The Government says it expects pension deficits built up before companies collapse to hit its coffers, but is still unable to predict how much is likely to fall on the Pension Protection Fund.
In the Office for Budget Responsibility’s Spring Statement outlook, it noted that the estimated combined deficit of Carillion’s pension schemes was £990m, and is currently being assessed by the PPF to see who is due compensation and how much is warranted.
The Treasury has already had to provide £150m to maintain continuity for Carillion’s Government contracts, it notes, as it expects Government departments to bear higher costs as well in taking on the services previously outsourced to the firm.
However, it is still unable to predict the benefits members of the 14 different schemes would be entitled too, and therefore how much support the Government would need to give.
The OBR statement reads: “The PPF is classified as a public sector pension scheme, so this transfer – and any decisions the PPF were to make about the levy it charges pension providers – would affect the public finances. But these effects are not currently captured in the public finances data and uncertainty over how they will be treated means that we cannot anticipate those effects in this forecast”.
The OBR added that as the Office for National Statistics reviews how funded pension schemes should be treated in accounts, they present “a risk” to borrowing and debt forecasts.
The outlook reads: “The PPF is likely to present a continuing risk to the forecast as schemes enter liquidation and are absorbed by the fund. It is not known, for example, what effect the collapse of Carillion, whose defined benefit pension scheme had a large deficit, would have on [borrowing] or [debt] if the PPF were included in these aggregates.”