The former steelworkers stripped to highlight their pensions plight

Staff at the Allied Steel and Wireless (ASW) plant in Sheerness saw most of their pensions disappear when the company went into bankruptcy in 2002.

They are among 85,000 workers who should be compensated, Parliamentary Ombudsman Ann Abraham has said.

But her report is not binding and the government has rejected its findings.

Ms Abraham said there had been maladministration by the Department for Work and Pensions.

She said official guidance on company pension schemes had been "inaccurate, incomplete, unclear and inconsistent".

But responding to her call for government compensation, Stephen Timms, minister for pensions reform, said: "It could not be the responsibility of taxpayers to bail out failed corporate pension schemes."

Andrew Parr, from the Pensions Action Group and himself a former ASW worker in Sheerness, said they had been misled into believing their pensions were safe.

A total of 300 workers lost their jobs at ASW's Sheerness plant

"The government has produced a lot of material using words like 'protected by law', 'guaranteed' and 'promised'.

"We all said the information was incorrect and the report has confirmed that.

"The majority of us have done nothing but think about the injustice of our pension.

"It affects your health, your life and your marriage.

"What do we have to do to get somebody to see the injustice of it?" asked Mr Parr.

Labour MP Derek Wyatt, whose Sittingbourne and Sheppey constituency covered the Sheerness ASW plant, said: "I think it's a moral duty of the state (to compensate the workers)."

A �400m trust fund was set up in May 2004 for tens of thousands of UK workers affected by the collapse of company pension schemes.

However, representatives from the Community union are still involved in a legal case against the government on behalf of the ASW workers, which is due to be heard at the European Court of Justice.