Carillon crash may crush employees expat dreams

Retirement experts are warning alarm bells should be ringing for pension savers as the Carillon crash threatens its employees’ direct benefit pensions.

These days, pension transfers and a quick exit from the UK to a warmer, less stressful overseas environment seems to be the way forward for an increasing number of British retirees. The looming threat of Brexit may or may not be yet another trigger for leaving, but the Carillon crash may have destroyed the hopes for a financially comfortable retirement either overseas or at home for almost 50,000 of the company’s employees.

The liquidated company had 13 direct benefit pension schemes, divided between 20,000 staff and another 28,000 savers, all of whom are now worried about their money. It’s almost certain the British government will be forced to pick up the tag via its Pensions Protection Fund, but those savers who haven’t yet drawn down their pensions are likely to be hit with a cut of at least 10 per cent. Managers and executives will also be subject to a cut in their annual payments, but it’s the workers who will suffer the most.

In the midst of all the uncertainty, British lawmakers are seeking answers to the question of the moment – exactly how huge is Carillion’s pensions black hole? Three years ago, the deficit was reported as £317 million, but the company’s poor performance in 2016 shot the total up to £587 million. A number of MPs are suggesting the firm’s directors diverted cash intended for the pension fund in order to pay outstanding bills.

Pension savers in the UK are now being warned of possible future problems as yet another major company has now failed amid rumours of wrongdoing. Given that the government’s Pension Protection Fund gives valuable and important support for pension savers, it’s now accepted that many other UK final-salary pension funds are mired in deficit black holes, beggaring the question of how many hits can the PPF take until it also becomes non-viable.

Would-be retirees looking to fund a new life overseas might well ask why, in an economic environment boasting positive global economic forecasts along with soaring stock markets, so many household-name companies are struggling to keep their promises to their pension savers.