When Carillion, the UK’s second-largest construction company, was forced into receivership earlier this week, it left in doubt the future of the company’s 13 pension plans, which cover 28,000 participants.
The plans’ members have been transferred to the Pension Protection Fund, the government-backed pension lifeboat. Current employees who are participants of the pension plan will receive 90% of the pension they were expecting, while the 12,000 retirees already receiving their pensions will continue to receive 100%, although their annual increases may be lower.
“The trustees have been very closely involved in all discussions with stakeholders over the last few months in order to protect members’ interests as far as possible,” said Carillion in a statement. “They will continue to work to understand the next steps and what these may mean for members. This includes working with the Pension Protection Fund.”
The company added that, “at this stage, it is too soon to say what will happen to other companies in the Carillion Group.”
On Monday, Carillion plc, Carillion Construction Limited, Carillion Services Limited, Carillion Integrated Services Limited, Carillion Services 2006 Limited and Planned Maintenance Engineering Limited entered into an insolvency process known as compulsory liquidation. The process is intended to help stabilize the business in the short term, and to allow PricewaterhouseCoopers, which was appointed to act as special managers for the liquidation, to work to protect the interests of all creditors of the companies.
In 2017, Carillion said its pension deficit was £587 million ($815 million), however, an independent pensions expert estimated that the actual cost to the PPF will be closer to £800 million, according to the Financial Times.
“The situation regarding Carillion is concerning for all those affected,” said Nicola Parish, executive director at The Pensions Regulator, in a statement. “We continue to work closely with all relevant parties in what are very challenging circumstances, including the pension scheme trustees, the official receiver, and the government.”