Value of Thames Water investment ‘minimal’, admits USS

UK higher education’s largest pension scheme has expressed “deep regret” after suffering heavy losses when the value of its stake in Thames Water plunged to “minimal” levels.

In annual accounts published on 25 July, Simon Pilcher, the chief executive officer of the investment arm of the Universities Superannuation Scheme (USS), said the outcome had led to “serious reflection” within the company about its approach to future investments.

USS, which manages the pensions of more than 500,000 university staff members, was one of the major investors in the ailing company, with its 20 per cent stake valued at £956 million two years ago.

It admitted that it had in effect written off this money as Thames Water struggles to recover from amassing large debts.

“Despite our very best efforts, it is clear this has not been a successful investment,” said Mr Pilcher. “While poor performance of a single asset should be considered in terms of our overall performance…this has been deeply disappointing, and we recognise the concern it will have caused our members.”

He said USS remained a shareholder in Thames Water, “but the future outlook for the company is unclear and the value of our holding at 31 March 2024 was minimal”, adding: “We deeply regret having arrived at such a position.”

Despite the challenges, the accounts said that USS had a £9.2 billion surplus in the defined-benefit part of the scheme.

This improving financial picture allowed for member contributions to be reduced from 9.8 per cent to 6.1 per cent in January, which it said was “one of the lowest member contribution rates in the 50-year history of the scheme”.

The University and College Union ended its long-running dispute over cuts to the benefits of the scheme last year, having secured a commitment to reduce contributions.

tom.williams@timeshighereducation.com