Refunds scheme a 'potential disaster'

A compensation scheme for people who were ill-advised about changes to the state pensions system could be "potentially disastrous" MPs warned yesterday.

The Public Administration Select Committee told Alistair Darling, the Secretary of State for Social Security, that the £8bn scheme was at risk of being unworkable.

Mr Darling announced the programme after the disclosure that thousands of people had not been told that their entitlement to the State Earnings Related Pension Scheme (Serps) would be halved.

But Dr Tony Wright, the committee's chairman, said it was a mistake to place the onus for disproving people's claims on the Department of Social Security (DSS).

"If a person comes forward and says I picked up a DSS leaflet 10 years ago and it failed to tell me about the change, how are you going to tell whether that person is telling lies? This scheme could be potentially disastrous," he said.

Mr Darling insisted that there would be tight enough rules to determine whether claims were genuine.