Water is everywhere, as I write the Thames is flowing fast down to Romney Weir and beyond. Yesterday as we walked to Arbor Park, we passed the terminus of the Slough extension of the Grand Union Canal, the water in my coffee was purified by Thames Water, the Canal and River Trust enable boats to navigate from Brentford to Birmingham. We are not only a maritime nation, we are a nation that lives on inland water.
This article argues that the successful husbandry of our rivers and canals and the treatment of the water that runs from out taps is dependent on the solvency of the organisations that manage our water. By extension, the pensions that they run for their staff are of public interest. If they can be turned to assets , their money can matter, if they remain liabilities, an opportunity goes down the drain.
Thames Water has a pension scheme (TWPS). Its liabilities exceeded its assets in 2023 by £182 m
In September 2023, shares were issued intercompany to meet £20.4 million of pension payments. Sky news reported last week that Thames Water’s parent (Kemble) faces £190m of immediate debt repayment and that creditors have appointed EY to negotiate. Things are looking pretty grim. Facing a raft of fines over pollution, pressure on its dividend and the leaking last summer that contingency plans have been drawn up for nationalisation, Thames does not need a leaky pension scheme.
Sky reports
Thames Water should consider this offer. A solvent pension scheme can over time become an asset to an employer, an insolvent scheme becomes a creditor that can drag it down. An insolvent pension scheme leads to haircuts in pensions and puts strain on other pension schemes through the PPF levy which must help finance any inherited deficit.
And Thames Water’s shareholders are primarily other pension schemes, they range from the Ontario teachers scheme to the UK’s University Superannuation Scheme (which owns 19% of the private equity). The failure of Thames Water, triggered by commercial debt or by trustees and the pension regulator, reduces the solvency of other schemes. No man is an island.
Dismissing the offer made to Thames Pension Scheme cannot and should not be done lightly, the risks of Thames Water becoming a burden on the general tax-payer are real enough for this to be more than a local corporate or pension matter.
Our Canals and Rivers
Although Thames Water has impacted on the River Thames, it is the Environment Agency that look after its infrastructure. The Canal and Rivers Trust look after our other inland waterways and a couple of Sundays ago, its CEO, Richard Parry told Britain’s Countryfile program that its magnificent work , maintaining and restoring our canals, their aqueducts and locks, needed additional sources of finance.
Like Thames Water, the Canal and Rivers Trust has a pension scheme, it is the lead participator in the British Waterways Pension Scheme which is solvent because it has a charge on some of the assets of the charitable trust. The pension scheme continues to be a drain rather than an asset to the Trust and I have personally written to Richard Parry on behalf of Edi Truell to provide the pension scheme with the support offered to Thames Water.
The ESG of pensions
The assets of pension schemes are routinely considered as part of TCFD. But the impact of the pension schemes on their sponsoring employers and their capacity to carry out environmental and societal good isn’t. If Thames Water cannot manage its pollution for the cost of servicing its pension debt, if the Canal and Rivers Trust can no longer maintain the canals, locks and aqueducts in its charge, because of its pension scheme, pensions become part of the problem, not the solution.
Trustees are under considerable pressure to fund projects that might more reasonably be considered the tax-payer’s problem. Commercial organisations like Thames Water and charities like the CRT are attempting to be self-sufficient from the public purse. John Arnitt told a Trades Union Pension Conference last week that there was no reason why trustees should invest with a “home bias ” when they had global opportunities.
While trustees are right to resist in being railroaded into investment in infrastructure, they need to accept that their fiduciary duty extends to ensuring the sponsoring employer can do the right thing for both members and wider society.
Put another way, the trustees of our pension schemes have an obligation to the environment and to society to reduce their strain on employers so employers can invest in ESG. Pension schemes cannot be seen to be exacerbating the employer’s environmental and social issues.
Water is everywhere
As I write, the rain is beating down on the Thames as it speeds towards Romney Lock, the Grand Union Canal is a couple of miles up the road, the liquid road to Birmingham. Water is everywhere this winter!
The lock-keepers will be attending to their weirs, the dredgers will be keeping the canals navigable , the Environment Agency will be ensuring that none of us are flooded. This complex eco-system of inland water is part of our heritage as are its pension schemes.
Can we please make sure that that heritage is secured by making use of whatever help is at hand. Mr Weston at Thames Water, Mr Parry at Canal & Rivers Trust, will you look to your pension schemes; they can be your asset, they need not be your problem.
Perhaps the USS should consider “consolidating” the Thames Water pension schemes into itself!