Chair of the Work and Pensions Committee Frank Field has written to Ofwat, the utilities regulator, about proposals by United Utilities and Anglian Water to close their defined benefit schemes while continuing to pay out large amounts to shareholders.
On Thursday, Field wrote to Ofwat chief executive Rachel Fletcher, highlighting that the Anglian Water schemes currently have an £86m deficit on an IAS19 accounting basis, while the United Utilities scheme has a £220m surplus on the same basis.
He said the proposals of these two water companies must be seen “in the context of their considerable profitability and their munificent attitude to shareholders”.
The letter drew attention to the fact that Anglian Water’s last five sets of annual reports show after-tax profits totalling £1.6bn, of which £800m was paid out in dividends to shareholders.
Similarly, United Utilities reported after-tax profits of £1.6bn over the same period, and paid out £1.2bn in dividends to shareholders.
Field asked for Ofwat’s view of the water companies’ proposals to close their DB schemes while continuing to make large distributions to shareholders.
He asked Ofwat to outline what requirements it can place on the companies it regulates in respect of their allocation of company resources to shareholder dividends, executive remuneration and pension scheme funding.
Moreover, the letter noted that in 2014, Ofwat granted companies leeway to recover some of the costs of deficit repair contributions through customers' water bills until the early 2020s, but noted that "there are strong arguments for shareholders to bear these costs in future".
“What strong arguments are there for already well-rewarded shareholders to be spared these costs through the closure of the schemes?” the letter asks.
