Carillion tried to ‘wriggle’ out of pension commitments

Carillion tried to ‘wriggle’ out of pension commitments

Collapsed outsourcing company Carillion had been trying to ‘wriggle’ out its pension commitments for the past 10 years, the MP leading an inquiry into its insolvency has said.

Frank Field MP, chair of the work and pensions committee investigating Carillion’s insolvency, blasted the outsourcing company for “shelling out dividends and handsome pay packets for those at the top” despite multiple profit warnings and cash flow problems.

Field was responding to a letter from Robin Ellison, chairman of trustees of Carillion’s pension schemes, which said that the company requested and received a deferral of pension contributions in September 2017 in order to gain access to new funds from banks.

Carillion went bust on 15 January, reportedly with just £29 million in reserve. The company had public and private sector contracts for major construction projects worth billions. The deficit of its five main pension schemes stood at £990 million.

The company had been struggling to meet its pension commitments since 2008, but only recently shared its problems with the trustees of its pension schemes.

Carillion later cited cash flow problems as reasons for not making higher pension contributions in 2011 and 2013, yet went on to pay more than £70 million in dividends to shareholders for both of those years.

The trustees agreed to a deferral of pension contributions in September, to be repaid in full with interest by January 2019, only because “the banks saw the trustee agreeing to the request as an integral part of them committing to providing new money to Carillion”.

Field said in a statement: “It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years. The purported cash flow problems did of course not prevent them shelling out dividends and handsome pay packets for those at the top.”

“This culminated in negotiating deficit contributions away entirely last autumn to enable more borrowing. Remarkably, this was endorsed by the trustees and The Pensions Regulator (TPR).”

“Once again, TPR has questions to answer. They have been sniffing around Carillion—at the trustees’ behest—since at least 2008, though it is not apparent to what effect.”

“When ten years later the company collapses with £29 million in the bank and £2 billion in pension liabilities it doesn’t look good for them.

Commenting on the Carillion pensions situation, Robert Branagh, president of the Pensions Management Institute, said: “If there is any silver lining to the fallout from Carillion, we hope that it is a reinvigoration of trustee and governance standards and a greater sense of responsibility for defined benefit pension arrangements. Pension obligations need to be managed with the utmost care and must not be the proverbial ‘hot potato’ passed around from one group to the next.”

Categories: News, UK Pensions

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