Several days after Carillion’s forced application for bankruptcy in the early hours of January 15, TPR announced it was initiating an investigation into whether the company or its directors attempted to avoid their obligations to the company’s pension schemes, which were carrying an estimated £800 million liability when it collapsed - £2.6 billion on an insurance buyout basis.
At the time, the Committee noted that TPR had chosen an unfortunate moment to finally intervene – when there was no money left in the company to put toward the huge deficit. The Committee has written to TPR welcoming the news that it is investigating its capacity to issue a Contribution Notice - a legally enforceable demand for a financial contribution to the pension deficit – against individual former directors of Carillion, and thus potentially recover monies in addition to whatever the pension schemes or PPF get from any assets realised from the company’s liquidation.
The letter states: “Ernst & Young, commissioned by Carillion to model recoveries in the eventuality of a liquidation back in December 2017, suggested the PPF could get as little as £12.6 million. By contrast, our analysis of Carillion’s annual accounts suggests that over the past decade, Carillion’s six main directors pocketed nearly £17 million in total remuneration. Whilst such amounts will not go far in offsetting the largest bill the PPF have ever picked up, estimated at £800 million, it is surely the case that these directors have benefitted disproportionately at the expense of the pension schemes they should have been funding”
Rt Hon Frank Field MP, Chair of the Committee, said:
“The Carillion directors continued to line their pockets as the pension entitlements of their workforce evaporated, with the PPF due to shoulder the staggering pension deficit they left behind. It appears though that TPR could set its sights on more than those ill-gotten gains, and go after the directors it finds responsible for everything they’ve got. We urge TPR to take this opportunity to demonstrate the new direction and vigour it keeps professing. Clear, exemplary action, not words, is necessary now to restore any confidence in its ability do its job and protect the pensions of ordinary people.”