Dorset County Council has defended its investment in Railtrack shares, which has had an effect on its pension fund.

And it has denied claims that employees' pensions will be affected or that the taxpayer may be forced to make up any shortfall.

It had been claimed that Dorset County Council, together with Poole and Bournemouth councils, lost £628,000 through a shares gamble on Railtrack, which has been plunged into receivership.

An investment in Railtrack was made on behalf of the three councils' pension fund, which is managed at Dorchester by the county council. At the end of September this year, the fund held 137,000 shares, then valued at £628,000, but Poole MP Robert Syms has claimed those shares are now worth nothing.

He said: "This is a big blow to the local taxpayers.

"Currently, the Railtrack shares are worthless. The burden will have to be shared by the employers - the residents - and the employees, council workers, who could have to pay increased pension contributions."

Other councillors have claimed that the Government should compensate the fund.

But a spokesman for Dorset County Council denied that council pensions were under threat or that taxpayers would have to pick up the tab. He said: "This really should be kept in perspective.

"Our total investment for ourselves and the Bournemouth and Poole councils is £830 million, so approximately 99.6 per cent of our pension fund investments are not in any way affected.

"Investing in Railtrack was not a gamble and it is entirely to avoid that kind of gamble that we spread our investments across a wide variety of different things. This really makes no difference and will not affect people's pensions. They are protected.

"I would also query the figure of £628,000. That may have been what the shares were valued at in September, but we believe that the recent drop in their value is actually closer to £300,000.

"At the time the shares were suspended on October 5, they were worth about £384,000. It's hard to say exactly, but we think they are now worth about 70p each, which makes a total of £100,000. Compared to the value they were before, that gives us a drop of about £300,000."