The Government is to pay the costs of four pensioners who took a case over their lost pensions to court in order to get legal pension advice on their plight and a commitment to compensate them.

Work & Pensions Secretary John Hutton told MPs that he was prepared to pay the costs incurred by the pensioners so far and any appeal costs that may arise from subsequent proceedings.

As a result of the court case, the High Court has ordered the Government to reconsider its rejection of findings arrived at by the parliamentary ombudsman on the issue of lost pensions.

The ombudsman, Ann Abraham, found last year that the Government was guilty of maladministration and had perpetrated an injustice by publishing inaccurate and misleading information about the security of occupational pensions.

She urged the Government to commit to arranging higher levels of compensation for about 85,000 people who have lost their occupational pensions, with nothing to compensate them for the deficit.

These people had lost all or most of their pension when their schemes were wound up with a deficit, between 1997 and 2005.

The Government decided against acting on the pension advice given by the ombudsman, and making compensation available, which provoked the four pensioners into launching their court action.