AIBU to not understand how things are allowed to get this bad?

[ButIamrightright]

“The vast Carillion construction and public services group was fighting for survival this weekend as management, the government and lenders to the stricken construction services firm were locked in rescue talks. The company is bleeding cash from several contracts that have turned sour and it is struggling under the weight of £1.5bn of debt, including a huge £590m pension deficit”.

How are the pension deficits allowed to get so big?

I just pray this is the end of HS2 and Chris grayling is sacked. What a debacle. I hope someone takes the carillion bosses to court to endure the pension fund is coveted. No way should the tax payer fund anything for this.

It’s outrageous particularly when you read the below. Unfortunately I feel the tax payer may take the hit.

www.thisismoney.co.uk/money/markets/article-4873710/Carillion-protected-bosses-4m-bonuses-crisis.html

Pension deficits get that big because people stick their fingers in their ears and go 'la la la' - also because they changed the way that pension liabilities is calculated (I think) which made ok under old method look dire under new pretty much overnight.

Which contracts btw are the ones which are haemorrhaging cash? For which govt depts and when?

Because 25 years ago somebody decided to take away the protection for pension pots. Big companies got all pissy seeing so much money sat doing 'nothing', they chose to spend it, to make the companies grow, told us that we were being greedy wanting to keep what we had been promised.

You only have to look at posts here, screaming about final salary pensions etc. Somehow it seems to be more reasonable to scream at people who got what they paid for than the people who change the deal after purchase!

And then, a couple of years ago they went further, took away more and, being clever bastards, they sold it to greedy twonks as 'pension freedom' and it was lapped up, mainly by those still throwing a hissy fit about baby boomers, teachers of a certain age - anyone who by mere dint of age had kept some of what they had paid for!

Ah well! It'll be fine. They will get bailed out, there is bigger all else that can be done! Far too many smaller companies will be decimated if Carillion and its ilk go under! It would probably cause another financial crash!

As Carillion is only 18 years old, how does that work with what happened 25 years ago? (If what happened before it demerged is relevant, then how?)

Also, did this do anything to it's pensions arrangements under the 'pensions freedoms' (which were enabling, not compulsory, I think)

What? Because prior to that companies could not raid the pension pot, or use it in any way at all! The only reason Carillion have a pension deficit it because the laws were changed.

Why is that hard to understand?

So the new pension freedoms are for DC pension pots, not DB (final salary) schemes that are the types to have a deficit such as above. Obviously the freedoms do still affect the DB schemes as more people may want to transfer from DB to DC to then take advantage of the freedoms, but I think that not as many have transferred as was originally thought.

And as to why has the deficit got so large...

Well, many reasons.

Financial conditions have deteriorated drastically which increases a deficit.

If schemes are invested poorly they won’t make good returns/won’t hedge against downturns which increases a deficit.

Companies are legally obliged to contribute towards a deficit. However this must be balanced carefully. Do you push for a higher contributions at a level the employer can’t afford, running the risk of the company becoming insolvent due to the contributions and therefore effectively permanently stopping any further contributions and leaving the scheme to go into the government insurance scheme (PPF scheme), or do you ask for less in the hope the employer continues running as normal and therefore can continue to contribute for a long time.

Carillon are just greedy fuckers from my (limited) experience. They own a lot of the NHS pfi buildings from what I've seen.

Pensions deficits build up because nobody is willing to accept receiving anything less than the pension they have earned. Why would they?

In the past pensions were generous because most people would only claim them for a few years. We are now in the world of baby-boomers leeching off final salary pensions for decades.

Pensions are basically a big pyramid scheme, ever more people are needed at the bottom to support the few at the top.

But don't worry, pension deficits will soon be a thing of the past. The younger worker today will not get the benefit of a luxurious retirement like their parents and grandparents - they won't even get a comfortable one.

Many companies took pension payment holidays in the 80's and early 90's as contributions would have been taken as tax. It is ups and downs. When interest rates return to around 5%, most scheme deficits will disappear.

"Why is that hard to understand?"

Because it's not remotely clear to me if the progenitor company availed itself of the policy change, under what terms the pensions arrangements transferred, how they have been managed since.

Not how far the change in the accounting rules impacted on this specific company.

The general idea isn't the issue, it's what it actually meant for this company that I was hoping might be more fully explained by those who post confidently that it is reasonably clearly attributable to specific policies.

Also, did this company change from DB to DC? When?

Also, which governments placed contracts with it. Given date of creation, it looks like this may date from 1999 and the noughties. Or have there been a lot of new contacts in the teens?

A number of factors I see!

I feel for any staff who loose their jobs & as another poster said smaller suppliers who will be affected.

Well, this morning's headline is that it has gone into liquidation

www.bbc.co.uk/news/business-42687032

so I expect quite a lot of info on exactly how it all went wrong will come out in the post-mortem

I have very mixed feelings about pfi hospitals. I work in a seventies build and am morbidly jealous of pfi buildings with their space. But oth it's a financial nightmare.

Even the Labour spokesperson on the BBC this morning says that Carillion' contracts were nearly all PFi placed by New Labour and that they simply didn't work.

"Some of Carillion's contracts will be taken on by other firms and some could be renationalised, according to BBC business editor Simon Jack."

Presumably he's got some sort of source in the inside, who knows what the plans are. It must be a very uncertain time for those working in Carillion projects, until their futures are known.

Are there any companies obvious suitable to take on any areas if work?

Do not be jealous of PFI.

Our local hospital's PFI deal is beyond insanity. For a build/renovation of around £70bn, the total cost at the end of the deal will be £350bn.

These deals are crippling the NHS. It's financial illiteracy to create such public liabilities as a burden on state finances. The irony is that PFI in the first place was designed primarily to avoid such burdens upon taxpayers.

And it's not just the cost of the deal, it's also the batshit costs of any changes to the fabric of the building and maintenance. £60 to change a light bulb, £15k to widen a door by two inches etc.

Government should take advantage of Carillion's situation to place PFI property back in public ownership. It would be the one thing that would do the most to restablise the NHS.

Also a worry is their supplier base, payment terms were I think 120 days for most, which means there are many smaller companies who will need to write off massive debts. There will be an impact there as well, possibly leading to trickle down redundancies or liquidations.

My two local London boroughs libraries and a couple of Museums are run by Carillion - I wonder if the local authority will take them back or they’ll get taken over by a 3rd private company.

*PickingOatum
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That's awful. Where are our media? Why isn't this being publicised when they're talking about our NHS being ravaged by immigrants. Who signed these deals? They're treating us like idiots, we're fools to be missing this.

More disasters created by Messers Brown and Blair - still Messer Blair has something like 12 houses now so he and his awful wife are doing OK ........

Also a worry is their supplier base, payment terms were I think 120 days for most, which means there are many smaller companies who will need to write off massive debts. There will be an impact there as well, possibly leading to trickle down redundancies or liquidations.

Absolutely, my company being one of them.

The pension disaster in the UK has one major culprit - Gordon Brown, who changed the system in 1997 and started taxing dividends so that he could throw that money at Labour's client state in the hope of getting more votes. He also brought in the disastrous tax credits but that is another story.

As someone above has said, Margaret Thatcher’s government relaxed the rules around pension funds to enable companies to use money put into the fund whenever the fund was in credit, but they inevitably didn’t leave any cushion and calculates it all wrong and so left many many pension funds in deficit. They also relaxed the rules around whether the company had to continue putting money into the fund, which exacerbated the problem.

It has caused endless unfairness and hardship (BHS was the same) as well as unnecessary cost the taxpayer and general industry because there is now a regulator and fund to make up the shortfall which is funded by industry generally - thus punishing companies who don’t even do anything wrong!

I think it was the disaster that is Gordon Brown responsible for this he taxed pension funds so he could set up the Tax Credit system - which has resulted in minimum wage jobs on zero hours contracts ......