Carillion bosses denied its pension scheme additional funding in 2014, despite being able to afford to do so, a joint committee heard in Parliament today (6 February 2018).
Under questioning from Business, Energy and Industrial Strategy and Work and Pensions committee MPs, former Carillion finance director Richard Adam, said that he did recall the trustee’s request for £67m to be contributed to the firm’s pensions pot, but in the end agreed with the trustees to pay £50m a year into the scheme.
A letter from the pensions covenant assessor, first published in February 2012, stated that the construction firm could afford to increase contributions to over £64m per annum, and that Carillion had “historically prioritised other demands on capital ahead of deficit reduction in order to grow earnings and support the share price”.
However, former finance director, Keith Cochrane argued that the board continued to “fulfil its obligations” to the pension plan, echoing many of the directors' responses to the funding of Carillion’s pension pot.
Carillion chairman Philip Green, said: “When we look at our business there are a number of shareholders, and trustees are separate to that.
“We didn’t consciously priorities [between dividends and the pension scheme] … Our business plan for 2017 allowed us to reduce debt, reduce the [pensions] deficit and pay dividends and an agreement was reached with the trustees.”
Speaking to the committee last week, Carillion trustee chair, Robin Ellison said that the finance director of Carillion insisted that “pensions were the highest risk to the board” but admitted he did not know if this was true.
In addition, Ellison said that the trustees “fought hard” and that as trustees their powers are limited.
“We engaged in robust discussions [with Carillion] with inadequate results”, Ellison said.
Despite this, Carillion chair of the remuneration committee, Alison Horner, admitted that while the £50m agreement with the trustees appeared sustainable, it was something they were going to have to reassess over time.
When questioned over whether the trustees asked for additional funds Horner said: “No”.
Commenting on the day's evidence, joint chairs Frank Field and Rachel Reeves, said: “This morning a series of delusional characters maintained that everything was hunky dory until it all went suddenly and unforeseeably wrong.
“We heard variously that this was the fault of the Bank of England, the foreign exchange markets, advisers, Brexit, the snap election, investors, suppliers, the construction industry, the business culture of the Middle East and professional designers of concrete beams.
“Everything we have seen points the fingers in another direction - to the people who built a giant company on sand in a desperate dash for cash.”