Carillion’s directors were “contemptuous” of their obligations to pay into the company’s pension schemes while signing off bumper dividends and bonuses to executives, MPs said on Tuesday.
The trustees of the main Carillion pension schemes wrote to the Pensions Regulator (TPR) in 2010 and again in 2013 requesting “formal intervention” to require the company to pay more to reduce its deficit, newly published letters show.
Frank Field, chair of the work and pensions committee which is jointly investigating Carillon’s demise said he hoped the regulator was now “going after” some of the “very generous bonuses” the firm paid out in that time.
The newly published letters show Carillion “refused to give an inch” to the pension schemes over two successive 15-month negotiations, Mr Field said. “Their private pleading that the company could not afford more was in stark contrast to the rosy picture – and bumper dividends – being presented to the outside world.”
He singled out Richard Adam, the company’s long-standing finance director, as having particular questions to answer.
Carillion collapsed last month leaving a huge pension black hole believed to be approaching £1bn. TPR only opened a formal investigation into Carillion on 18 January 2018, three days after it went bust. More than 1,000 Carillion workers have since lost their jobs.
In a 2010 letter, the company maintained it could afford to pay no more than £23m per year to reduce the pension deficit – £12m less than the minimum the trustees said was affordable.
The low offer came shortly after Carillion’s results announcement, which MPs described on Tuesday as “bullish”, and a 12 per cent increase in the company’s dividend payment to shareholders.
In a 2013 letter, the trustee of five Carillion schemes told TPR that the December 2011 valuations could not be signed off by the statutory deadline of March 2013. The trustee proposed a rescue plan to the company which required it to pay £65m per year in a bid to close a yawning £770m pension deficit.
In response Carillion proposed a final “take it or leave it” offer of just £33.4m a year. As a result, the trustee told TPR an “impasse” had been reached and called for formal intervention by the regulator.
