Carillion attempted to "wriggle out" of pension obligations, MPs say

Collapsed construction giant Carillion has been accused of attempting to "wriggle out" of pensions obligations for the best part of a decade while paying out tens of millions in shareholder dividends and pay for bosses.

Parliament’s work and pensions committee has criticised the firm after publishing a letter from Robin Ellison, chairman of trustees of Carillion's pension scheme, which gives an account of the firm's pension scheme. MPs say Carillion had been "falling short" of what trustees expected it to contribute to pension schemes since 2008. The committee believes the firm's pensions deficit could stand at £990m - far higher than the £590m previously reported. 

The committee says the letter shows that pension trustees were "kept in the dark" about the state of Carillion's finances until late last year and that dividends and bonuses were paid out at the expense of pension fund contributions.

Frank Field, chair of the work and pensions committee, said: "It’s clear that Carillion has been trying to wriggle out of its obligations to its pensioners for the last 10 years. The purported cash flow problems did of course not prevent them shelling out dividends and handsome pay packets for those at the top. This culminated in negotiating deficit contributions away entirely last autumn to enable more borrowing. Remarkably, this was endorsed by the trustees and the pensions regulator.”

Last week, a joint inquiry was launched by the business and the work and pensions select committees, with Ellison set to be one of the witnesses will be taking evidence from trustees of the company’s pension scheme. Ellison, said in his letter to MPs that the company repeatedly cited "constraints in cash flow" prior to 2017, as the reason they could not make higher pension contributions. 

“Once again, TPR has questions to answer, Field added. “They have been sniffing around Carillion - at the trustees’ behest - since at least 2008, though it is not apparent to what effect. When ten years later the company collapses with £29m in the bank and £2bn in pension liabilities it doesn’t look good for them."

Furthermore, the Financial Reporting Council (FRC) has announced it will be liaising with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and the Pensions Regulator to ensure a joined-up approach to the investigation of all matters arising from the collapse of Carillion. The probe will cover the years ended 2014, 2015 and 2016, and additional audit work carried out during 2017. The investigation will examine KPMG's audit work on areas including estimates and recognition of revenue on significant contracts and accounting for pensions.

Commenting on the investigation, business secretary Greg Clark said: “I welcome today's announcement from the Financial Reporting Council that following their initial enquires into the collapse of Carillion they will be opening an investigation into KPMG's audit of the company's financial statements. I had written previously to the FRC asking them about this matter and trust their investigation will be conducted as quickly and thoroughly as possible.”

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