Carillion – a growing pension scandal?

The questions keep coming after the collapse of Carillion. Now, what is happening to employees’ pensions?

UNISON has already raised concerns over the collapse of contractor Carillion and the potential impact on job losses and services. But what will happen to the company’s pension arrangements and what was going on in the trading of Carillion shares?

The government has assured everyone working on these contracts that their wages will be paid and it is hoped their pension will be covered too.

The company had scheme members in thirteen local government pension funds: Croydon, Durham, Ealing, Greater Manchester, Harrow, Hounslow, Nottinghamshire, Oxfordshire, South Yorkshire, Teesside, Tyne and Wear, West Midlands and West Yorkshire.

Under agreements with these funds Carillion should have agreed cover for contributions and pension deficit payments in case the employer went into liquidation. Similar arrangements should be in place for members in the NHS pension scheme.

Staff who did not join the LGPS or NHS scheme would have been enrolled into the company’s defined contribution (DC) scheme under the management of Blackrock, the largest asset manager in the world.

Blackrock will continue to manage the investment funds for the members of the scheme, but there of course will be no employer contributions. The investment funds are safe and members should be contacted by the provider to inform them of the status of their fund.

Conflict of interest

Investigations by UNISON has shown that Blackrock, with over US$6 trillion of clients’ savings to invest, was betting on the stock market against Carillion, whilst at the same time running their DC pension scheme. This could be seen as a significant conflict of interest.

UNISON’s national officer for pension investments and governance Colin Meech asks: “Did the board of Carillion pay enough attention to whether their pension schemes were adequately managed and resourced?

“And did the trustees of the pension schemes, led by the Chair of the Trust, do enough to ensure they were fulfilling their statutory duty to run them in members’ best interests?”

UNISON believes it is imperative that all institutions involved in the governance chain are held to account.

Added Colin: “An urgent question is whether BlackRock is clear whether any Carillion employees’ pension fund money was used in bets against Carillion’s share price. Can asset managers act in the best interests of company pensioners that the same asset manager, (even if it is a different part of the company), is driving down the company share price?

“The government need to prevent these conflicts of interest in the first place. It should be obligatory for all pension vehicles to disclose all their holdings, including who they have lent our shares to. Then workers will know who is doing what with their retirement money.

“At the moment, most savers don’t have a clue what the City does with their money.”

UNISON will continue to monitor the situation.