2,000 Carillion staff lose final pension provision

The 2,000 Carillion employees who still enjoy the comfort of being on a defined benefit pension scheme are to lose that status as the group brings them into line with the rest of its staff.

The vast majority of Carillion’s 50,000 employees are already on a defined contribution pension regime, the difference being that this reduces the employer’s risk.

Those affected by the current review are in one of the following three:

• Carillion B pension scheme
• Mowlem Staff Pension & Life Assurance Scheme
• Planned Maintenance Engineering Pension & Life Assurance Scheme

Carillion has written to these 2,000 individuals to say: “Your pension scheme is well funded and managed, but the combined size of the pension funds listed above is very large compared with the size of Carillion.

“This means that a small change in the value of the pensions promised could have a damaging effect on our business.

“As a responsible company that puts effective risk management at the heart of everything it does. This is something we cannot ignore.

“This leaves us in a difficult situation. On the one hand, we are proud of the pension arrangements we provide. On the other, it is essential that we find effective ways to predict and control the financial risks involved in helping employees prepare for their retirement.”

Carillion put four alternatives the trustees of the three pension funds affected on 11 April. Since then, the groups of trustees have worked with their advisers to consider what is on offer and to provide feedback to the company.

Three weeks ago there were further developments and at the heart of the latest affairs is an employee consultation forum which made up of 15 employee representatives and three Carillion company representatives. The aim is to reach a consensus on the changes that the group is proposing to make.

Janet Dawson, Carillion’s head of reward, wrote to all employees involved offering them the chance to stand as an employees representative or to make a nomination in the name of a colleague.

During 2007, Carillion brought the total deficit in its pension funds down from £76m to £14m, largely as a result of a one-off cash payment of £46m. The on-going deficit recovery plan should see the balance of the shortfall eliminated in future years.

Having tackled that problem, however, the subsequent acquisition of Alfred McAlpine introduced a fresh pensions deficit headache as McAlpine arrived with a pension scheme in need of £30m-£40m to bring it into balance.