Southern Water criticised over ‘unfair’ pensions scheme by regulator

The Pensions Regulator has rapped Southern Water over claims it treated its pension scheme unfairly, it was revealed.

TPR said it was taking action after finding Southern’s pensions pot was subject to “undue risk” despite the company’s strong finances.

The watchdog was concerned over an “imbalance between the funds contributed to the Southern Water pension scheme and the level of dividends paid to shareholders in 2016 and 2017,” it said.

The company has now been compelled to pay £50m more into the scheme over a shorter period, following an agreement between it and the regulator.

The scheme’s £252m deficit in 2016 should have been paid off much sooner in light of £190m payouts to shareholders over the following two years, the regulator said.

In 2015 the supplier halved its contributions to the scheme, electing to pay them over a longer time period.

“During our lengthy investigations into Southern Water it became clear that in our view the pension scheme was not being treated fairly.

“We considered that Southern Water could afford to clear the scheme’s deficit much more quickly without negatively impacting the company’s growth prospects,” said Nicola Parish, an executive director at the regulator.

A spokesperson for Southern Water said: “We are pleased to have completed negotiations for our final salary pension scheme and an updated plan is now in place. A new management team are now leading the transformation of Southern Water and are committed to dealing with historic issues such as this.

“Given the increased pension deficit we have agreed to increase contributions to ensure that members interests continue to be our priority. In addition, our shareholders (who are mainly themselves pension funds) have supported the introduction of a sharing mechanism such that deficit repair contributions will increase with dividends.”