Defined BenefitJan 16 2018

MP calls for Parliamentary inquiry into Carillion pensions

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MP calls for Parliamentary inquiry into Carillion pensions

Liberal Democrat MP Stephen Lloyd submitted yesterday (15 January) a motion in Parliament calling for an inquiry into collapsed Carillion.

Mr Lloyd, MP for Eastbourne and Willingdon, and frontbench spokesman on work and pensions, said the "government must now take responsibility to ensure the pensions are properly protected for the tens of thousands of Carillion employees."

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.

Mr Lloyd said there is a need for a parliamentary inquiry "into some of the very questionable decisions made in the past few months, including the issue of the former chief executive still being paid his salary, plus perks and bonus".

He added: "Meanwhile, the Carillion pension scheme has a deficit of £580m, meaning there isn't currently enough money in the scheme to meet the promised pension pay outs."

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.

Carillion retired members will continue to receive their pensions in full, while members who haven't reached retirement will see cuts of typically between 10 per cent and 20 per cent when the schemes enter the pensions lifeboat.

In a statement to the House of Commons yesterday (15 January) on Carillion, David Lidington, minister for the Cabinet Office, said the official receiver appointed in the company's liquidation process "will consider potential detriment to the interests of pension contributors and pensioners as well as to employees of the company, and may seek to impose penalties".

Mr Lidington said: "In addition, The Pensions Regulator [TPR] has the powers to recover payments made to executives or others in the company if there is evidence that they have abused their responsibilities."