Work and Pensions Committee chair Frank Field has probed the utilities regulator Ofwat on Anglian Water and United Utilities’ decisions to close their defined benefit pension schemes.

Writing to Ofwat’s chief executive Rachel Fletcher, Field questioned the two firms’ proposals to close their DB schemes to future accruals.

Highlighting that Anglian Water has a pension deficit of £86m and United Utilities, a surplus of £220m, both on an IAS19 accounting basis, Field stated that their closure proposals “should be seen in the context of their considerable profitability and their munificent attitude to shareholders”.

Field brought to light that in the last five years to March 2017, after tax profits at Anglian Water and United Utilities both totalled at £1.6bn. In this same period both firms paid out £0.8bn and £1.2bn in dividends to shareholders, respectively.

As a result, the chair queried Fletcher as to what Ofwat’s view is of the pension closure proposals in light of their large dividend payments and what requirements Ofwat can impose on companies it regulates in regards to the allocation of company resources to shareholder dividends, executive remuneration and pension scheme funding.

Moreover, Field added: “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?”

“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 said.

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