A proposal that would force the government to lend money to a fund to restore the pensions of 120,000 people who lost out when their companies went bust was being vigorously resisted by ministers Monday night ahead of a Commons vote on Tuesday.

The Conservatives, Liberal Democrats and some Labour MPs want the loan paid to a “lifeboat fund” to boost the Financial Assistance Scheme. This guarantees only 80 per cent of core benefits to those who lost out when their companies went under before the Pension Protection Fund was created. The loan would be repaid from unclaimed financial assets.