The finance director of Carillion, Richard Adam, thought funding the firm’s pension schemes was a “waste of money”, it has emerged.
The comments were found in minutes from a 2013 pension scheme valuation meeting between Carillion pension scheme trustees and The Pensions Regulator, released by the Work and Pensions Committee yesterday (22 February 2018).
In the documents, Carillion trustee chair Robin Ellison said that it was his understanding that Adam was more focused on the preservation of cash and considered the scheme funding to be a “waste of money”, “particularly in respect of deferred members who did not actively contribute towards the business”.
The trustees suggested a pension contribution linked to earnings or dividends, but the firm was not willing to consider such a method, instead wanting to target “aggressive investment returns” and a “degree of re-risking”.
It comes after the Carillion board said it could not afford to pay more than £23m a year in 2010, significantly below the £35m advised by the trustees, as negotiations failed to go further than £25m a year.
The outsourcing firm finally made a “take it or leave it” offer of £33.4m per year for 15 years in 2013, after the trustees proposed a £65m per year for 15 years strategy.
The minutes said: “In the opinion of the trustee, the process has been protracted because the company is not willing to negotiate. The company had not moved from its opening negotiating position whereas the trustee had moved from what it considered a reasonable position (its original proposal) to what it considered marginally acceptable (the proposal sent on 26 March 2013).”
An additional document published by the Committee showed how the trustees were weighing up a £42m reduced offer, over getting the regulator involved but were concerned over how long it would take.
The 2014 pension trustee meeting document said: “In the absence of an agreement it was noted that TPR could refer the matter to the Determinations Panel to impose a schedule of contributions but it was estimated this could take 2 to 3 years.”
It also showed how the regulator became sympathetic to Carillion’s situation after a presentation from Adam.
Furthermore, the trustees were concerned that Carillion was telling the city and telling the trustees about the firm's “modest borrowing”.
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