Don’t panic about Carillion’s pensions.


The fate of Carillion as a company is in the balance. Up to 20,000 jobs are at risk.

Carillion 2

Bond and equity holders are likely to lose substantial sums. Carillion driven projects are likely to suffer and 28,000 members of Carillion pension schemes will suffer loss.

Carillion’s 13 pension schemes which include such household names as Tarmac, Mowlem and Alfred McAlpine, will probably into the Government lifeboat , the Pension Protection Fund.

Pensioners may get a slightly lower rate of pension increases, those awaiting their pensions will see their pensions cut by 10% (more if they have big pensions). None of this is good, this is not a good time to be connected with Carillion in any way.

There is a group of former public sector workers who may lose out slightly more, as Prospect are pointing out (via the FT).

It is clear however , that members of the pension schemes are protected.

But  it would appear that the situation is complicated by not all of the individual companies being in administration – It would appear that 8 out of the 14 companies in the Carillion Group are not in administration , which explains this statement from tPR

The list of companies in administration is

Carillion Plc

Carillion Construction Ltd

Carillion Services Ltd

Planned Maintenance Engineering Ltd

Carillion Integrated Services Ltd

Carillion Services 2006 Ltd

For a pension scheme to go into the PPF , a section 120 notice has to have been issued following the  insolvency . It is possible that some of the businesses may survive and with them their pensions.

keep calmNone of this is sufficient for people to be alarmed, let alone panic. Even if a pension scheme goes into the PPF, you have strong protections.

The PPF is strong and will be able to absorb the deficit of £580m, even if this deficit is measured another way, it is not big enough to increase levies on other pension schemes (which have been falling fast in recent years as the PPF moves towards being “levy-free” or “self-sufficient”).

We must get used to seeing companies fail. Not all companies that fail pass their pensions into the PPF , BHS remains outside as do others. The British Steel Pension Scheme avoided the PPF. The PPF has capacity and is – if anything -underused.

As this blog has said many times, the PPF is a national treasure. It is invested – not in funds – but by its own investment managers, it is self-administered, it treats its members well and it is a model of good governance. It is one of government’s success stories.

While it is not a good time to be retiring from Carillon, its pension schemes are not badly run. The deficit is not so “huge” as to make the scheme the cause of the company’s financial woes. Indeed the scheme, would, in the normal course of events, have followed a recovery plan to solvency. It may not now be allowed to, but Carillion members should not be blaming its trustees for that.

Carillion’s woes as a company are to do with its debt and to do with business decisions that went wrong. These things happened , not because of some financial credit crunch or global recession – we are beyond these things – but because of a combination of poor decision making and bad luck.

The attrition rate of large companies operating in the Western World is low, not many go bust – Carillion may still not go bust. But some companies will go bust. For every Amazon there is a BHS.

I worked for a time with Alfred McAlpine and got to know a good many of the people who were in its pension scheme. They were good people who built roads, I remember being taught about roads –  I remember the pride with which they talked about environmental considerations. We do not stop needing the skills of these people. They will find new work. The shareholders and bond holders of Carillion will absorb their losses as these holdings are part of diversified portfolios. Few people should have their financial futures dependent on the price of Carillion equities and debt.

It seems to me, the major concern expressed today , is that Carillion has been awarded Government contracts, while in its current financial pickle. This may be a political worry for those who awarded them and may account for the weekend meetings in the Cabinet Office. But this is hardly the cause for panic.

The reality is that Carillion’s current problems are local and manageable. The deferred pensioners and pensioners will get less , but not markedly less (full details here) . The PPF will do what it is designed for. Investment portfolios will absorb losses on Carillion debt and equity and Carillion workers will find new work.

This is business as usual and not the end of the world, even if that is what it feels like, if you work for Carillion this morning. My thoughts are with those who work for Carillion and I hope that any who read this , will take heart that they are not the first – nor will they be the last – who face this situation.

The Pension Advisory Service (TPAS) has set up a dedicated helpline for Carillion pension scheme members 020 7630 2715

philip green carillion

Carillion’s Chair – Phillip Green (no relation)


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions, Pensions Regulator, Retirement and tagged , , , , , . Bookmark the permalink.

8 Responses to Don’t panic about Carillion’s pensions.

  1. Adrian Boulding says:

    Just an observation. I find it strange that those with long service in DC schemes are currently seeing record large pot sizes whilst those with long service in DB schemes are facing large deficits and PPF haircuts.

    • henry tapper says:

      If DB schemes had participated in the equity bull run , instead of being locked into gilt based investment strategies, they would now be stronger. But most have set their sights on buy-out and are managing investment strategies accordingly. FABI informs on this. It may be that we can return to the concept of “DC pensions” rather than “DC freedoms” which is what is driving current interest in CDC. This however won’t help Carillion.

  2. John Mather says:

    The protection fund is not funded by government is it?

    Yet again the “Golden promise” seems all that glitters may result in disappointment for those who were sold DB

    In a level playing field the actuaries and trustees would face a FOS and pay compensation they might also be written about in the press and the whole profession dammed as self interested greedy swamp dwellers

    Or maybe the White Knight IFA will come riding over the hill with his tempting bag of fish and chips, wrapped in the Telegraph for effect

  3. henry tapper says:

    The PPF is not funded by Government but by levies on other schemes. In time it will be self-sufficient. Once Carillion enters the PPF assessment period – which looks like pretty soon, the opportunity to transfer away DB rights will be lost (fish, sausage or chicken and chips notwithstanding).

  4. Gerry Flynn says:

    Taylor Wimpey is a separate company, which bit of Wimpey are you referring too?

  5. Stefan says:


    Great article.

    We can provide support to the Carillion pension scheme(s) members as most of the questions asked and answered by our members will also provide the info individuals from Carillion need. If someone from Carillion wants to start their own support group they can contact us at


  6. PeterCB says:

    My first observations are:
    1. Did the trustees of the pension schemes give formal consent to the issue of the charges dated 24th and 26th October 2017 (less than 3 months before liquidation) creating fixed and floating charges over the assets of the Company in favour of the banks and existing debenture holders? Also were tPR’s clearance processes followed?
    Carillion’s Accounts as at 31st December 2016 indicate that most bank loans and overdrafts were unsecured and would rank equivalent to the pension schemes. The creation of these charges however has severely restricted the pension schemes likely recovery from the liquidation.
    Incidentally I do not believe there is any reason, other than banks willingness to provide new facilities on this basis, why part or all the pension scheme debt could not have been protected by being included in the parties whose interests were being protected by the charges. Does anyone know differently?
    2. Even without a substantial recovery from the Company. I think it is likely that some or all of the 13 UK DB Pension Schemes may not enter the PPF.
    a. Some of them may have subsidiary companies as a sponsoring employer and that subsidiary survives. I note the Charges referred to above cover Carillion plc’s shares in subsidiary companies, so the Official Receiver and the beneficiary banks may well wish to protect that investment.
    b. Some employees may be members of statutory pension schemes with recourse to the Government.
    c. There may well be sufficient assets in the other pension schemes to provide more than PPF levels of benefit.
    i. In this respect I note the closed DB schemes were 74% funded at 31st December 2016 on an IAS19 basis using a discount rate of 2.7% and assumed average pension increases of 3.1%.
    ii. Investment values are likely to have risen if there were no significant unexpected cash outflows in 2017 (the net cash outflow in total shows expected pension payments of £125M minus deficit contributions of £54M), particularly if the schemes were invested in growth assets (12+% return from an FT All Share index tracking basis compared with 2.3% in a UK Gilt tracker during 2017). Assuming no change in the discount rate (UK Gilt yields rose slightly during 2017) this would imply a funding rate rise to up to 80%.
    iii. As the 5 largest pensions schemes (82% of all pension scheme deficits) were all closed to future accrual the undiscounted liabilities can only have gone down since the last valuations (31Dec13) due to mortality and transfers out (whose effect would be positive on a discounted basis)
    iv. PPF levels of benefit are likely to be well below the benefits assumptions in the IAS19 valuation due to:
    1. PPF pension increases being capped at CPI <2.5% compared to the global 3.1% increases assumed in the IAS19 valuation.
    2. No increase being provided on pre 1997 benefit accrual.
    3. The 90% benefit protection level for Members under NRD in the PPF.
    4. The operation of the £38.5K pension cap in PPF benefits.
    d. My advisors are telling me that the buy-out market is currently very competitive and that good deals can be obtained. Whether this would apply to a compulsory purchase or reflected in the PPF assumption of the market is unclear.

    • henry tapper says:

      Thanks for this very cogent analysis. Like you, I see the future of part of the Carillion Pension portfolio as more self-sufficient than has previously been reported.

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