“The Work and Pensions Select Committee is far from subtle in its final report into Carillion’s collapse – it was, in no uncertain terms, a disaster. The report reveals the executive of Carillion did not act in the best interest of their employees and acted against recommendations of best practice.
“The report is equally blunt with its assessment of The Pensions Regulator (TPR). Companies and their directors need to be terrified of the wrath of the TPR, something the committee feel is far from the case currently. Indeed in 13 years of DB scheme regulation, TPR has issued just three Warning Notices relating to its section 231 powers, and has not seen a single case through to imposing a schedule of contributions. So there is some merit to this criticism.
“However, a cultural shift has already begun. In the Defined Benefit White Paper it was suggested TPR be given new powers strong enough to ensure this type of boardroom behaviour doesn’t happen again. The committee report says these powers need to be combined with a shift in attitude by the regulator, to be stricter and more combative with rogue executives.
“The TPR has already begun asserting its authority to ensure that pension schemes remain a priority to all businesses, intervening in a number of merger and acquisitions such as the purchase of FirstGroup and Melrose’s takeover of GKN. It is crucial such a crackdown continues as the fate of thousands of people’s prosperity in retirement rests on such actions.
“Importantly this crackdown also needs to involve current DB schemes and continued scrutiny over directors’ decisions and actions. Pensions are deferred pay and it is crucial that directors view pension schemes as a priority when it comes to funding, not something that is second tier. The disaster created by Carillion’s collapse cannot be repeated.”