Carillion directors ‘contemptuous’ of pension funding

Aaron Morby 4 years ago
Share

Watchdog MPs have accused Carillion directors of being contemptuous of their pensions obligations in their probe in to the collapse of the group.

Carillion directors refused to give an inch to the pension schemes, says pension committee chairman Frank Field
Carillion directors refused to give an inch to the pension schemes, says pension committee chairman Frank Field

The work and pensions select committee also slams the pensions regulator for doing too little too late after being called on to intervene on two occasions.

About 29,000 members of Carillion’s 13 pension schemes face cuts to their benefits after the group collapsed last month with a pension shortfall that almost doubled to nearly £1bn in three years.

Letters published by the work and pensions select committee on Tuesday reveal the trustees wrote to the watchdog in 2010 and 2013 pleading for help to break a deadlock with Carillion over funding its plans.

But the regulator only opened a formal investigation into Carillion on 18 January three days after its collapse.

Frank Field MP, Chair of the Work and Pensions Committee, 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.”

Key pension deadlock dates

2010 – Bullishness in public did not reflect private negotiating position

Despite a recent bullish results announcement and a 12% increase in dividends, Carillion maintained it could not afford to pay more than £23m per year for the pension deficit. The trustees had advice that a minimum of £35m was affordable.

Carillion pushed for a 15-year recovery plan when anything more than 10 years is considered exceptional.

Negotiations got no further than £25m per year, which the trustees considered “not acceptable” and “far less than … reasonable”.

2013 – ‘Take or leave it’

The 2013 letter said that an “impasse” had been reached in negotiations between the trustees and Carillion.

The trustees had proposed contributions of £65m per year over 14 years to meet a deficit they estimated at £770m.

Carillion made a “take it or leave it” offer of just £33.4m per year over 15 years. The company pushed for more optimistic assumptions which resulted in lower estimates of the deficit.

The trustees contended that Carillion had got weaker in recent years and wanted that reflected in calculations, but this was rejected by the company.

Carillion had “made no move from its original position throughout the whole negotiation process”. The trustees wrote to the regulator after the statutory 15-month negotiation period had passed warning that the pension schemes were falling behind relative to other Carillion stakeholders and taking a disproportionate amount of risk.

In a statement, the Pensions Regulator said: “When the trustees wrote to us in 2013 to say they could not agree funding plans with the company, we did intervene by threatening to use our powers unless a funding plan was agreed.

“Our intervention resulted in a significant increase in the amount of money the company was prepared to pay into the scheme. We believed this was reasonable based upon our understanding of the company’s trading strength as set out in its audited accounts.”

The evidence was released as MPs prepare to question KPMG, the company’s auditor, on Thursday.

Latest news

Ten demolition firms named in cartel probe

Biggest names in demolition face massive fines over "unacceptable" behaviour on 19 contracts worth over £150m
3 days ago

Imtech vows to avoid big resi jobs after return to profit

Engineering services arm puts trio of loss-making residential jobs behind it
3 days ago

Sisk replaces Morgan Sindall on £1bn Midlands Highways Alliance

Four firms secure places in Midlands framework renewal race
4 days ago

Winvic wins Bristol Redcliff Quarter 468 flats job

Grainger buys planned build to rent project and brings in Winvic to start this Autumn
3 days ago

Peel takes on Wirral Waters after Urban Splash modular collapse

Developer is reviewing whether to return to traditional build methods after modular specialist collapse
3 days ago

Kier launches £80m JV to build 2,000 homes by 2027

Property arm JV with Lloyds fund to develop housing on urban brownfield sites
4 days ago

Mace chief Reynolds replaces Mitchell at CLC

Mark Reynold takes over as co-chair of the Construction Leadership Council
4 days ago

Cost inflation forces bid rethink for £200m M5 junction 10

ECI simplified and amendments made to reflect rising construction costs
4 days ago

Wages among key trades keep pace with cost of living rise

Self employed plasterers, plumbers, roofers and scaffolders enjoy wage rises ahead of annual inflation rate
4 days ago

Midgard drives recovery at JRL Group

Revenue tops £600m again at diversified contractor
4 days ago

Green light for £100m Norwich A47 dualling

Galliford Try to start work in October on 2.6km dualling between Norwich and Acle Straight
4 days ago

Design change sees 70,000 cubic metres of concrete cut on HS2 stretch

Revamp of Staffordshire cutting will mean 6,700 fewer concrete mixer lorry loads
4 days ago

Subcontractors and suppliers wanted across the Midlands

Constructionline Meet the Buyer event in Derby: Register now
5 days ago

Contract race starts as cost of giant aqueduct job hits £1.75bn

United Utilities looking to shortlist three bidders for Haweswater Aqueduct Resilience Programme
5 days ago

M&S blasts Gove after Oxford St rebuild plan called in

Retailer "bewildered" after Housing Secretary steps-in over embedded carbon concerns
6 days ago

Springfield buys rival Scottish house builder for £46m

Mactaggart & Mickel Group takeover deal includes 17 sites with planning for 700 homes
5 days ago

Costain bets on hydrogen infrastructure

Consortium launches to develop hydrogen infrastructure for shipping and aviation in the Westcountry
5 days ago

Caddick starts on Star Wars bar office scheme

Host of employee-friendly features on new building at Crewe Business Park
5 days ago

Murphy to host virtual recruitment day

Specialist engineering and civils contractor opens doors online to potential new staff: Register now
6 days ago

Plans in for Isle of Dogs 52-storey resi tower

460 flats skyscraper to replace offices at 4 & 5 Harbour Exchange Square
6 days ago

Van Elle seals piling deal on Transpennine Route Upgrade

Firm appointed to the piling framework for the West of Leeds section
6 days ago

Demolition firm fined £5,000 after fatal platform fall

Contractor went into administration following death plunge at Scottish Power site
6 days ago

Modular specialist TopHat to open vast housing factory

Goldman Sachs-backed house builder to open Europe's largest modular factory in Corby
7 days ago

Asphalt giants make low carbon standard for road mixes

Tarmac and Aggregate Industries make warm mix asphalt new standard on highways jobs
7 days ago

Wates launches Retrofit brand for net zero work

Wates Retrofit to target domestic and non domestic clients
6 days ago

BAM wins £24m Wigan net zero carbon school

BAM has started enabling works at Fred Longworth High School development
6 days ago

Urban Splash modular failure to cost supply chain £12m

Suppliers left with mountain of worthless invoices following Urban Splash House collapse
7 days ago

Kier to trial hydrogen generators on site

Zero-emission generator to start trial on South West site
7 days ago

Hinkley Point remobilises to over 8,000 workforce – video

Construction work on second reactor achieves 20%-30% efficiency savings
7 days ago

Kier and Wates win £500m deal to expand six prisons

New houseblocks to be built at HMPs Bullingdon, Channings Wood, Elmley, Highpoint, Hindley and Wayland
1 week ago

Contractor services