UK Government Rebuffs £15 billion Pension Compensation

June 7, 2006 ( - The compensation for about 85,000 UK workers who lost their pensions will be far less than the £15 billion some ministers said it would cost to help ease some of the loss.

The Financial Times reported that buried in the fine print of a report meant to defend the government’s decision not to acquiesce to the £15 billion proposal lies data that the price tag for the government will not go above £100 million in any year over the next six decades.

The 85,000 workers lost at least 20% of their promised retirement benefits when their employer went bust, or, by taking advantage of a legal loophole, wound up their scheme, according to the London newspaper. The government agreed that the compensation would leave the scheme with too little to pay all promised benefits.

Prime Minister Tony Blair said that the government should not have to absorb the cost suggested by Parliamentary Ombudsman Ann Abraham in March (See UK Government Will not Take Responsibility for Pension Loss ), which accused the government of maladministration in how it had run occupational pension schemes.

According to Abraham’s report, the government kept in place rules that allowed employers to hold too little in their pension schemes, and had flouted repeated warnings from the actuarial profession that plan participants could suffer as a result of egregious underfunding.

The Department of Work and Pensions gave Tuesday to parliament its response to the ombudsman, contending that it never made any guarantees in respect to occupational pensions.

Work and Pensions Secretary John Hutton proposed in May a £2 billion compensation deal that would benefit workers who are up to 15 years from retirement (See UK’s Hutton Proposes £2B Bailout for Workers’ Lost Pensions ).