TENS of thousands of people were knowingly misled by ministers into investing in pension schemes that later collapsed and left them in penury, a damning report has found.

Government leaflets left out key warnings about the financial safety of the schemes which ministers knew only had a 50-50 chance of paying up in full. As a result as many as 85,000 people in at least 400 company pension schemes have been hit.

The Parliamentary Ombudsman, who compiled the report, said that the Government should pay up to £15 billion in compensation.

Ann Abraham, the ombudsman, accused the Government of producing “inaccurate, incomplete, and inconsistent” information. But ministers flatly rejected her call, saying that it was not their fault that the schemes had collapsed leaving workers losing 20 per cent or more of their savings.

The 254-page indictment covers the years from 1997 when Labour was desperate to encourage people to save more for their retirement, and in particular to invest in their company schemes.

In evidence from those affected, Alistair Darling, the former Social Security Secretary, was singled out for criticism. He was accused of dismissing advice from officials to inform members of occupational schemes that their savings could be wiped out if the company scheme collapsed. She also criticised the Government for weakening the regulation of company pension schemes by twice cutting the minimum funding requirement which was designed to ensure that employers paid enough money into the pension scheme.

“The maladministration which my investigation has uncovered caused injustice to a large number of people who, as a result, lost the opportunity to make informed choices about their future,” Ms Abraham said.

The Government’s actions caused “real suffering, distress and uncertainty about the future among pension scheme members and their families”, she added.

But the Government dismissed her findings and said that it would not compensate those affected. “We have studied the report carefully but we reject its findings of maladministration. It simply does not make the case. For the report to assert that the taxpayer should make good all such losses — however they arose — is a huge and unsustainable leap of logic,” said Stephen Timms, the Pensions Minister. “Responsibility must fall on those companies whose schemes were, or are, being wound up and to the trustees who, with the benefit of professional advice, were responsible for protecting members’ interests.”

He said that DWP leaflets were a “general introduction” to the subject of pensions which never made any claim that taxpayers would guarantee occupational schemes.

The ombudsman’s report shows that Mr Darling made a promise that the public would be compensated if his leaflets were found wanting when he awarded reparations to pensioners after the Serps mis-selling scandal.

In 2000 he said: “The giving of wrong information by a department is inexcusable.

“The public rely on Government information and they are entitled to be reassured that leaflets are accurate and comprehensive.”

Mr Darling, who has been tipped as a future chancellor, continued: “As a matter of principle, we believe that when someone loses out because they were given the wrong information by a department, they are entitled to expect the Government to put it right.”

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Damming indictment or unsustainable leap of logic?

• A strike by 1.5 million local council workers over pensions is expected to be announced today. The row involves a change to pension rules which means that workers will no longer be able to retire at 60 and get a full pension.

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