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Blair rejects ombudsman call on pensions

UK – Prime Minister Tony Blair has rejected a call by the Parliamentary Ombudsman for the government to compensate up to 85,000 people who have lost pension fund benefits.

Ombudsman Ann Abraham said members of defined benefit funds that were wound up with inadequate assets were let down by governments and other public bodies between 1996 and 2004. The issue is front-page news in the UK.

Blair said the government would not compensate – a move which newspapers estimate could cost up to £15bn (€21.7bn).

"We simply cannot do that in circumstances where the reason for the loss is the collapse of the pension scheme itself," he said in his weekly question time session.

The government is reviewing the £400m Financial Assistance Scheme emergency fund, Blair added.

Pensions minister John Hutton also rejected the findings in a BBC radio interview. "I don't think that the taxpayer can be held liable for the failure of these private pension schemes. Absolutely not."

The Ombudsman’s report said official information about the minimum funding requirement was “sometimes inaccurate, often incomplete, largely inconsistent and therefore potentially misleading, and this constituted maladministration”.

Pension reform minister Stephen Timms said: “We have great sympathy for all those who have lost any part of there pensions saving. Ministers have regularly met with people affected and we are doing what we can to help people who have lost their pensions. But that cannot mean that the taxpayer is liable for their losses.”

"Confidence in pensions is at an all time low,” said Gail Philippart, pensions consultant at Hewitt Associates.

“The government has a real opportunity to start rebuilding people's faith in our retirement savings system and it has failed to step up to the challenge.

Confederation of British Industry deputy director general John Cridland said: “Whatever action the government now decides to take, it must not ask business to bail out the Financial Assistance Scheme.

“This is a Government initiative and should be funded with Government money. Companies are already finding over half a billion to support the Pensions Protection Fund and are still unclear how much this will cost year on year.

"Further costs will only put viable pensions schemes at risk."

The issue comes as around 1.5m council workers in the UK have voted for strike action against government proposals to downgrade the Local Government Pension Scheme.

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