Since support services firm Carillion collapsed earlier this week, a number of questions have been raised about the organisation’s remuneration and pension arrangements.
Numerous news reports have told of employees fearing the non-payment of salary owed, while the organisation’s pension arrangements have transferred to the Pension Protection Fund (PPF).
At the time of its collapse, Carillion operated 13 defined benefit (DB) pension schemes covering more than 27,000 members. A significant proportion of these scheme members are now facing cuts to their retirement benefits. When it entered the PPF, the schemes’ deficits were thought to stand at £587 million, however, the pensions lifeboat has since indicated that this could be as high as £900 million.
It has since emerged that Carillion had been on the PPF’s watch list of risky schemes since last autumn, after deficits nearly doubled between 2015 and the end of 2016. Members of the opposition have called on the government and The Pensions Regulator for an explanation of how this situation was able to develop to this extent.
But while Carillion’s demise has brought these issues to the forefront of public attention, only time will tell whether it will bring about long-term change. In particular, will it result in changes to the way in which organisations manage pensions and scheme deficits in order to mitigate the risk of similar situations arising? After all, this is not the first prominent firm to enter the PPF in recent years, following the likes of BHS and others.
So, should there be greater onus on employers to prioritise plugging pension deficits over executive remuneration packages and shareholder returns?
Ultimately, will this be the catalyst for change or will things soon return to business as usual?