HUNDREDS of former steelworkers who lost their pensions after the collapse of Allied Steel & Wire at Sheerness are to be compensated.

When the company went into receivership in 2002, the employees of the firm found their savings were virtually worthless.

But today the Government announced a £400m trust fund was being set up to help them and 60,000 other UK workers.

In the House of Commons, Andrew Smith, the Work and Pensions Secretary, said this would help people who had lost life savings casting what he termed a "terrible shadow" over their retirement.

Derek Wyatt, MP for Sheppey, has helped lead a campaign in the House of Commons on behalf of the workers who lost out.

In April, Prime Minister Tony Blair told Mr Wyatt (Lab) and other backbenders that the former steelworkers were a "special case".

Mr Wyatt said today: "I am thrilled, absolutley overjoyed. This started as a local campaign and went national."

Mr Wyatt has withdrawn his amendment to the Government's Pensions Bill, which is due to have its third reading in the Commons from Tuesday to Thursday next week, so that the Government can bring forward its own amendment.

The Government's announcement has been given a cautious welcome by some campaigners. Andrew Parr, a former process control engineer at the ASW at Sheerness who lost most of his pension when the firm went bust, said: "We want to see the detail. We think there will restrictions which will be unacceptable to us."

But the Government announcement was welcomed by the ISTC and Amicus unions. Tom Butler, chairman of the ISTC Sheerness branch, said: "I take the view that we are halfway there. It will take nine months to sort out who is going to get what."

Until today the Government's proposed law protected workers whose occupational pensions were wound up in future, but campaigners wanted workers whose pensions had already been wound up to receive compensation.

Mr Wyatt also told KM-fm he was delighted by the news...