WORKERS robbed of their pensions when their company schemes went bust were celebrating last night after a Government U-turn promised them compensation.

Pensions Secretary Andrew Smith unveiled a £400m fund to help the estimated 60,000 people who have lost their nest egg for retirement.

The alarm has been raised over pensions at royal carpet manufacturer Carpets International, which shed 74 jobs at its Hartlepool factory after going into receivership last summer.

There is also concern for workers at construction company Ballast plc, which was placed in administration in October. It employs 1,000 staff and has a base in Billingham, Cleveland.

Tony Blair was facing a humiliating rebellion next week by 200 of his backbenchers unless he backed down and agreed to compensate those who have lost out.

They included: Vera Baird (Redcar), Frank Cook (Stockton North), Kevan Jones (Durham North), John Cummings (Easington), Gerry Steinberg (City of Durham) and Bill Etherington (Sunderland North).

The Pensions Bill, due to be debated on Wednesday, will set up a fund to protect the pensions of staff in company schemes - but only people affected after April next year.

Now all workers whose pensions have disappeared since April 1997 can apply to the separate £400m pot, although details are still being worked out.

Mr Cook said: "I'm both delighted and relieved that the Government has finally seen sense with regard to this issue. But I cannot say what the impact will be for my constituents until I have been able to explore the full implications of the announcement."

The 20-year scheme will be reviewed after three years to check the level of payments to people who have lost widely-differing amounts.

It amounts to only £6,666 for each of the 60,000 people - or £350 a year - but the government said it would be topped up with "contributions from industry".

In March, the Pensions Secretary was insisting the Government could not "protect people against events that have already happened".

But, announcing the amendment to the Pensions Bill yesterday, he said: "This will give real help to people who have lost their life savings through no fault of their own."

Under laws introduced after the Maxwell pension scandal of the early 1990s, any money left in a company scheme goes first to retired workers. That means staff who are nearing retirement can find themselves left without a penny.