The demise of one of the UK’s biggest companies has left the pensions of over 20,000 in the balance and shows the vulnerabilities employees are exposed to, say savings experts
The collapse of construction firm Carillion has triggered concern over the safety of the savings and pensions of its 28,000 members and shows the “risks of relying on others for a retirement income”. Following a write down in value to £61 million from £2 billion last year, the UK’s second biggest construction company, whose projects include the Battersea Power Station development, has now gone into administration. This morning it was reported that the company owes debts of over £585 million and holds a £650 million pension liability.
The payment of Carillion’s pensions is now set to fall under the responsibility of the government’s Pensions Protection Fund (PPF), the cost of which has been quoted at £580 million. However, independent pensions expert, John Ralfe, told the Financial Times the pension liabilities would be closer to £800 million.
Although the government, which awarded the Carillion £2 billion’s worth of infrastructure contracts despite profit warnings, has told the firm’s employees that they will get paid and should go to work, the financial future of thousands remains uncertain. “The combination of 28,000 UK pension scheme members, a pension deficit of £700 million or more, and a bust company is about as bad as it gets,” said Neil Moles, managing director of wealth planners Progeny Group in a statement.
The PPF’s lifeboat service provides little reassurance for those still in employment said Moles. “At least the 12,000 pensioners in payment are largely safeguarded, for now, but for those not yet drawing a pension things are less positive. They will get 90% of what they expected but this is capped at £38,505.61 pa for someone aged 65.”
“Prudent savers have to see this as another example of the risks of relying on others for a retirement income. What is promised can sound wonderful at the outset but the actual delivery decades later inevitably has to depend on the funds being available,” said Moles.
The imminent disintegration of the company that maintains GCHQ, employs 43,000 people and who hold a major HS2 contract, was branded a “complete shambles” by Tim Roach, head of union GMB, who called for the government to step in to safeguard workers’ future. “Despite months of profit warnings, ministers have failed to prepare for the collapse of Carillion, which has plunged workers into crisis today. Merely propping up this botched shell of a company is not a secure or stable solution for our public services.”
Roach went on to call for a review of the relationship between contractors and the state. “Carillion is the tip of the iceberg. Continued privatisations have mortgaged our future and services that we all rely on to profiteering companies. What is unfolding at Carillion must never be allowed to happen again.”
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