SUPPORT services business Carillion had no sooner gone into liquidation at the start of this week when warnings about the impact on the pensions sector started being sounded.

The company’s demise should, said the boss of advisory business the deVere Group, Nigel Green, “trigger alarm bells for pension savers across the UK as it puts a huge question mark over the fate of yet another major pension fund”.

Specifically, Mr Green questioned how many more schemes the Pension Protection Fund (PPF), which is expected to take on responsibility for the 27,500 members of Carillion’s 13 retirement funds, would be able to handle.

“Whilst the PPF is an important and valuable support, UK final-salary pension schemes have an enormous deficit blackhole, which raises the inevitable question: how many more big hits can the PPF take?,” Mr Green said.

The question seemed well founded, given that pension funds will only find themselves in the PPF when their sponsoring employer has gone bust. As bust businesses are not generally found to be sitting on large pension scheme surpluses, the cost to the PPF of meeting their liabilities could be huge, even though non-retired scheme members will receive smaller payouts than if their employer had stayed afloat.

In Carillion’s case it is estimated that the total cost to the PPF could be in the region of £900m over the lifetime of the company’s pensioners.

The PPF was quick to respond, with the Financial Times quoting it as saying that, with assets of £30 billion and a surplus of £6bn, it is “very financially strong”.

Royal London policy director Steve Webb, a former Liberal Democrat MP who served as a pensions minister in the coalition government, agreed, noting that the deficit on Carillion’s schemes - which stood at £587 million at the end of 2016 - “will not sink the pensions lifeboat”.

“Although there is a big shortfall across the Carillion pension schemes, the PPF is financially strong and will be able to pay out pensions in line with its normal rules,” he said.

While agreeing with this statement, Ros Altmann, a Tory peer who served as a pensions minister in David Cameron’s government, warned that depending on the terms of the Brexit deal many more large pension schemes could find themselves in the PPF, which could put a strain on its ability to service them.

“The PPF can cope fine with Carillion and a couple of other big schemes but this should be a wake-up call to the Government that a hard Brexit could affect big manufacturing companies that have big defined benefit schemes,” she said.

“If we come out of the customs union and the single market I don’t see how our manufacturing sector could cope.

“In that instance I don’t think the PPF could cope.”

For those with defined benefit savings this is obviously moot because unless and until the employer funding the pension goes bust, the amount that members can expect to receive will remain set in stone.

Which is why industry body the Pensions and Lifetime Savings Association (PLSA) is warning defined benefit pension members to be wary of anyone trying to capitalise on the bad news around Carillion to encourage them to transfer their retirement savings into money purchase funds.

Joe Dabrowski, head of governance and investment at the PLSA, said: “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.”

While those already retired would receive the same benefits from the PPF as they would from their employer, albeit with smaller annual increases, those who have yet to retire would receive 90 per cent of what was promised, with the total annual payment capped at just under £35,000.

It is thought that some advisers sought to capitalise on this when a rescue deal was struck for Tata UK, encouraging some members of the British Steel pension fund to make unsuitable transfers rather than join the PPF or a new, less generous, Tata scheme.

City regulator the Financial Conduct Authority was forced to restrict the activities of a number of advisory firms after questions were raised about the quality of the advice they gave and police are now investigating whether any steelworkers have been victims of pension fraud.

In light of this, and at a time when transfer values remain high relative to historical norms, anyone tempted to transfer should take note of Mr Dabrowski’s warning: “Transfers should only be undertaken if they are in the best interest of the scheme member and with the right level of guidance.”