Brown's £10bn pension reckoning

A MAJOR inquiry into allegations that the Government misled workers over the security of company pension schemes is expected to be announced on Tuesday, the Financial Mail on Sunday has revealed.

The investigation, ordered by the Parliamentary Ombudsman, could result in the Government being forced to pay compensation totalling between £5bn and £10bn to at least 65,000 workers.

They lost pensions after their schemes failed, even though Government literature up to last year said final salary company pension plans were safe and protected by law. The compensation would restore the company pensions that workers have lost and pay them damages.

So far, the Government has offered compensation of only £400m through a Financial Assistance Scheme due to start making payments next spring.

The Ombudsman's move is a blow to the Government, which has tried to dodge responsibility for the widespread failure of company pensions.

Experts believe the Government will find it difficult to defend itself, especially after Chancellor Gordon Brown's £40bn tax plundering of company pensions since 1997.

Though the Ombudsman, Ann Abraham, has no power to enforce her recommendations, the Government usually accepts them. In the past 37 years, only two requests for compensation made by the Parliamentary Ombudsman have been refused.

Abraham has launched her investigation, which might take nine months, because of evidence from more than 200 MPs and members of failed pension schemes pointing to Government 'maladministration'.

Government publications repeatedly perpetuated the myth that a pension from a final salary or defined benefit scheme was guaranteed, say victims.

And pensions regulator Opra mistakenly told fund trustees that if they met minimum funding requirements, all pensions would be paid if a scheme was wound up.

MPs and scheme members claim that if the risks had been explained, workers could have taken corrective action.

One of the most high profile victories for the Parliamentary Ombudsman was in 1989 when the Conservatives were forced to compensate victims of financial adviser Barlow Clowes to the tune of £150m.

The company, run by Peter Clowes, took savings from 11,000 investors under the pretext of investing them in Government securities. Instead, the money was used to fund his lavish lifestyle.

Three years ago, the Government was forced to pay compensation when the Ombudsman found it had bungled over plans to strip widows and widowers of their rights to a full Serps pensions after a partner's death.

Last week, several Government departments, including the Treasury, were contacted by the Ombudsman, alerting them to an 'imminent' decision.

On Friday, Ros Altmann, policy adviser to Downing Street, said: 'I do not know whether the Ombudsman will investigate, but I sincerely hope so. It is essential that our Parliamentary democracy can recognise this dreadful social injustice and provide financial compensation to these 65,000 people.

'It is also imperative if we want to restore confidence in pensions.'