A report in the UK industry press says that the government is set to mount a vigorous defense of the much-criticized Financial Assistance Scheme.

The scheme is intended to pay compensation to people who have lost their retirement savings due to the insolvency of their employer, however it has come under attack since, despite thousands of pensioners being eligible for compensation, only 200 have yet been paid.

Although the government has pledged to extend the scheme so that more compensation is offered, there remains a fierce debate in parliament about how far the government is liable.

This follows the report last year by the parliamentary ombudsman Ann Abrahams, which found that the government’s information provided to affected pensioners did not make clear that their pensions would not be reimbursed. She found the government guilty of ‘maladministration’, a charge the government contests.

Now the House of Commons’ public administration select committee has backed Ms Abrahams’ view, and both Labour backbenchers and opposition MPs have since rounded on the government, demanding that more be done to help the victims of the collapsed funds.

Adviser news service IFAonline quotes a spokesman for the Department of Work and Pensions as saying that, we recognize the losses of those affected, which is why we are committed to spend GBP2 billion to help those most in need. But this is taxpayers’ money and there is a balance to be struck.

IFAonline reports that it is not necessarily the case that the extra money for payouts would come from the taxpayer, as the government implies.