A former bodyguard to Margaret Thatcher claims he warned her one of her top aides, Sir Peter Morrison, allegedly held sex parties with under-age boys.
Barry Strevens, who is also an ex-detective chief inspector for Cheshire Police, said he passed on the allegations immediately.
But despite learning of the rumours he claimed Lady Thatcher appointed Sir Peter deputy party chairman of the Tory party. He died in 1995 but has since been linked to child sex abuse claims in North Wales.
Mr Strevens told the Sun on Sunday (£): "I am sure he would have given her assurances about the rumours as otherwise she wouldn't have given him the job."
Tory grandee Lord Tebbit has previously said he confronted Sir Peter over the allegations and received a flat denial.
A full-scale investigation into claims of an alleged paedophile ring in Westminster is now underway.
Earlier this month Ex-Tory activist Anthony Gilberthorpe also claimed Thatcher knew about alleged illicit sex parties within her party.
Former Prime Minister Margaret Thatcher knew about an alleged paedophile ring among the Conservative Party in the 1980s, according to the Sunday Mirror.
Ex-Tory activist Anthony Gilberthorpe told the newspaper he was asked to supply cabinet ministers with underage boys for illicit sex parties.
Mr Gilberthorpe claims he handed Thatcher, who died last year, the names of those involved 25 years ago but no action was taken.
Two inquiries are to be held into alleged child sex abuse involving MPs and wider institutions such as the NHS, the Church and the BBC.
Margaret Thatcher considered calling on troops at the height of the miners' strike amid fears union action could destroy her government, according to newly-declassified files.
Government papers from 1984, released by the National Archives, show ministers were so concerned at the outbreak of a national docks strike while the miners were still out, they considered declaring a state of emergency.
Plans were drawn up for thousands of service personnel to commandeer trucks to move vital supplies of food and coal around the country.
It is thought to be the closest Mrs Thatcher came to defeat in her battle with the miners but the scheme was never implements after the dockers' action petered out after less than two weeks.
As Prime Minister, Margaret Thatcher's immaculately coiffed blonde locks were as much a part of her image as her famous handbag - and newly-released government files show just how much time she spent keeping up appearances.
Her appointments diary for 1984, released by the National Archives, show that she had 118 hair appointments in the space of 12 months.
In June, when she was hosting world leaders at an economic summit in London she had hair appointments on five consecutive days.
The diary also confirms her reputation as a workaholic who found it difficult to relax.
Margaret Thatcher threatened to scrap a visit to Ireland because it was being "unfriendly" about the Falklands War, new records reveal.Read the full story ›
The Prime Minister is moving onto Margaret Thatcher's legacy in government.
"Margaret Thatcher made our country stand tall again, at home and abroad," he says.
He compares his task to that of Mrs Thatcher who also had "an almighty mess to clear up when she came to office".
Recounting an anecdote at a dinner, he say: "After a while I said: 'Margaret, if you had your time in government again, is there anything you'd do differently?'
"And she turned to me and said: 'You know, I think I did pretty well the first time around'."
The Conservative Party conference has created a series of bottled beers for its delegates to enjoy - but with a twist.
Conference goers in Manchester can sip on "Miliband Ale: Weaker than Brown", "Leftie Blond" and the "Extra Strong Union Ale".
There is also a beer to commemorate the late-Tory leader Margaret Thatcher, called "Our Maggie."
Chancellor George Osborne told Daybreak he may toast his speech to the Conservative Party conference today with a bottle of beer brewed in honour of former leader Margaret Thatcher.
The conference in Manchester was opened with a video tribute to Baroness Thatcher, who died in April.
"This is an opportunity for the party she led as Britain's first woman Prime Minister to pay tribute to her memory."
Asked if he had tried a pint of "Our Maggie", the Chancellor answered, "I haven't had a chance yet, but maybe after I have delivered my speech I will have a pint."
Baroness Thatcher's ashes were laid to rest today in the grounds of the Royal Hospital Chelsea.
Members of her family including her children Sir Mark and Carol Thatcher attended a short church service in the chapel of the central London site before a solid oak casket containing her ashes was placed in the ground.
A headstone bearing the simple inscription "Margaret Thatcher 1925 - 2013" was being erected on top of her final resting place in the leafy grounds of the hospital.
The country's first female prime minister died aged 87 on April 8.
Mugs with the slogan "I still hate Thatcher" are being sold at the Trades Union Congress conference.
The former Prime Minister died on April 8 this year at the age of 87.