Pensions over dividends or risk more Carillions, Unite warns govt

More must be done to prevent companies from legally prioritising executive pay over pension deficit recovery payments, Unite has warned.

A year after the collapse of the outsourcing giant Carillion, the union said that the government’s inability to tackle such issues could result in future corporate meltdowns.

Carillion reported a £900m pensions deficit when it entered liquidation in January 2018, with its six main directors pocketing a reported £17m in the few years leading up to its insolvency.

According to Unite, experts believe the firm had been trading while it was insolvent for several years before its collapse.

Unite assistant general secretary, Gail Cartmail, said: “The manner in which Carillion’s board were able to prioritise paying dividends, bonuses and their own salary, over dealing with the company’s pension deficits is yet another example of its disdain for the welfare of its workforce.

“Future Carillions will only be avoided if The Pension Regulator’s powers are increased and it uses those powers to step in to force companies to deal with pension deficits. Companies must be legally prevented from prioritising executive pay, dividends and bonuses over pension deficit recovery payments.”

In May 2018, The Pensions Regulator chief executive Lesley Titcomb said that the regulator has been “learning lessons” over the mistakes made in the Carillion case.

In October, Titcomb said it was important for the regulator to “get the balance right” when writing to schemes over their dividend payments, reiterating that it will not be implementing a deficit recovery contribution to dividend ratio but that it will be ensuring that schemes “get their fair share”.

TPR said that it will be targeting 50 schemes that it will “probe” over “excessive” payments.

Unite added that no action has yet been taken against any Carillion directors, despite investigations by TPR, the Financial Reporting Council and the Insolvency Service.

Last week, the government launched a consultation which would give public sector workers the option to remain in the Local Government Pension Scheme in the event their job is outsourced, in a move which could safeguard thousands from losing their pension pots.

It is the third such consultation launched on the issue, after the government rejected the proposals outlined in the previous two.

Last month, Pensions Age reported that six of the UK’s largest contracting firms, some with leading government contracts, have a combined pensions deficit of £730.2m.

Security services firm G4S recorded a £382m deficit in its H1 18 results, while Capita noted a £289m deficit over the same period.

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