Pensions regulator slammed as ‘feeble’ in Carillion report

The Pensions Regulator (TPR) has come in for heavy criticism in the select committees’ report on Carillion, with MPs describing its response to the company’s ballooning pension deficit as ‘feeble’

This came amid complaints that despite involvement with the outsourcer since its inception, the regulator failed to prevent serious losses to the company’s pensioners.

The report suggests the management team at Carillion had little interest in honouring pension obligations, even though ‘their cash-chasing acquisitions policy meant they acquired pension scheme deficits alongside companies.’

MPs claimed this outlook was epitomised by Richard Adam who, as finance director, considered funding the pension schemes a ‘waste of money’.

The report said that TPR’s ‘feeble response’ to the underfunding of Carillion’s pension schemes was a threat to impose a contribution schedule, a power which the committee noted ‘it had never—and has still never—used’.

The report found: ‘The regulator congratulated itself on a final agreement which was exactly what the company asked for the first few years and only incorporated a small uptick in recovery plan contributions after the next negotiation was due.’

MPs said TPR had failed in all its objectives regarding the Carillion pension scheme, as scheme members will receive reduced pensions while the Pension Protection Fund (PPP) and its levy payers will pick up their biggest bill ever.

The report stated: ‘Carillion collapsed with net pension liabilities of around £2.6bn and little prospect of anything being salvaged from the wreckage to offset them.

‘Without any sense of irony, the regulator chose this moment to launch an investigation to see if Carillion should contribute more money to its schemes. No action now by TPR will in any way protect pensioners from being consigned to the PPF.’

The report’s conclusions and recommendations are highly scathing of what MPs saw as TPR’s failure to prevent Carillion from knowingly avoiding its pension responsibilities, saying TPR saw the wholly inadequate recovery plans and had the opportunity to impose a more appropriate schedule of contributions while the company was still solvent.

The report stated: ‘TPR’s bluff has been called too many times. It has said it will be quicker, bolder and more proactive. It certainly needs to be. But this will require substantial cultural change in an organisation where a tentative and apologetic approach is ingrained.

‘We are far from convinced that TPR’s current leadership is equipped to effect that change.’

Anne-Marie Winton, partner at ARC Pensions law, agreed that with the report accusing TPR of being a ‘paper tiger’, there was pressure for the regulator to become ‘clearer, quicker and tougher’ as outlined in the March white paper and its recently published corporate Plan for 2018-2021.

Winton said in practice this was most likely to mean TPR being given the power to issue larger fines, and in more circumstances.

 ‘This is an easy power to add to existing legislation and fines are likely to be perceived as a greater threat than the use of its more complicated anti-avoidance powers.

‘Following the report and white paper, it is possible that more clearance applications will be made (reversing the steep decline in seeking clearance since 2005/06). This could mean that the one-third of TPR’s resources allocated to frontline regulation for 2018/19 will end up very stretched,’ she warned.

Report by Pat Sweet

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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