Ombudsman to investigate Government pension advice

The Parliamentary Ombudsman, Ann Abraham, announced plans yesterday to investigate whether the Government had misinformed occupational pension scheme members over the safety of their savings - a move that could result in the public purse being squeezed for compensation of up to £10bn if it is found at fault.

The Parliamentary Ombudsman, Ann Abraham, announced plans yesterday to investigate whether the Government had misinformed occupational pension scheme members over the safety of their savings - a move that could result in the public purse being squeezed for compensation of up to £10bn if it is found at fault.

The investigation will consider more than 100 complaints received by the Ombudsman over the past few months, alleging that the Government misinformed final salary scheme members, and ignored vital evidence when making decisions on pensions.

The Ombudsman's move to investigate this aspect of the pensions crisis follows extensive lobbying by the Liberal Democrats and Ros Altmann, the Government pensions adviser and governor of the London School of Economics, who compiled a dossier providing evidence of the Government's false promises over pensions.

Ms Altmann said that although the Department for Work and Pensions published literature assuring final salary scheme members that their pensions were guaranteed, there are now thousands of workers who have seen the majority of their pensions wiped out after their company went bust, leaving a large pension deficit. "It is wonderful news for the victims of this dreadful injustice that they may, at last, receive compensation for their suffering," Ms Altmann said. "They trusted the Government, trusted our pension system, but have been left in misery."

So far, the Government has agreed to put up just £20m - spread across the next 20 years - to help the 65,000 workers who lost their pensions before May of this year. Ms Altmann estimates that about £75m a year over the next 40 years is necessary to provide meaningful compensation.

The fate of 40,000 former Turner & Newall workers, the insolvent car parts manufacturer whose pension fund needs £300m, is also still uncertain. Government plans announced last week, look set to land the liabilities of T&N on the pensions protection fund, a new privately funded pensions lifeboat, which is to be launched in April. If the Ombudsman's investigation finds evidence of maladministration, it could force the Government to foot the bill.

The Ombudsman told MPs in writing that her investigation would look into four government departments - the DWP, the Occupational Pensions Regulatory Authority, the Treasury and the National Insurance Contributions Office. She added that she would not be able to look at the allegation that current legislation affords inadequate protection to pension scheme members, as "the content of legislation is a matter for Parliament".

Elsewhere yesterday, members of Unison, the public sector union, demonstrated outside Parliament against new government proposals to raise their retirement age to 65 and cut pensions of public sector employees by up to 25 per cent.