Call it marketing spend. The £400m offer of compensation to workers who have lost rights to pensions because their employers went bust will provide only limited relief for the tens of thousands involved. But the government must hope the gesture will help restore faith in saving for old age. If people who were compelled to join a regulated pension scheme cannot rely on its delivering retirement income, why should anyone trust the system?

The answer for the future is supposed to lie in the Pensions Bill, which returns to the Commons tomorrow. Assuming the compensation deal, struck after pressure from MPs, smoothes its passage, the reforms will take effect from next April.

Most eye-catching is the Pension Protection Fund, designed to provide compensation to workers whose employers follow the likes of ASW on to the scrap heap. This sounds like a good thing - call it marketing again - but its drawbacks highlight the legacy problems with defined benefit, or final salary, schemes.

First, it is too little, too late. When fully operational, the scheme is expected to raise £300m a year. But this could easily be swamped, as has happened in the US to the long-established Pension Benefit Guaranty Corporation.

Second, although part of the levy will eventually be risk-based, which means funds with the biggest deficits will pay the most, it still leaves the good bailing out the bad. By raising costs, it makes defined benefit schemes even more unattractive. They are, in any case, outmoded for all but the few companies that still sell themselves as paternalistic. Employers have enough to worry about without being ultimately responsible for an army of retired employees.

But to see out final salary schemes, it does make sense to have a limited insurance policy, which is what the PPF - rightly dubbed the partial protection fund - is. The restrictions on benefits are to be welcomed both to contain the cost and as a reminder that there are two ways to plug a gap: cutting liabilities is just as essential as doling out compensation to those in funds that have been badly run for years.

More important are reforms that should improve the running of occupational schemes. These include a new pro-active regulator, raising trustee standards and tax simplification.

But none of this will stop the trend away from defined benefit schemes and towards defined contributions, which shifts responsibility for saving for old age on to the individual. It remains tax efficient for employers and employees to contribute to individual pension pots, but the attractions are diminished by the obligation to buy annuities at the end of the process. The urge to simplify should now be directed at that maelstrom.

Meanwhile, most pensioners will continue to rely on the state to provide means-tested benefits, or increasingly turn the one big asset they do control - their house - into income.