£2.9bn pension rescue plan welcomed

Unions and campaign groups who have been fighting for five and a half years for the lost savings to be paid welcomed the move, which will restore 90% of the value of pensions for up to 140,000 workers.

Some of those affected were forced to continue working instead of retiring, while one couple had to move in with their son after selling their house as part of a plan to emigrate to Spain, which had to be abandoned through lack of cash.

Work and Pensions Secretary Peter Hain said the money, which will mainly come from taxpayers, will deliver justice to workers "cruelly robbed" of their pensions.

Union leaders announced they will not go ahead with legal action in the European Court of Justice against the Government as a result of the move.

Mr Hain said up to 140,000 people would be eligible for extended help under the Financial Assistance Scheme (FAS), which was set up by the Government to tackle the pensions crisis involving workers but was criticised by unions for not going as far as another rescue scheme, the Pension Protection Fund.

Mr Hain said workers involved had done the right thing by saving for later life, only to see their pensions disappear through no fault of their own. He said the total commitment to workers caught up in the scandal was worth £12.5 billion.

Community union general secretary Michael Leahy said workers were "ecstatic" that they would be receiving 90% of their expected pensions, adding: "This has been a story of successive political failure by Conservative and Labour Governments which has caused unnecessary suffering and anguish for those affected and has undermined public confidence in the UK pension system. We are delighted that the Government has finally listened and acted to end this running sore."

Shadow work and pensions secretary Chris Grayling said: "Congratulations to all of the campaigners who have spent their own time and money trying to get this Government to right its pensions wrongs."

Liberal Democrat work and pensions spokesman Danny Alexander said: "This is no less than these people deserve. Given the Government's record, we will have to watch the small print but finally it seems as if ministers have been dragged kicking and screaming into doing the right thing."