Trade union Prospect has warned Carillion pensioners might lose retirement payments following the government contractor's collapse, since these are not made through the company's pension funds.
The number of members affected has not been confirmed, but Prospect called on the government to clarify what can be done to protect those who may lose the income stream.
The defined benefit (DB) pension schemes of Carillion, one of the UK government's biggest contractors, will enter the Pension Protection Fund (PPF).
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.
After unsuccessful talks with its lenders and the UK government, Carillion made an application yesterday (15 January) to the High Court for compulsory liquidation.
The accountancy firm PWC has been appointed as administrator.
According to Prospect, the company has been making payments to retired former members of staff, who moved over from the public sector when it was awarded certain government contracts that were not strictly pensions, but instead goodwill or "ex-gratia" payments that the ex-public sector employees received in lieu of pension.
Prospect's 141,000 members are engineers, scientists, managers and specialists in areas such as agriculture, broadcasting, defence, education and children's services, energy, environment, heritage, shipbuilding, telecoms and transport.
These pension-like payments, however, aren't covered by the pensions lifeboat.
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.
Neil Walsh, pensions officer with Prospect, told FTAdviser's sister newspaper the Financial Times that "ex-public sector workers aged 50 or over were entitled to an enhancement to their pension on redundancy — basically those were the public service terms that were protected when they were privatised".
He said: "However these were not or could not be delivered by the Carillion pension schemes. So instead the company has basically been sending the affected retired staff a cheque for the amount every year."
Mr Walsh said that income stream would not be covered by the PPF, and warned there may not be much money left over to cover the extra payments to members after the company's senior creditors have received their share of the proceeds from Carillion's liquidation.
Carillion manages schools, courts, prisons and hospitals and it is also the second biggest supplier of maintenance services to Network Rail, in addition to maintaining military bases for the Ministry of Defence.
Philip Green, chairman of Carillion, said the company – which is also one of the government's partners on the HS2 high-speed railway - had been unable to secure funding to support its business plan.
He said the government will be providing the necessary funding "to maintain the public services carried on by Carillion staff, subcontractors and suppliers".
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 yesterday (15 January).
In the meantime, Liberal Democrat MP Stephen Lloyd submitted a motion in Parliament calling for an inquiry into collapsed Carillion.
maria.espadinha@ft.com
