Pensions move 'irrational and unlawful'

The Government was accused of acting "unlawfully and irrationally" by refusing to accept the findings of a Parliamentary Ombudsman's report into occupational pension schemes yesterday, as a three-day judicial review into the findings began at the High Court.

The Ombudsman found the Government guilty of maladministration in its regulation of the occupational pensions market last year, recommending that it fully compensate the 125,000 people who lost most or all of their retirement savings when their employers went bust.

However, the Government rejected the findings, and refused to contribute any more than the £400m which it has provided for a Financial Assistance Scheme (FAS), which will provide limited financial aid for some of those affected.

Representing the case of four workers who lost their pensions, Dinah Rose QC yesterday told a court that the Ombudsman's findings were binding, claiming that the Secretary of State had seemingly rejected them on the basis that he had a "bona fide difference of opinion".

Ms Rose also accused the Government of lulling workers into a "false sense of security" by encouraging them to sign up to company pension schemes, without warning them that there was only a 50 per cent chance their pensions would be protected if their scheme was wound up. This was a result of the inadequacy of the Minimum Funding Requirement rules, which have since been tightened up.

A spokesman for the Department of Work and Pensions said that the victims' pension schemes were not provided by the state, and could not be underwritten by taxpayers.

David Laws, the Liberal Democrat spokesman on work and pensions, hit out at the Government for refusing to pick up the bill for the pension victims. The four victims may be forced to sell their houses to pay costs to the Government if they lose the case.

The hearing continues.