Thousands of workers who lost their pensions when their companies went bust are to receive a rescue package.

Ministers have agreed a deal to restore 90 per cent of the value of pensions to around 125,000 workers.

The scheme will put the workers in line with other employees whose pensions are covered by the Pension Protection Fund.

The 125,000 workers have been covered by a Financial Assistance Scheme, mainly financed by the Government, but this has so far failed to give them the same level of money as the PPF.

Unions launched legal action against the Government for publishing misleading information about the security of company pension schemes and for not doing enough to compensate workers.

Prime Minister Gordon Brown and Chancellor Alistair Darling had reportedly blocked plans by Mr Hain for an improved scheme.

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