Rogue financial advisers may be trying to fool collapsed construction group Carillion’s defined benefit pension scheme members to transfer out of the scheme, triggering a warning from the U.K.’s Pension and Lifetime Savings Association.
Carillion was forced into liquidation on Monday after insolvency specialists declared the business was carrying too much debt to warrant restructuring, leaving nearly 28,000 members of its defined benefit pension schemes seeking answers about their future benefits. On Tuesday, the national trade group for workplace pensions issued a statement warning that companies were already seeking to “take advantage” of members of these defined benefit schemes.
“Following the collapse of Carillion, we have already seen warning signs that scammers may be seeking to exploit DB scheme members’ fears about their future,” said Joe Dabrowski, PLSA’s head of governance and investment, in the statement. “We call upon regulators to act urgently to ensure that members are protected, and to take the strongest possible action against unscrupulous companies looking to take advantage of savers. Transfers should only be undertaken if they are in the best interest of the scheme member and with the right level of guidance.”
[II Deep Dive: UK Pension Watchdog Prepares to Bite]
According to Carillion’s last annual report and accounts, for the year 2016, the company had assets of £2.57 billion and liabilities of £3.37 billion, leaving a pensions deficit of approximately £800 million before deferred taxation. The company’s pension schemes will now be transferred to the U.K.’s pensions lifeboat, the Pension Protection Fund, according to the Financial Times, though the PPF has not publicly confirmed the move.
“We can confirm that we have been notified that some of the Carillion group’s companies have gone into liquidation and we know this news will raise serious concerns for their employees,” a spokeswoman for the PPF said in a statement. “We want to reassure members of Carillion’s defined benefit pension schemes that their benefits continue to be protected by the PPF and will continue to be protected if or when their scheme enters the PPF assessment period.”
The PLSA said that the PPF already has more than 300,000 members’ pensions, and it hoped this offers some comfort to the members of the Carillion scheme who have yet to be told about whether their benefits will be significantly affected.
Steve Webb, director of policy at investment group Royal London, said Carillion’s employees will “understandably be devastated” at the collapse of the firm but urged them to take heart that the PPF was financially fit and able to help.
“Be assured that the pensions lifeboat, the Pensions Protection Fund (PPF), will help to protect their pensions,” he said in a statement. “Although there is a big shortfall across the Carillion pension schemes, the PPF is financially strong and will be able to pay out pensions in line with its normal rules. The deficit in the Carillion schemes will not sink the pensions lifeboat.”
Also on Tuesday, the TUC, which represents British trade unions, called for the U.K. government to establish a national task force to safeguard the jobs and pensions of those affected by the collapse of the group.
Ben Gold, head of pension investment at Xafinity Punter Southall, said the collapse of Carillion highlights the need for trustees of defined benefit schemes to push plan sponsors to give regular updates about the financial health of their business.
“Trustees can sometimes just sit there thinking that their sponsor is doing well enough,” he told Institutional Investor. “This is a sharp reminder that trustees need to monitor the sponsor covenant independently.”