Revealed: The £225m attack on Carillion pensions
How bosses tried to chop savers’ incomes to cut costs
BOSSES at Carillion made a £225m attack on the firm’s pension scheme to put the company’s finances on a stronger footing.
The firm pressurised trustees to lower payouts to staff, suspended eight months of payments, and cut other benefits in moves that would have saved £225m, documents reveal.
However, the raid would have hammered savers who would have seen the amount they earn in retirement cut by hundreds or thousands of pounds. Much of the extraordinary assault was even backed by The Pensions Regulator, piling pressure on its role in the collapsed firm.
The changes are even more damaging given that, just months earlier, it approved a £79.3m dividend payout to shareholders.
Last night, former pensions minister Baroness Ros Altmann said: ‘The thing that is the problem is withholding contributions – it’s a big no-no. I think it’s very unreasonable of the banks to demand. And there is a governance issue here.’ Carillion’s pension schemes have around 28,500 members.
The company went into liquidation on January 15 owing up to £5bn and with a pension deficit of up to £2.6bn. It had 20,000 UK workers and around 30,000 suppliers.
The firm sounded the alarm on its spiralling debts last July and a profit warning sent shares plummeting. To save cash, it took desperate measures. The Mail understands that from August it was holding talks with pension scheme trustees on ways to save money.
Initially, two options were considered. One, to withdraw discretionary increases in pension payments, helped to cut the deficit by £80m.
A second option was to link increases in retirement payouts to the lower consumer price index rather than the retail prices index, to potentially save a further £120m.
However, as the firm tried to negotiate a £140m emergency loan from banks, Carillion was forced to agree to a third plan – to stop putting pension contributions of £25.3m into the scheme.
Payments were stopped from August 2017 to March 2018, a move that was approved by The Pensions Regulator.
The suspension was revealed in an announcement issued to the stock market in October. Workers were told of all three plans – which would have saved a total of £225.3m – in a letter from trustees on October 26. None were detailed in a results announcement issued the previous month.
It is believed the firm went bust without implementing the £120m consumer price index change.
The decisions are now set to be examined by a committee of MPs which probed the BHS scandal.
Parliament’s pensions and business committees yesterday confirmed that they will call several Carillion bosses as witnesses to evidence sessions, which will be starting next week.
They include former chief executive Richard Howson, 49, chairman Philip Green, 64, interim boss Keith Cochrane, 52, and the ex-finance chiefs Richard Adam, 59, Zafar Khan, 49, and Emma Mercer, 42.
Howson, who headed the company from 2012 until July 2017, pocketed £1.5m in 2016.
The committees will also probe the role of Carillion’s auditor, KPMG, which signed off the group’s 2016 accounts.
A spokesman for The Pensions Regulator said yesterday that it backed the trustees’ decision to defer pension deficit recovery payments.
A spokesman for the Carillion pension schemes said that deferring payments was done after consultations with experts, regulators and trustees, and the plan was to repay the contributions with interest.