Carillion

rammywhite wrote:

wanderlust wrote:

rammywhite wrote:Lusty,
Is there any evidence that they did raid their pension fund ( like Captain Bob Maxwell did with Mirror Group) or did they merely default on paying in sufficient contributions as indicated by actuarial valuations of potential future liabilities over the estimated lives of pension fund members.? The first may be illegal, and as far as I understand it, the second one isn't

I don't know for sure Rammy. It may be the second scenario but if so surely the actuaries would have stepped in and raised the contribution from both employer and employee if they forecast a shortfall? I'd have thought not doing so would be gross negligence. Alternatively, if they knew there was a shortfall and yet consciously continued to under contribute, is that not illegal?

There are a  vast number of companies whose pension fund is lower than the actuarial valuation of future pension fund liabilities. However not all those liabilities are current and so any shortfall must be made up over time. So-its not illegal to have a shortfall,  but there is a contractual liability to make good the shortfall over time as the pension fund liability crystallises.
What is worrying is that with stock markets around the world at ,or near to record highs, and with most pension funds investing in equities ,that shortfalls still exist.. However they're based on expected lives of pensioners (and dependents in some cases) and thus are best estimates of future liabilities. The valuations depend also on the discount rate chosen to discount the future liabilities ( sorry- that's a bit technical). That is often pitched at an abnormally high level- another possible problem.
Businesses are obliged to disclose their longer term pension liabilities in the Balance sheet if material.
I've just been reviewing the Annual Accounts of the RSPB and they have  disclosed a pension liability of £90 million with annual income  this year of £146m. That's revenue- not profit! That's a frightening number.
So for many organisations its a massive liability which many will attempt to pass over to the Pension Protection scheme.
But the answer is no- if you have a pension fund liability (a shortfall) you don't have to make it good immediately

That would imply that workers pay into company pension schemes to provide reserves for the employer?
But don't employers have to make provision for the repayments in the financial statements rather than just acknowledge the liability exists?
If not, the whole thing needs regulating.

Workers contribution have to be paid over to the pension fund trustees within three weeks of the deductions (same as PAYE and NICs)- and in fact someone I used to work with had a suspended prison sentence imposed for not doing so. The money is invested then by the trustees in the way that the pension fund regulations stipulate.
It's sometimes the employers contributions that don't get paid- and that's the potential fraud if you're looking for one.
There is  a real problem here about who 'owns' the pension fund though. Is it the company- or is it independent of the business. I'm in the universities scheme (the USS) which is entirely separate from the employers-they have absolutely no say whatever in what it does-they certainly can't raid it. That's the best deal for a pension fund- to be totally independent.
However relationships are usually much closer between businesses and  their staff pension funds  and sometimes the trustees are senior management of the employer -and that's the issue that allows access to the pension fund. If the employer 'owns 'the pension fund then, as you say, that can provide cash reserves for a struggling business. Utterly immoral and unethical. Sometimes the pension funds will lend money to the employer at arms length ( like any other loan) if it makes commercial sense as well-I've seen that in a couple of businesses I've dealt with professionally.
The accounting aspects are all covered in a technical document FRS 17.
But you're correct- the whole area is a mess and needs much more legislation to separate out pension funds from employers.
If the pension rules stipulate that a pension fund will pay out a given amount to retired employees and the fund can't currently meet those obligations that's when the contingent liability arises and must be shown in the company accounts provided it's the business contractual responsibility to pay those amounts.

Most companies that have/had a final salary scheme are running with a deficit, a decent employer would have a plan to make up any shortfall over a period of time to meet the liability.

Most companies are closing these schemes to shift the risk from the employer to the employee, they put your scheme into deferment then put in place a private pension that will grow into you final pension pot, at the time of retirement when you take the pot all the risk is now with you in terms of investment, so a great move for companies to eventually get the pension scheme off the balance sheet.
Carillion are showing a shortfall of 580 million, so PPF who have funds in excess of 6 billion will pick up the tab, however current employees will lose a percentage of their pension pot.

This is why we are all paying for PFI deals:

http://www.bbc.co.uk/news/business-42724939

The government response was 3 massive lies: "the government said PFI projects improved public services, offered better value for money and shifted risk away from the public sector."

1. There is no evidence at all that PFI "improved public services".
2. This report clearly demonstrates that they don't "offer better value for money".
3. They don't "shift risk away from the public sector" as Carillion so clearly demonstrates.

Shocker. Xmiles blames the Tories.

xmiles wrote:This is why we are all paying for PFI deals:

http://www.bbc.co.uk/news/business-42724939

The government response was 3 massive lies: "the government said PFI projects improved public services, offered better value for money and shifted risk away from the public sector."

1. There is no evidence at all that PFI "improved public services".
2. This report clearly demonstrates that they don't "offer better value for money".
3. They don't "shift risk away from the public sector" as Carillion so clearly demonstrates.

Agreed xmiles-PFI (and PPP which is similar) are a financial nightmare. I work in an institution which has large numbers of these and we're paying £millions each year to PFI contractors. An additional problem is that these contracts are marketable and are being scooped up by clever investors in the Middle East and in particular China where sovereign funds, awash with state provided money, are buying them. So we're now paying overseas investors large amounts of money.
But make sure that when you lambast the government you include both major political parties as many of these contracts were set up during the reign of Brown and Blair.
PFI contracts do not figure in government debt figures and that's a reason they were so attractive.
The whole affair is a nightmare which still hasn't grown to full maturity- it will cost us more in future.

I work in a PFI built Hospital and have a company called Sodexo who basically run all the non clinical functions within the Hospital and they overcharge for everything if you need repairs, replacements etc. The standard of the build leaves a lot to be desired as well, it looks good from a distance but get up close and you find lots of issues.

Norpig wrote:I work in a PFI built Hospital and have a company called Sodexo who basically run all the non clinical functions within the Hospital and they overcharge for everything if you need repairs, replacements etc. The standard of the build leaves a lot to be desired as well, it looks good from a distance but get up close and you find lots of issues.

..and Sodexo are ,of course a French company with UK subsidiaries. So we're paying the cheese eating surrender monkeys good money for shoddy work.
We should change the name of the Macron to something else rather than remind ourselves on a daily basis of the Froggies chief honcho

rammywhite wrote:

xmiles wrote:This is why we are all paying for PFI deals:

http://www.bbc.co.uk/news/business-42724939

The government response was 3 massive lies: "the government said PFI projects improved public services, offered better value for money and shifted risk away from the public sector."

1. There is no evidence at all that PFI "improved public services".
2. This report clearly demonstrates that they don't "offer better value for money".
3. They don't "shift risk away from the public sector" as Carillion so clearly demonstrates.

Agreed xmiles-PFI (and PPP which is similar) are a financial nightmare. I work in an institution which has large numbers of these and we're paying £millions each year to PFI contractors. An additional problem is that these contracts are marketable and are being scooped up by clever investors in the Middle East and in particular China where sovereign funds, awash with state provided money, are buying them. So we're now paying overseas investors large amounts of money.
But make sure that when you lambast the government you include both major political parties as many of these contracts were set up during the reign of Brown and Blair.
PFI contracts do not figure in government debt figures and that's a reason they were so attractive.
The whole affair is a nightmare which still hasn't grown to full maturity- it will cost us more in future.

Completely agree with all your points rammy.

Sky News just reported: The pension deficit was £2.6bn when the firm collapsed not £587m as previously reported

That is shocking, so yet again the average worker gets shafted on pensions 

To show how ridiculous PFI agreements can be, where I used to work, there was a section that had 24 hour TV screens, set on particular channels. If, for whatever reason, somebody wanted the channels changed, they had to phone a specific person, and request it, (followed by the on-line request form), for this they were charged £11.

The problem is that the building was tailored for a specific purpose, and negotiations included some civil servants who knew their job, but didn't have a clue about contracts, loopholes, etc. Hence the ridiculous building costs, and ongoing charges. They even get to take their building back, free of charge, after, (I think), 40 years.
We were told that PFI was good, as the government didn't have to pay for the full support infrastructure, which as it has turned out, is a load of rubbish, and I'm sure that if the true figures come out, for all PFI 'initiatives', we'll see we've all been shafted by a dishonest private industry, and an incompetent government negotiating process.

gloswhite wrote:To show how ridiculous PFI agreements can be, where I used to work, there was a section that had 24 hour TV screens, set on particular channels. If, for whatever reason, somebody wanted the channels changed, they had to phone a specific person, and request it, (followed by the on-line request form), for this they were charged £11.

The problem is that the building was tailored for a specific purpose, and negotiations included some civil servants who knew their job, but didn't have a clue about contracts, loopholes, etc. Hence the ridiculous building costs, and ongoing charges. They even get to take their building back, free of charge, after, (I think), 40 years.
We were told that PFI was good, as the government didn't have to pay for the full support infrastructure, which as it has turned out, is a load of rubbish, and I'm sure that if the true figures come out, for all PFI 'initiatives', we'll see we've all been shafted by a dishonest private industry, and an incompetent government negotiating process.

On that note, Defence Estates need to be overhauled. There's a lot of chat about cutting the defence budget but as long as DE continue to pay 2 or 3 times over the odds for private sector services, I have no sympathy.