British Steel’s pension trustees agree deal with insurers

The Pension Insurance Corporation will buy out the existing scheme which is expected to take place towards the end of 2021

Trustees of collapsed British Steel’s pension scheme have agreed a £2bn deal with insurers to secure the pensions of 30,000 staff.

The agreement will see the Pension Insurance Corporation buy out the existing scheme at or above the level of compensation supplied by the Pension Protection Fund (PPF).

The Old British Steel Pension Scheme (OBSPS) has been in the hands of the UK’s pension lifeboat since 2018, after a restructuring of Tata Steel’s UK operations.

A year later, British Steel went bankrupt, threatening the jobs of 5,000 employees.

The majority of the British Steel Pension Scheme’s (BSPS) roughly 120,000 members had chosen to switch to a new scheme in 2018, but the remainder chose to move into the PPF.

The decision to stay meant their retirement benefits were guaranteed, but at a lower level than they had accrued during their careers.

Members of the pension scheme were first informed about the possibility of a buy-out in April 2020.

The buy-out is expected to take place towards the end of 2021. Until that point, the scheme will still be protected by the PFF.

Jonathan Hazlett, managing director of Open Trustees, said: When we were first appointed as trustee of the OBSPS, we anticipated that the PPF would assume responsibility for OBSPS. However, better than expected funding levels coupled with the adoption of scheme-specific mortality assumptions have meant that a wind-up outside of the PPF became possible.

We are delighted to have entered into this buy-in policy with PIC. This transaction will eventually see OBSPS members receive benefits either at the same PPF level as those currently provided or, for many members, an uplift above that amount, Hazlett said.

Consultancy Barnett Waddingham led the transaction on behalf of OBSPS.

Partner Rosie Fantom said: This is a significant step in what has been a long journey for OBSPS members, who now have the certainty that their benefits have been secured with an insurer on very favourable pricing terms in a turbulent market.

Fantom said, rigorous work carried out over the last two years allowed the scheme to take full advantage of longevity reinsurance.