Trade union Unite is supporting the probe launched by the Work and Pensions select committee to the closure of Anglian Water and United Utilities defined benefit (DB) schemes.
The union said that “huge profits made by these two companies are heavily skewed toward the shareholders – with not enough investment going into the UK’s water infrastructure and also to maintaining the pension schemes”.
A thousand Unite members employed by United Utilities in the north west of England took industrial action on 1 April, in a pensions’ dispute which could see them thousands of pounds worse off in retirement, the union said.
Their final salary pension scheme is being replaced by a hybrid plan. Industrial action is currently suspended for further talks to take place, Unite added.
Workers at Anglian Water have accepted the changes to the scheme, even though Unite warned that some staff will see their pension pots reduced by up to £100,000.
The utility company, which is the largest geographic water company in England and Wales, has said it will close its DB schemes because the water regulator Ofwat has told it to save money.
Labour MP Frank Field, chair of the committee, wrote last month to Rachel Fletcher, chief executive of Ofwat, asking for her organisation’s views on the closure of these two schemes.
Mr Field said: “Water and sewerage companies are natural monopolies which are subject to no competition.
“They hold a privileged position as long-term licence-holders enjoying large and predictable cash flows from a captive consumer base.
“There appears to be no effective restraint on these firms' policy of distributing massive sums to shareholders while cutting the pension benefits that their employees are counting on for their retirement.”
He pointed out that the last five annual reports from Anglian Water showed after tax profits of £1.6bn, of which £0.8bn was paid out in shareholder dividends.
United Utilities made £1.6bn in after tax profits during the same period, with £1.2bn going to shareholders.
Mr Field asked Ms Fletcher what requirements can Ofwat place on the companies it regulates in respect of their allocation of company resources to shareholder dividends, executive remuneration and pension scheme funding.
According to Peter McIntosh, Unite’s acting national officer for energy and utilities, Mr Field “is on the right track in demanding that Ofwat gives clear answers as to its stance” on the DB schemes closures.
He said: “It is clear that the financial rationale of these water companies is tilted far too heavily in favour of short-term gains for the shareholders and not enough emphasis on the price needs of the hard-pressed consumer; the requirement for substantial investment in the infrastructure; and the safeguarding of retirement incomes for dedicated workers.
“A line in the sand needs to be drawn, otherwise the pensions of thousands of water workers will be seriously eroded by shareholder-obsessed bosses.”
maria.espadinha@ft.com
