Trustees twice sought formal intervention from pensions regulator
One of the Labour MPs heading the investigation into Carillion’s collapse has condemned its directors for their attitude to the company’s gaping pension shortfall.
Frank Field (pictured), chair of the work and pensions committee, said new information from the trustees revealed they had written to the pensions regulator twice seeking “formal intervention” after the failed contractor refused to increase its contributions.
He said: “These letters suggest the Carillion directors were contemptuous of their pensions obligations. Over two successive 15 month negotiations they refused to give an inch to the pension schemes.
“Their private pleading that the company could not afford more was in stark contrast to the rosy picture – and bumper dividends – being presented to the outside world. Richard Adam, the longstanding finance director, has particular questions to answer.
“With characteristic alacrity, the pensions regulator started its arduous process of chasing money down from Carillion a few days after it was formally announced there was no money left. I can only assume – and hope – they are going after some of those very generous bonuses.”
The first letter, which was sent back in 2010, revealed the gap between pension contributions and the shareholder dividends that were being paid.
In the letter, FR Herzberg, chair of the Carillion staff pension scheme, said: “There is a difference of opinion over what the Carillion group can afford to pay. In view of the recent bullish results announcement by the Company, the strong cash flow and the 12% increase in shareholder dividends there appears to be a reluctance to recognise the position of the six Group schemes.
“Carillion stated that no more that £25m each year was available towards funding the six Group Schemes. In the opinion of the Trustee Forum this is not acceptable and is far less than what the Trustee Forum thinks would be a reasonable overall annual contribution.
“We will continue to do our utmost to bring discussions with the Company to a conclusion and in the meantime would welcome any assistance you can give.”
The second letter, which was issued by Robin Ellinson, chairman of Carillion Pension Trustee and scheme actuary Edwin Topper in 2013, said that negotiations between the trustees and the company were at an “impasse”.
It was revealed that the trustees had proposed contributions of £65m a year over 14 years to meet a deficit they estimated at £770m, while the company made a final “take it or leave it” offer of just £33.4m a year over 15 years.
The letter also revealed that the trustees had said the company had weakened in recent years, which was rejected by the company.
The trustees said that the pension schemes were “falling behind relative to other Carillion stakeholders” and “taking a disproportionate amount of risk”.