Pensions 'lifeboat' fund bid sunk

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Despite some Labour backbench support, the amendment to the Pensions Bill was narrowly defeated by 282 to 260.

The vote came after the Prime Minister rejected a call from Tory leader David Cameron to back the move using unclaimed pension assets as funding.

Mr Cameron said it would help deal with "heart-breaking" cases where thousands of people had paid into company pension schemes, seen them collapse and been left with "little or nothing".

But Mr Blair said ministers were worried about an "unfunded commitment" that over time could amount to nearly £2.5 billion.

He said, during question time, the "cruellest thing" would be to tell people "we can make that commitment and bail them out when it transpires we cannot".

The bid to help 125,000 who paid into company pension schemes only to see them collapse was spearheaded by the Tories with Liberal Democrat and some Labour backing.

It came after Chancellor Gordon Brown on Tuesday night comfortably survived by a 65-vote majority a rare Conservative no confidence motion over his handling of occupational pensions.

As debate on the Bill got under way Pensions Minister James Purnell announced a concession to win over would-be rebels on his own side. He said the existing financial assistance scheme would be extended to cover members of schemes that began winding up between January 1 1997 and April 5 2005.

This would happen "where a compromise agreement is in place and where enforcing the debt against the employer would have forced the employer into insolvency" and would benefit an extra 8,000 people, in 15 schemes.