Parliament blocks higher pension compensation

LONDON (Reuters) - The government defeated an attempt on Wednesday to force it to increase compensation for thousands of workers who lost out on pension payments after their company schemes collapsed.

Opposition MPs as well as some members of the Labour Party backed a parliamentary measure that would have raised the benefits payable to workers whose pension funds collapsed before April 2005.

The move would have put these workers -- who are entitled to help from the government-backed Financial Assistance Scheme -- on a par with workers in a similar situation today, who are protected by a more generous Pension Protection Fund.

Workers covered by the FAS receive up to 80 percent of the pension they were due while the PPF guarantees 90 percent.

The government opposed the measure, saying it did not know if funds could be found to finance it. The proposal was eventually narrowly defeated by parliament.

"The problem with going still further is we do not know that we can afford to make that commitment to people," Prime Minister Tony Blair told parliament on Wednesday as he rejected opposition calls for more generous payouts.

Chancellor Gordon Brown said in his budget last month that funding for the FAS would rise to 8 billion pounds and its reach would be extended to 125,000 people from 40,000.

The government said last month it would review the way it uses the assets of insolvent employers' pension schemes and would consider moving them into the government-backed safety net to boost payouts.

Pensions Minister James Purnell offered a further concession on Wednesday by saying the FAS would be extended to include some 8,000 workers whose pension schemes were wound up before 2005 although the firms they worked for had not gone into liquidation. These workers were not previously covered.