Pension trustees ‘wanted £200 million from Carillion’

Carillion's pension trustees were pressing the collapsed builder to pump as much as £20 million a year extra into its scheme 10 years before it finally went under, the Standard understands.

Sources said trustees carried out an assessment into what the firm could afford to pay in 2008, arriving at a figure of “around £15 million to £20 million” beyond the £27 million a year being contributed by Carillion to the biggest of its schemes, which has more than 20,000 deferred and retired members.

By the time of its collapse this month, Carillion was paying in £39 million a year — still far below the levels called on by the trustees — after years of the company paying out tens of millions of pounds in dividends to shareholders, it is understood.

A letter published today by the Work and Pensions Select Committee shows pension chairman Robin Ellison — who is giving evidence to the committee tomorrow — sought to agree higher contributions for the schemes in 2008, 2011, and 2013. But Carillion — under pressure thanks to the financial crisis as well as slashed government subsidies for its energy services business Eaga — sought to “wriggle out” of its financial commitments, according to committee chairman Frank Field.

The firm’s present pension deficit is estimated at £990 million and will be transferred into the Pension Protection Fund, shifting the burden of the firm onto the industry-backed scheme and cutting the benefits of non-retirees by 10%.

The scrutiny of Carillion’s pension scheme came as accounting watchdog the Financial Reporting Council launched a formal investigation into KPMG for its auditing of the business between 2014 and last year. The FRC will examine whether Carillion breached “ethical and technical standards” as well as how the firm recognised revenues on “significant contracts”. KPMG said it believed “that we conducted our role as Carillion’s auditor appropriately and responsibly”.

The head of the ICAEW accounting trade body Michael Izza said: “It is vital that we are able to have confidence in audit and financial statements. Cases such as this undermine that trust so it is right and proper that they should be investigated.”

The probe is the latest setback for KPMG, which was dropped from the Grenfell inquiry on concerns over conflicts of interest. It was also forced to dismiss executives in South Africa after the Gupta political scandal.

Listed infrastructure investor John Laing Infrastructure Fund said that the cost of replacing Carillion as the facilities management provider on nine public private partnership projects would be around £3 million, with “minimal” service disruption incurred.