Shadow Work and Pensions Minister Oliver Heald has proposed a new scheme which would ring fence pension funds and guarantee payouts, with priority to employees within ten years of retiring.

And he has called on the Government to change the law immediately - tabling an early day motion asking them to adopt the proposals straight away.

The Tory plans were prompted by the plight of workers from Allied Steel and Wire who featured in the Panorama programme:

Not acceptable

The ASW workers had paid into their pension schemes for years, only to be told their pension would be drastically reduced after the firm went bust.

He said: "We need urgent action to protect the pensions of long-serving workers when their employer goes bust. The present protection is insufficient and has actually resulted in more and more people facing large cuts in their retirement incomes.

"We propose new rules that workers be given priority when benefits are allocated after a company scheme winds up, particularly workers within 10 years of retirement."

Mr Heald added: "It is not acceptable for workers who spend their entire lives contributing to their retirement, to end up with next to nothing because their pension scheme folds. The Government must take steps to rectify this situation as soon as possible."