ASW workers marched to Downing Street in protest over their "lost" pensions

Dr Ros Altmann, the Governor of the London School of Economics, and noted pensions expert, says her scheme would guarantee full pensions to hundreds of men who face losing their money following the collapse of the company last year.

The former workers could be thrown a lifeline under new proposals being considered by the Secretary of State for Works and Pensions Andrew Smith.

Almost 800 workers found they had lost 90% of the value of their pensions when the plant closed down. The UK government told them there would not be any compensation.

Under Dr Altmann's plan, the government would eventually have to pay the pensioners.

Dr Altmann said it was unlikely that any public funds would be needed for at least five to 10 years, and possibly longer than that, depending on market movements.

False sense of security

She said that the plan minimised the impact that compensation was likely to have on government finances - compensation that it is likely to be forced to pay in any event following legal challenges - and that such a move was ethical.

"The government never warned people of the risks of occupational pensions," Ms Altmann said.

The 1995 Occupational Pensions Act lulled scheme members into a false sense of security by creating a Minimum Funding Requirement that led them to believe that even if their employer became insolvent, there would always be enough money to meet pension promises.

However, successive changes to the way the MFR is calculated have greatly undermined scheme safety. A scheme may meet 100 per cent of the MFR definition of solvency while holding only enough assets to pay two- thirds of promised benefits

"The collapse of the ASW scheme is having an awful effect on people's lives," Dr Altmann said. "Confidence in pensions has been lost and confidence in government has been lost."

Annual pensions bill of �1.4m

Under the terms of the proposal, the investment income of the �71m scheme assets, along with cash from the sale of some investments, would be used to pay the annual pensions bill of members as they retire.

The total annual pension bill for all members currently receiving benefits is �1.4m.

"At the end of the day, this is not going to cost a lot of money," Dr Altmann said.

Kevin Brennan, the MP for Cardiff West, told BBC Radio Wales' Good Morning Wales programme that it was the right approach.

Mr Brennan said he had had an encouraging meeting with Andrew Smith.

Cardiff West MP Kevin Brennan - workers left "high and dry"

The MP had previously raised the ASW workers' dilemma In the Queen's Speech debate on health and pensions, in November, 2002.

He then called upon the government to look at the "scandal" affecting workers of Allied Steel and Wire (ASW) when looking at pension reform.

ASW went into receivership in July, forcing the closure of plants in both Cardiff and Sheerness in Kent.

After the company went into receivership, work started on winding up the two final salary schemes. Unfortunately, both funds were seriously depleted.

Mr Brennan said in the debate at Westminster: "The situation facing former ASW steelworkers is deplorable.

"Thousands of loyal workers, who have stuck by the company through thick and thin, have been left high and dry with no pensions provision to sustain them through retirement."

The Department for Work and Pensions said they "are currently considering the proposals" but added that they did not wish to raise false hopes.