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4 January 2024

An update on our investment in Thames Water

The challenges facing Thames Water are the manifestation of historic under-investment over multiple decades and, more recently, the significant financial impact of soaring energy prices and other inflationary cost pressures. However, we have given our backing to Thames Water’s latest business plan.

As a long-term investor, we can provide patient capital and be an active, responsible steward of the company. While the value we place on our Thames investment may go up or down as part of our regular revaluations, we continue to view this as a long-term investment, in line with the long-term needs of the scheme. That is why we were willing to commit additional funds to the business in March 2023 and have shown willingness to commit more in the future.

We have not received a shareholder dividend or payments of interest on any shareholder loans since we first invested in 2017, with shareholders instead reinvesting capital back into the business to drive improvements. We remain of the view that, with an appropriate regulatory environment, the long-term objective of repairing important UK infrastructure and paying pensions to our members are in strong alignment.

The value we placed on Thames at the end of March 2023 was fully reflected in the USS Report and Accounts and our 2023 scheme valuation1. Our diversified approach to investing means that we do not expect events surrounding Thames Water to have a material impact on our funding position, the reduction in contributions from January, the benefit changes from April, nor on the security of members’ promised pensions.

All our private assets are valued by experts who are independent of our investment teams, and we take considerable external input as we go about this. You can read more about our valuations here.

1 The 2023 valuation reported a £7.4bn surplus and resulted in lower member and employer contributions from 1 January 2024, with improved benefits on course to be implemented from 1 April 2024. Read more about what’s changing and when.