BT pension scheme lost £300m on Thames Water stake

The BT pension scheme lost £300m after writing off its holding in Thames Water, the UK’s largest water company that is buckling under a £20bn debt pile.

The loss came after the telecoms company’s decision to write off its 8.7% equity stake in Thames in 2024, according to a presentation to analysts captured in a video, in news first reported by the Financial Times.

BT also said the pension scheme had sold its debt in the utility to avoid a further write-down, without giving details.

Shan Abdullah, who leads the pensions risk team at the telecoms company, said: “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 scheme first invested in Thames in 2012 when it acquired a 13% stake, and sold 4.36% of it in 2017. It now has no exposure to Thames bonds.

“The BT pension scheme is well diversified, so any challenges from a single investment do not materially impact the overall portfolio,” a spokesperson for the pension fund said.

Thames is moving closer towards public ownership, after the UK environment secretary last week objected to a £10bn rescue proposal because it would place an “undue burden” on consumers.

The regulator Ofwat was close to a deal under which Thames would avoid any new fines over sewage leaks for four years in return for a cash injection into the business from its 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 on Monday, “to stand up for the 16 million people who have no choice but to use Thames Water, a company which has poured sewage into our rivers and extracted £12.9bn for faraway shareholders since privatisation in 1989”.

This month, Burnham said Thames should be nationalised and that public ownership of water companies would “absolutely be an option” if he became Labour leader.

BT will announce the triennial valuation of its pension scheme next week, in which it will set out details of its payments for the next three years to fund payouts to about 213,600 retired employees.

The £33.2bn pension scheme, which was closed to new members in 2001, pays out £2.9bn in benefits each year. It is managed by Brightwell Pensions and is one of the UK’s largest schemes in the private sector.

During its annual results in May, BT disclosed that its pension deficit was £4.2bn at the end of March, up from £4.1bn a year earlier. It said this reflected updated views on mortality and inflation, and lower asset returns than expected, and was partly offset by scheduled contributions. The company paid nearly £800m into the pension fund in the last financial year.