Carillion Bosses Accused of Wriggling Out Of Pension Obligations

MPs have set the stage for a showdown with Carillion bosses over pensions, with committee head Frank Field accusing the firm of attempting to “wriggle out” of obligations.

The Work and Pensions Committee, currently investigating the collapsed construction company, has published a letter from Robin Ellison – chairman of trustees of Carillion’s defined benefit pension scheme. According to his account, the deficit in funds could be around £990m – more than a third higher than previously reported. Ellison’s letter further argues that pension trustees were “kept in the dark” over Carillion’s finances.

Image: Robin Ellison – chairman of trustees of Carillion’s defined benefit pension scheme.

Mr Ellison is to appear before the committee of MPs later this week. Bosses of Carillion will also be requested to attend, on the 6th February. In his letter, Ellison suggests that the company cited “constraints in cash flow” as part of their reasoning for not investing sufficiently in pension contributions. Frank Field has already commented that: “The purported cashflow problems did of course not prevent them shelling out dividends and handsome pay packets for those at the top”.Indeed, a spokesman for the Pensions Regulator has said that while the regulator had been in contact with Carillion and its pension fund’s trustees, “Carillion’s recovery plans, and its payment of dividends, did not highlight sufficient concern to justify the use of our powers”.Carillion was able therefore to negotiate pension contributions away in order to enable more borrowing. A spokesperson from stockbrokers Hargreaves Lansdown has suggested a rationale behind the Regulator and Trustees’ decision to allow this. “They had to make a judgement call whether to continue to work with the employer or effectively pull the plug and accept the consequences could be they would precipitate the collapse of the business.”"That gamble did not pay off but they were doing what they thought was in the best interests of pension scheme members."