Defined Benefit  

Carillion collapse adds to pressure for DB rule reform

According to Nathan Long, senior pensions analyst at Hargreaves Lansdown, this delay is "surely down to the scale and complexity of the issues being covered."

He said: "On the one hand, the government want to ensure schemes are sustainable, with businesses continuing to prosper and providing jobs.

"On the other, any dilution of member pension benefits will erode the fragile confidence in pensions that is slowly returning following the good work of auto-enrolment."

Carillion, which employs about 43,000 people, has been struggling for several months, issuing a profit warning last year that sank its share price – which has fallen from more than £2 a year ago to about 14.2p this morning.

When a firm becomes insolvent and the pension scheme is passed to the PPF, the assets of the scheme are also passed over to the pensions lifeboat. 

According to Carillion's last annual report, its schemes have assets of £2.57bn and liabilities of £3.37bn.

The exact size of the impact on the PPF will not be the same as the headline deficit on the pension scheme, but it is likely to be well in excess of half a billion pounds.

Frank Field MP, chair of the Work and Pensions select committee, isn't surprised with the recent developments in the company.

He said: "Carillion took on mega borrowings while its pension deficit ballooned. We called over a year ago for The Pensions Regulator to have mandatory clearance powers for corporate activities like these that put pension schemes at risk, and powers to impose truly deterrent fines that would focus boardroom minds.

"If government had acted then, the brakes might have been put on Carillion's massive ramping up of debt and it never would have fallen into this sorry crisis.

"It seems we have a new case like this every week, and this one is particularly disastrous, with massive job losses and 28,000 current and future pensioners at risk. I would like to ask the government today: what more is it going to take?"

The chairs of the Carillion pension schemes will now be working with PWC, appointed special managers to official receiver of the company, and with the PPF, "to deliver detailed information to members about how their benefits will be affected, and provide them with all the support that we can," they said.

The chairs added: "We are in the process of issuing an initial communication to all members, and we will make further information available as soon as possible, including by establishing a dedicated web page."

According to Nicola Parish, executive director at The Pensions Regulator (TPR), the watchdog will "continue to work closely with all relevant parties in what are very challenging circumstances, including the pension scheme trustees, the official receiver and the government, to help achieve the best possible outcome for members of the pension schemes and those impacted by the situation".