Kevin Skerrett | CUPE Research
File this under “awkward pension fund investment” stories.
British public services union UNISON recently informed CUPE and other Canadian unions that Thames Water, a private water company, had announced collective bargaining proposals to close down the secure Defined Benefit-type pension plans that covered thousands of their employees.
Guess who holds a large stake in UK water companies? Canadian pension funds.
That’s why UNISON and its coalition partner unions asked Canadian unions to pressure the funds who own very significant stakes in these companies (over 30 per cent in total). Naturally, we answered the call.
Water privatization is much more widespread in the UK. Unlike in Canada, UK water and wastewater services sectors were entirely privatized in the late 1980s by former British Prime Minister Margaret Thatcher. Nine private water and wastewater companies took over these systems and operate them with a primary focus on maximizing profits for the owners. In 2017, several of the largest Canadian pension funds – including OMERS, OPSEU Pension Trust, bcIMC, and Alberta-based AIMco – expanded their ownership stakes in these water companies and became controlling owners.
Water privatization is often very profitable for investors. However, the consequences are typically very negative for the quality of the service and for the workers involved. In this particular case, Thames Water has been repeatedly found guilty of dumping enormous quantities of toxic sewage into London waterways, a practice that one British judge deemed to be “borderline deliberate.” Rather than investing properly in its infrastructure, Thames and other water companies pay out enormous amounts of money to their owners as dividends. Now, they are aiming to squeeze even more money out of their operation by shutting down their employees’ pension plans.
Thames Water closed their defined benefit (DB) plans in 2013. Employees hired after that were enrolled in a defined contribution plan. But for some 2,500 employees hired before that time, their pension plan remained the same kind of secure, final-average-salary type pension plan that most CUPE members have.
In October 2017, UNISON shared a briefing note with Canadian unions on the specific details of the employer proposals for closing the company’s secure DB plan altogether. Soon after, the company announced their plan to close their DB plan and force all of their workers into the less secure defined contribution plan. When UNISON faced an increasingly aggressive negotiating team from the company, they began contacting the Canadian unions with members in the pension funds that co-own this company.
CUPE and other Canadian unions took action. Over several weeks, representatives from the CLC, BCGEU, NUPGE, and CUPE contacted pension trustees and senior staff at the four funds directly involved with Thames Water.
We did this because Canadian pension fund holdings in the Thames Water parent company (called Kemble Water Holdings) are very substantial, ranging from 3.2 per cent (AIMco) up to 17.5 per cent (OMERS). These ownership stakes are not holdings of publicly-listed stock – they are direct, “private equity” ownership shares that mean the funds actually have very powerful roles as direct owners of Thames Water (alongside other financial institutions).
By November 2017, we got some good news. Following this initial wave of pressure, combined with the strong bargaining table fight put up by the UK unions, Thames Water negotiators had agreed to temporarily “suspend” the pension plan closure proposal for two years, pending a review of pension plan costs and fees.
This is not the complete victory the unions wanted, but it’s nonetheless very positive. It shows that this kind of coordinated action among trade unions involved in pension issues can play a vital role in protecting workers and their livelihoods.
For CUPE and for public sector workers in Canada, there are two even more important lessons to be learned.
The first is that privatization of these kinds of public services is a serious threat – both to the services and to the workers who provide them. The second lesson is that, ironically enough, Canada’s pension funds are now playing a disturbing role as direct owners of infrastructure companies that attack the pension benefits of the workers they employ.
The goal of ensuring that worker pension funds are not used in this way is clearly an ongoing challenge – at the bargaining table and beyond.
What your local can do:
- Work with your CUPE staff representative and CUPE researchers to find out where and how your pension fund invests.