Defined Benefit  

Pensions watchdog probes Carillion

Pensions watchdog probes Carillion

The Pensions Regulator (TPR) is “closely involved in discussions” with Carillion and the trustees of its defined benefit (DB) schemes, as the company, one of the UK government’s biggest contractors, is fighting for survival.

A spokesperson at the pensions watchdog told FTAdviser that TPR has been following the case and working with the company and its scheme trustees, but declined to comment any further.

Carillion, which employs about 43,000 people, has been facing difficulties after a profit warning last year that sank its share price – which has fallen from above 200p a year ago to about 22p.

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According to FTAdviser’s sister newspaper the Financial Times, the company held a meeting on Wednesday (10 January) with key stakeholders including a number of banks, where it was expected to present a business plan and revised strategy.

Carillion has 13 final salary schemes in the UK, with more than 28,500 members, and a deficit of £587m at the end of July.

The Pension Protection Fund (PPF) – which will take on the Carillion scheme as the last resort scenario if the company fails – is “aware of the discussions between the company, government and banks”.

Along with the trustees and TPR, PPF “will act as it always does to protect the interests of Carillon scheme members and levy payers”, a spokesperson said.

In the meantime, Cabinet Office secretary Oliver Dowden said yesterday at parliament that ministers had “contingency plans for all eventualities,” when asked by an opposition Labour MP what measures were in place should the business fail.

Carillion is one of the government partners on High Speed 2, a planned high-speed railway which will connect London, Birmingham, the East Midlands, Leeds and Manchester. 

The Pensions Regulator has been involved in other recent cases of collapsed companies with DB pension schemes and their restructuring plans, such as Toys R Us, Tata Steel and Hoover.

According to Tom Selby, senior analyst at AJ Bell, the government and TPR will clearly take an active interest “where any company in distress is responsible for funding a large pension deficit”.

He said: “Given the controversy that has surrounded the behaviour of some employers which have fallen by the wayside – most notably BHS – the regulator will obviously be keen to ensure any future failures do not repeat the mistakes of the past.”

BHS went into administration in April 2016, putting workers' retirement nest eggs at risk and TPR has been investigating the case since.

In the end, a £363m settlement with Sir Philip Green was reached to fund a new independent pension scheme for 19,000 former BHS workers.