Hundreds of thousands of women were potentially owed compensation because of government failings over the way changes to the state pension age were made, a long-awaited official report in March said.
The Parliamentary and Health Service Ombudsman (PHSO) report ruled that some women born in the 1950s were not adequately informed about the impact of the changes.
It recommended payouts of between £1,000 and £2,950 a person which fell far below the £10,000-plus that campaigners were calling for.
Pensions Secretary Liz Kendall confirmed today the Government would not award the women compensation.
And the ombudsman cannot compel the government to pay a penny for the injustice.
Steve Webb, partner at pension consultants LCP said: “The Government’s handling of this issue sets an extremely worrying precedent.
“If it is acceptable for a Department to completely reject the findings of a report by the independent Parliamentary ombudsman, this strikes a blow at the heart of the whole process.
“There is a risk that governments will now feel emboldened to ‘pick and choose’ when faced with a critical ombudsman report, effectively setting themselves up as judge and jury.
“Even if the government felt it could not afford to implement the recommendations in full, there were many options which would have offered some redress to those most affected. Outright rejection of the ombudsman’s report raises much wider issues than compensation over pension age changes, and MPs should not take this decision lying down”.
The age at which people receive the state pension has been increasing as people live longer, and currently stands at 66 for men and women.
But for decades, men had received their state pension at 65 and women at the age of 60.
Under the 1995 Pensions Act a timetable was drawn up to equalise the age at which men and women could draw their state pension.
The plan was to raise the qualifying age for women to 65 and to phase in that change from 2010 to 2020.
But the coalition government of 2010 decided to speed that up.
Under the 2011 Pensions Act the new qualifying age of 65 for women was brought forward to 2018.
Campaigners claimed women born in the 1950s have been treated unfairly by the speedy changes and the way they were communicated to those affected.
Thousands of people said they did not know they would have to wait longer to receive their state pension, and had suffered financial and emotional distress because of this.