Michael Howard has warned the prime minister that "time is running out" for a decision on compensating pensioners who have lost out in company bankruptcies.

The Conservative leader said there was "widespread support" across all parties for compensation to be paid to the estimated 60,000 people who have lost pension benefits following the collapse of their schemes.

Speaking during prime minister's questions, he pointed to previous statements by Tony Blair that the government was considering its final position on the issue.

"It seems that it will take a prime ministerial decision to compensate them, he has given hints that he will act.  Will he now do so?" asked Howard

Blair said he hoped to be in a position to make an announcement "very shortly".

But that prompted Howard to warn that "time is running out".

"This actually isn't a party political point. There is support from all quarters of this house for this measure," he added.

"I know how difficult it is to agree to compensation retrospectively, and it is important not to set too many precedents, I understand all that, but this is an issue on which a majority of members of this house have signed House of Commons motions calling for compensation."

The prime minister said he would "announce shortly what it is we are able to do for people".

He added that the government was already introducing a new system to protect pensions.

Responding, Howard said that legislation was "to deal with a problem that has arisen under this government".

Blair rejected the criticism, saying the previous Conservative government had seen nine million people lose pension rights and had presided over the pension mis-selling scandal.