Pensions decision reviewed in the high court
Wednesday, 7 February 2007 12:00 AM
The government's decision to refuse compensation for thousands of workers who lost all or part of their pensions will come under review by the high court today.
The case is being brought by four people who claim they are among about 85,000 people who lost most of their retirement funds when their companies went bust.
They are not eligible for help under the Pensions Protection Fund (PPF) because their problems took place before the fund was set up in April 2005, although they do have access to help under the Financial Assistance Scheme (FAS).
Last year, the parliamentary ombudsman demanded the government compensate the workers, saying they lost out in part because of inaccurate, incomplete, unclear and inconsistent advice from official leaflets.
A select committee report several months later backed Ann Abrahams' call, saying the government was guilty of "maladministration" in advising people to take money that would have gone into their second state pension and place it in the private sector.
However, the government denied it was to blame for the workers' loss, and said it would be too expensive to compensate them all. On Monday, work and pensions secretary John Hutton said ministers "will argue our case very strongly" in today's hearing.
Speaking during a question and answer session in the House of Commons, Mr Hutton also rejected the suggestion that the government had ignored Ms Abrahams' advice, saying it had put more than £2 billion extra into the FAS following her report.
But today the Conservatives revealed that just 871 of the 125,000 people who have lost pensions savings are being helped by the scheme, despite it being in operation for almost 18 months, and the FAS is taking more than six months to process a single claim.
Shadow work and pensions secretary Philip Hammond said the figures, obtained in a parliamentary answer, showed the scheme was "clearly not fit for purpose".
"This is simply not acceptable and is further proof that the government are not taking the plight of these people seriously. The government must show some leadership in resolving this problem," he said.
"Nobody is expecting them to write a blank cheque with taxpayer's money but there are other routes open - they should be looking at using unclaimed financial assets to bolster the FAS and at whether compulsory annuitisation of failing pension funds is delivering the best return for those who have lost their pensions."
Last month, the European court ruled the government had failed to properly implement a 1983 EU directive requiring member states to provide proper protection for workers' pensions, saying it provided "inadequate" safeguards.
However, it said it was up to the British courts to decide if this meant the government must compensate workers, leaving the way open for a future challenge in the high court.
Newsletter sign up