MPs back ombudsman over pensions

By THIS IS MONEY
Updated:

 

THE Government must act to recompense thousands of workers who saw their pensions slashed after it failed to warn of them of potential risks, MPs demanded today.

The influential Commons public administration committee backed a watchdog's finding of maladministration and accused ministers of effectively 'abandoning' some victims of collapsed schemes.

And it renewed warnings that government willingness to dismiss such findings by Parliamentary Ombudsman Ann Abraham raised 'fundamental constitutional issues'.

Ms Abraham released a damning report in March which found official information on the security of final-salary pension schemes had been 'inaccurate, incomplete, unclear and inconsistent'.

As many as 125,000 people lost a 'significant' part of their retirement cash when many schemes were wound up without sufficient funds to meet their liabilities. But almost all of her recommendations were dismissed by Work and Pensions Secretary John Hutton amid claims it could cost taxpayers £17bn to compensate the victims.

The Government did extend its Financial Assistance Scheme in response but not all victims - including those whose employers were solvent when they wound up schemes - will benefit.

He refuted the maladministration charge and said the leaflets she attacked had been meant for 'general guidance' and not supposed to give 'a full explanation of the law'.

The committee said that stance was 'at best naive and at worst misleading' and that anyone reading such official information would expect it to have 'covered all the important points'.

'In fact they did not mention one of the greatest risks. This is clearly maladministration,' the MPs concluded in their report. 'A proper level of accuracy in government information should be a basic principle of good administrative practice; for many years the information provided on occupational pensions fell far short of this and of the Government's own declared standard.'

It said there appeared to be 'little chance of recompense' for workers who lost large chunks of their pensions when solvent employers wound up schemes.

'The Government cannot simply abandon such people; if it is possible to make employers take responsibility then it should do so itself. We believe the Government should look again at what can be done.

'Like the Ombudsman, we will not tell the Government what it should do or attempt to prescribe a precise level of compensation. We expect the Government to work with others to put together a significant package of support.

'The main elements of such a package should include compensation for scheme members, regardless of their age, measures to ensure payments begin at the age of 65, regardless of whether a scheme's wind up has been completed, indexation for pensions and security for dependants' benefits.'

 
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Committee chairman Labour MP Tony Wright said: 'It was entirely reasonable for people to put trust in government information on the safety of their occupational pensions. The pension leaflets neglected to warn of a substantial risk; people have lost significant sums of money.

'This was clearly maladministration and the Ombudsman was right to say so. The Government should stop quibbling over this and act to find an acceptable solution for the thousands affected. As the Ombudsman herself has said, it's maladministration - get over it!'

The committee also said its report should act as 'a warning' to the Government not to think it could routinely ignore the Ombudsman's findings.

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