to only 27 victims, despite having a budget of £20m a year. "Pensions ministers should hang their heads in shame," he said. "Sixteen months after Parliament passed the Pensions Act setting up the Financial Assistance Scheme, this record of incompetence and delay is simply shocking."

Mr Field said it was a disgrace that it was costing more in salaries to administer the FAS than is being paid out in benefits.