Admission adds to pressure for pensions compensation

The case for compensating thousands of workers who lost their pensions when their companies went bust will gain further momentum today when the Government itself admits that 9 million workers have been misled over their retirement promises.

Appearing in the 30 Minutes programme on Channel 4 this evening, Andrew Smith, the Secretary of State for Work and Pensions, confesses that he too thought the company pension schemes in which about 9 million Britons have put their savings were safer than has transpired. "I am sure that people thought the protection provided by the law was stronger than it turned out to be," he said.

The admission comes as the Government faces a decision over whether to give in to compensation calls for 60,000 workers whose pensions were shattered when the companies employing them collapsed. A backbench rebellion is strengthening on the issue, and Kevin Brennan, the Labour MP for Cardiff West, will next week table an amendment to the Pensions Bill. The Bill is to provide greater protection for pension rights from 2005 onwards, but Mr Brennan has the support of 298 MPs from all parties, including 206 Labour MPs, to get compensation for those already affected.

David Willetts, the shadow work and pensions minister, said yesterday: "Andrew Smith has revealed the Government's guilty secret that people thought their pensions were guaranteed. The Government does have an obligation to help. It is now in the absurd position where it is admitting that people were misled, but at the same time is not doing anything to help." Under present law, only retired people have their pensions guaranteed in full. But many workers were told, by the Government and other regulatory bodies, that their future pension benefits were safe while they were still working.

Steve Webb, the Liberal Democrat work and pensions spokesman, thinks the Government is likely to face defeat unless it comes up with a deal soon. "Some of the literature from Government departments promoting pension schemes talked of 'guaranteed minimum benefits' - what impression did that leave people with? Andrew Smith's comments now make it more difficult for the Government to give compensation only to certain people, such as those who were compelled to join their company scheme, as has been feared. Everyone saw the same publicity about company pension schemes - everyone saw the same material."

The ISTC, the steelworkers' union which is campaigning to restore the pensions of many of its members, also said that Mr Smith's comments left the Government with no option but to compensate all workers who have lost entitlements.