Pensioners score £400m victory as Blair orders U-turn

The government made a last-minute climbdown yesterday by setting up a £400m fund to help 60,000 workers who lost their pension when their company went bust.

The government made a last-minute climbdown yesterday by setting up a £400m fund to help 60,000 workers who lost their pension when their company went bust.

A few hours before Labour MPs were to table a rebel amendment to the Pensions Bill which could have defeated the Government, ministers headed off the rebellion by announcing the special fund to which workers can apply for help. The Government will pay in the money over 20 years, and it may be topped up by industry.

Kevin Brennan, the Labour MP for Cardiff West who, along with the ISTC union, has spearheaded the campaign on behalf of the pensioners, said yesterday: "I am delighted with the victory. It's a great step forward. We don't quite know how the finances will work but the important thing is that they have agreed the principle of helping those who lost out." Mr Brennan would have tabled the crucial amendment.

The U-turn was ordered personally by Tony Blair, who was convinced that the victims had a strong case and was anxious to avoid another damaging revolt when the Bill is debated next week. The workers had been backed by 298 MPs including 209 Labour backbenchers.

Andrew Smith, the Work and Pensions Secretary who worked out the package with Mr Blair and Gordon Brown, said: "These workers lost their pensions, and often their jobs at the same time, through no fault of their own. This isn't compensation. We are not recognising legal liability, but they have got a human case."

Brendan Barber, the TUC general secretary, said: "This is an important victory for union campaigning, and the ministers who have been working hard for a just deal deserve praise." Derek Simpson, the general secretary of Amicus, said: "This is great news for our members whose pensions were cruelly snatched away when their companies went bust. This is, however, only the end of the beginning of our fight for pensions security. We have won justice for 60,000 people today but we now want to win a decent safe occupational pension for everyone at work."

But Willie Riggans, a former worker at United Engineering Forgings who lost most of his pension when the company went into administration, was disappointed. "It is less than half of what we are looking for, but we need to hear the details. At the moment it's certainly not making me happy," he said, adding that £20m a year would not be enough for the 60,000 people who had lost their pensions. Other estimates put the figure of what is needed as high as £75m.

Tim Keogh, European partner at Mercer Human Resource Consulting, said: "The Government has bowed to the inevitable and set out to help those who have lost large parts of their pension savings. But although £400m is a serious sum, it's not a great amount in relation to the problem. If the estimate of 60,000 people affected is anything to go by then £350 a year each will make only a modest difference."

Steve Webb, the pensions spokesman for the Liberal Democrats, said: "This last-minute amendment has all the signs of panic. Half-baked compensation is not the answer."

Nigel Waterson, the Tory spokesman on pensions, welcomed the move but said: "It is a shame that this action was not taken before, instead of this amendment being cobbled together at the last minute."

The pension fund industry said it would fight any pressure from the Government to contribute to the compensation fund. However, Terry Faulkner, the chairman of the National Association of Pension Funds, said that in a conversation with Mr Smith yesterday, he had been told the Government was not necessarily looking for a pecuniary contribution from pension funds. Mr Faulkner said his impression was that it was after the industry's free help and advice to establish and run the fund.

Paul Braithwaite, the general secretary of the Equitable Members Action Group (EMAG), said the tabling of the amendment demonstrated that it was possible to get the Government to pay out if enough pressure came from backbenchers and lobbyists.