The BT pension scheme incurred a £300 million loss after writing off its entire equity holding in Thames Water, the UK's largest water company currently grappling with a £20 billion debt pile. The write-down, which occurred in 2024, was disclosed in a presentation to analysts captured on video, as first reported by the Financial Times.
Details of the Write-Down
BT confirmed that its 8.7% equity stake in Thames Water had been written down, resulting in the £300 million loss. Shan Abdullah, who leads the pensions risk team at BT, stated: "The equity stake in Thames Water has been written down, which I believe was about £300m. The scheme also had debt exposure to Thames Water, which was sold off prior to needing to be written down."
The pension scheme initially invested in Thames Water in 2012, acquiring a 13% stake, and later sold 4.36% of it in 2017. It now holds no exposure to Thames bonds. BT emphasised that the pension scheme is well diversified, so challenges from a single investment do not materially impact the overall portfolio.
Thames Water's Financial Struggles
Thames Water is moving closer to public ownership after the UK environment secretary objected to a £10 billion rescue proposal, citing an "undue burden" on consumers. The regulator Ofwat was reportedly close to a deal under which Thames would avoid new fines over sewage leaks for four years in exchange for a cash injection from creditors, who would take over the company.
The We Own It campaign group has called on Andy Burnham, who is likely to be the next prime minister after Keir Starmer's resignation, to stand up for the 16 million people who rely on Thames Water. The group highlighted that the company has poured sewage into rivers and extracted £12.9 billion for shareholders since privatisation in 1989.
BT Pension Scheme Valuation
BT is set to announce the triennial valuation of its pension scheme next week, detailing payments for the next three years to fund payouts to approximately 213,600 retired employees. The £33.2 billion pension scheme, closed to new members in 2001, pays out £2.9 billion in benefits annually. It is managed by Brightwell Pensions and ranks among the UK's largest private sector schemes.
During its annual results in May, BT disclosed that its pension deficit stood at £4.2 billion at the end of March, up from £4.1 billion a year earlier. The increase was attributed to updated views on mortality and inflation, as well as lower asset returns than expected, partly offset by scheduled contributions. BT paid nearly £800 million into the pension fund in the last financial year.
