United Utilities' DB pension surplus rises by £270m

United Utilities’ defined benefit surplus stood at £754m at 31 March 2020, according to its annual results, up from a surplus of £484m in March 2019.

The results showed that the fair value of the United Utilities schemes’ assets declined from £3.91bn to £3.81bn over the course of the year, however liabilities fell from £3.43bn to £3.06bn over the same period.

In April 2019, the group accelerated £103m of deficit repair contributions to its defined benefit pension schemes, £97.6m to the United Utilities Pension Scheme (UUPS) and £5.4m to the Electricity Supply Pension Scheme (ESPS).

These contributions represented the final acceleration of contributions agreed with the schemes’ trustees and completed the firm's pension scheme deficit repair contribution obligations.

The FTSE 100-listed utilities provider had laid out these contribution plans in March 2018, with the expectation that the plan would result in the pension schemes being fully funded on a low dependency basis without additional contributions from the company.

The company also attributed its increase in surplus to a spike in credit spreads at 31 March 2020, expressed as a £154.6m remeasurement gain, due to Covid-19, that resulted in a temporary decrease in the valuation of liabilities.

Over the year, the company recognised £6.6m of costs associated with the guaranteed minimum pension equalisation between men and women.

This amounted to £5.5m, or 0.2 per cent of liability, for the UUPS and £1.1m, or 0.3 per cent of liability, for the ESPS.

The year also saw United Utilities make £22.5m of contributions to defined contribution schemes, down from £23.0m the year before.

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