The collapse of Carillion, the UK’s second biggest construction firm, prompted the warning from the PLSA, which advised consumers to be careful of the companies that seek to capitalise on the collapse by encouraging people to transfer out of DB pension schemes without due consideration.
Joe Dabrowski, head of governance and investment at the PLSA, said: “One in six pension holders in the UK have been contacted by a company – other than their provider – to discuss making changes or transferring their pension.
“And following the collapse of Carillion, we have already seen warning signs that scammers may be seeking to exploit DB scheme members’ fears about their future.”
As of July 2017, Carillion had more than 28,500 members in final salary schemes and a deficit of £587m ($808m, €660m).
Regulatory action needed
Dabrowski called on regulators to “act urgently to ensure that members are protected, and to take the strongest possible action against unscrupulous companies looking to take advantage of savers”.
“Transfers should only be undertaken if they are in the best interest of the scheme member and with the right level of guidance,” he added.
“Scheme members who are concerned about the future of their scheme should gain comfort from the existence of the Pension Protection Fund (PPF). This Pensions Lifeboat already looks after more than 300,000 member’s pensions and has the financial strength, as well as experience, to deal with any claims resulting from companies’ liquidation,” Dabrowski said.
Scrutiny on DB scheme transfers
Carillion’s collapse has put increased pressure on the UK Government to tackle the sustainability of DB schemes, Ian Browne, pensions expert at Old Mutual Wealth warned on Monday.
“Carillion is the latest company to struggle under the weight of pension debt as defined benefit pensions have turned out to be far more expensive than most could ever have imagined,” the pensions expert said.
“Factors such as significant increases in life expectancy mean that companies are now having to pay much more than originally anticipated to fund pensions for their former employee’s decades after they finish work.”
The Financial Conduct Authority confirmed last week that it will collect data from every UK firm that advises on DB pension transfers, as part of a probe into practices across the market.
Christopher Lean says:
When a company with a DB scheme goes into liquidation, the scheme enters PPF assessment and no transfers out can be made. So far, 5,900 members have entered the PPF assessment stage as a result of the initial liquidation statuses of some of the group. No doubt the rest will follow. Do the scammers know this? I wonder now many CETV requests the trustees will be getting soon?
Sally James says:
I can’t believe people are scamming those who have just lost their job, and pension! Imagine losing your job in the space of a day, then getting scammed into a false pension scheme, it’s a terrible day for those who work for Carillon.