The liquidation of construction and public sector contract provider Carillion should not sink the UK’s pensions lifeboat,according to two former UK pension ministers.
Steve Webb, the former pensions minister under the Conservative-Lib Dem coalition, and director of policy at Royal London, commented: “Carillion workers will understandably be devastated by the announcement of the liquidation of their firm. But they, and retired Carillion workers, can be assured that the pensions ‘lifeboat’, the Pensions Protection Fund (PPF), will help to protect their pensions. Although there is a big shortfall across the Carillion pension schemes, the PPF is financially strong and will be able to pay out pensions in line with its normal rules. The deficit in the Carillion schemes will not sink the pensions lifeboat.”
Former pensions minister, Ros Altmann, warned that members of the Carillion pension schemes not yet at pension age, or who took early retirement, could lose up to 20% of their promised pension. Altmann added: “The PPF has budgeted for some big schemes to fail and can manage the onboarding of all Carillion’s pension schemes.”
But Altmann said that Carillion’s collapse showed the risks of a hard Brexit to some of the UK’s largest manufacturing firms. “A hard Brexit could undermine our automobile or chemical sectors in which defined benefit schemes have been prevalent. If too many of those businesses suffer as a result of leaving the Single Market and Customs Union, then the PPF could face difficulties that might even result in reduced benefits for workers covered by the insurance it provides.
“I hope the Carillion situation will be a wakeup call for the government to take seriously the threats and risks of leaving the EU without securing the integrated supply chains and regulatory standards alignment that our large industrial companies depend on,” Altmann said.