Staff of failed construction giant Carillion are likely to see their pensions cuts after the company went into liquidation leaving a pensions black hole of £580m.
Carillion employs 43,000 people across the globe, including 20,000 in the UK.
The UK government has promised staff employed by Carillion will continue to be paid, but their pensions will be affected.
The assets of the Carillion pension fund are now likely to be taken over by the Pension Protection Fund (PPF), which will be responsible for paying out pensions.
Tom McPhail of brokers Hargreaves Lansdown said Carillion pension scheme members would be “understandably worried” at today’s news that the company was going into administration.
10% pension cut
“The Carillion scheme has a deficit of £580m, meaning there isn’t currently enough money in the scheme to meet the promised pension pay outs,” he said.
“Whilst the PPF provides valuable security, members who have not yet reached retirement should be prepared for a cut to their pension pay-outs.
“This will involve an immediate cut of 10%, plus the possible loss of some inflation-proofing; higher earners may be affected by the PPF cap on payouts, which currently stands at £34,655.”
He said pension scheme members who had already reached normal retirement age should continue to enjoy 100% of their current pension payments.
If the PPF does take on the Carillion scheme, the assessment process could take months or even years, but McPhail said the Carillion scheme administrators, the liquidators and the PPF would work together to ensure continuity of payouts for members.