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Pensions Carillion chiefs hid £1bn pensions hole as money rolled in

CARILLION was accused of hiding pension deficits of nearly £1 billion yesterday — nearly double the figure it had originally claimed.

The collapsed outsourcing and construction firm has also been accused of trying to “wriggle out” of its pension obligations for a decade while paying out tens of millions in dividends for shareholders and “handsome pay packets” for bosses.

The massive cash hole was revealed in a letter sent to the Commons work and pensions select committee by Robin Ellison, chairman of trustees of Carillion’s pension scheme.

Carillion’s liquidation earlier this month left a £900 million debt pile, a £590m pension deficit reported by the firm and hundreds of millions of pounds’ worth of unfinished public contracts.

But Mr Ellison — who will be questioned by the committee tomorrow — suggests the pension deficit could be even higher at £990m, the MPs said.

Carillion has been “falling short” of what trustees expected it to contribute to pension schemes since 2008, the MPs added after analysing his letter.

The company cited cashflow problems as a reason for not making higher pensions contributions in 2011 and 2013, but paid more than £70m in dividends in both those years.

Trustees were also “kept in the dark” about the state of the company’s finances, “largely” being restricted to information which was already in the public domain until May 2017.

The trustees “negotiated away” pension deficit contributions in the autumn in an effort to keep Carillion afloat by enabling more borrowing, the MPs said.

In a damning assessment committee chair Frank Field said: “It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years.

“The purported cashflow problems did of course not prevent them shelling out dividends and handsome pay packets for those at the top.

“This culminated in negotiating deficit contributions away entirely last autumn to enable more borrowing.

“Remarkably, this was endorsed by the trustees and the Pensions Regulator.”

The Labour MP went on: “Once again the regulator has questions to answer.

“They have been sniffing around Carillion — at the trustees’ behest — since at least 2008, though it is not apparent to what effect.

“When 10 years later the company collapses with £29m in the bank and £2bn in pension liabilities it doesn’t look good for them.”

Shadow work and pensions secretary Debbie Abrahams said a Labour government would strengthen the rules over companies’ pension obligations to their workers by imposing fines on bosses who raid the funds for their own interest.

She said: “It is completely unacceptable that Carillion has failed in its duty to meet its pensions obligations to many thousands of people.

“The pensions regulator’s failure to identify and challenge such irresponsible and unacceptable behaviour over several years raises serious questions about this Tory government’s failure to reform the pensions regulatory framework in spite of warnings going back to 2013.

“A Labour government would bring forward urgent measures to regulate the pensions sector including improvements in pensions governance, new mandatory clearance powers and greater transparency as well as powers to fine bosses who benefit at the expense of pension members, to ensure that such devastating mismanagement can never happen again.”

GMB national secretary for public services Rehana Azam said: “The more we see, the more it appears that the workers are paying the price for the failures of corporate bosses and government ministers.  

“Thousands of Carillion workers still don’t know what will happen to them as their pay, terms and conditions hang in the balance — and worse, the prospect of their pensions being raided.

“The system that has allowed this to happen is broken and it must change. The government needs to get on with it — this mess needs sorting out and it's a mess that lies directly at their door.”

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