Carillion directors ‘trampled over the rights’ of pension scheme members - Field

Carillion directors “trampled over the rights” of the firm’s pension scheme members, according to Work and Pensions Committee chair, Frank Field.

Ahead of the joint committee hearing in parliament today (6 February 2018), documents released by the Work and Pensions Committee said that “historically, Carillion has subordinated the pension schemes to other demands on cash flow”, particularly debt and a “progressive dividend policy”.

A letter from Carillion's pensions covenant assessors, Gazelle Corporate Finance (GCF), in May 2017, said that the group is “approaching maximum leverage”, with the company “paying shareholder distributions at a level which is higher than the total operating needs of the business”.

Field said: “It is clear that the directors of this company trampled over the rights of their tens of thousands of pension scheme members. Their main focus was paying out fat dividends and bonuses that exceeded their cash flow, all the while stiffing their suppliers, borrowing mega sums of money, and allowing their liabilities and pension deficit to balloon to ruinous levels.

“Clear warning signs were evident several years ago in the assessments of the company’s commitment to its pension schemes.”

GCF delivered warning signs to the trustee board as early as a 2012 in which “based on long-term business risks”, it would “expect TPR to challenge a recovery plan which extends beyond the 10 year trigger point”, which the committee states it did not do.

In April 2016, a covenant assessment noted that Carillion was one of the most shorted stocks in the market raising speculation around the prospect of the business and highlighting the “historically low priority given to pension deficit repair in the corporate allocation policy”.

Last week, Workers union Unison called for a “proper investigation” into major Carillion shareholders including BlackRock, to find out if worker’s pensions were used to bet on the firm’s share price falling, just days before Carillion collapsed.

Carillion directors are facing questions from the Business, Energy and Industrial Strategy Committee and Work and Pensions Committee today.

    Share Story:

Recent Stories


A changing DC market
In our latest Pensions Age video interview, Aon DC senior partner and head of DC consulting, Ben Roe, speaks to Laura Blows about the latest changes and challenges within the DC sector

Being retirement ready
Gavin Lewis, Head of UK and Ireland Institutional at BlackRock, talks to Francesca Fabrizi about the BlackRock 2024 UK Read on Retirement report, 'Ready or not. How are we feeling about retirement?’

Podcast: Who matters most in pensions?
In the latest Pensions Age podcast, Francesca Fabrizi speaks to Capita Pension Solutions global practice leader & chief revenue officer, Stuart Heatley, about who matters most in pensions and how to best meet their needs
Podcast: A look at asset-backed securities
Royal London Asset Management head of ABS, Jeremy Deacon, chats about asset-backed securities (ABS) in our latest Pensions Age podcast

Advertisement Advertisement