The Government should compensate workers who lose their pensions when companies go bust, the Liberal Democrats said at their Brighton conference yesterday.

Speaking at the party's annual conference, pensions spokesman Steve Webb said protecting the 20,000 workers whose retirement plans had been plunged into turmoil would cost only £56m a year.

Plans are already under way for a state insurance scheme but this will not come into effect until 2005 and will not cover workers whose pension schemes have already collapsed.

The 20,000 employees hit nationwide have fallen foul of a legal ruling that when occupational pension schemes fail, current pensioners should have priority in the distribution of assets.

People coming up to retirement are at the back of the queue, losing some or all of the money they have saved.

Prof Webb said: "Every week we hear about another group of workers who thought their pensions were safe and discover the value of their nest egg has been slashed.

"The toll of victims mounts while the Government sits idly by.

"The Government is betraying a generation who worked hard and saved hard.

"The Government's Pension Protection Fund only promises to secure pension schemes from 2005.

"There must be provision for those who are and will be affected before then.

"The Government has a moral duty to compensate them."

Prof Webb said the cash could come from the Department of Work and Pensions' contingency fund, which now stands at about £100 million.

Thursday September 25, 2003