A report in a UK newspaper has suggested that the British government is facing a battle with pension campaigners over compensation for victims of collapsed funds.

The Times newspaper has reported that the UK’s parliamentary ombudsman Ann Abraham is compiling a report that will detail how the government misled many pensioners about the security of their final salary pension schemes. Thousands of pensioners were told that their rights were enshrined under a regime known as the minimum funding requirement (MFR).

The ombudsman is set to conclude that the government was negligent in giving out such advice, and that it must compensate pensioners affected by funds that collapsed when their company went bankrupt. The MFR regime has now been replaced by a more rigid framework called scheme-specific funding.

When these schemes collapsed – reportedly affecting some 85,000 people – most lost all their savings. The parliamentary probe is likely to declare the government responsible, meaning it could be landed with a compensation bill of some GBP5 billion, the Times says.