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Pensions regulator slams Southern Water for putting dividends over pensions

Southern Water will increase funding for its pension scheme after The Pensions Regulator investigated the firm over an “imbalance” between dividends paid to shareholders and what it paid into its pensions scheme.

Southern Water will pay £50m more into its scheme over a shorter period than initially planned after TPR looked at the level of dividends paid across 2016 and 2017.

While the water company’s pension scheme had an ongoing deficit of £252m as at March 2016, TPR found that the firm could have afforded to pay this off sooner has it not paid £190m in dividends over the two years in question.

In a statement this morning, TPR says it “considered this amounted to unfair treatment of the scheme” and “a dividend sharing mechanism will ensure future dividend payments do not lead to unfair treatment of the scheme”.

TPR executive director of frontline regulation Nicola Parish says: “During our lengthy investigations into Southern Water it became clear that in our view the pension scheme was not being treated fairly. We considered that Southern Water could afford to clear the scheme’s deficit much more quickly without negatively impacting the company’s growth prospects.

“The company and trustee’s decision in 2015 to halve contributions to the pension scheme and pay them over an extended period whilst later paying substantial dividends despite a growing scheme deficit meant the risk to member benefits was unacceptably high. This has now been addressed.”

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  1. Bravo TPR. This should make other companies think twice about paying massive dividends when their pension schemes are underfunded.

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