British Steel Pension Scheme
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Trustee Press Release - 11 August 2017

TERMS AGREED FOR SEPARATION OF BRITISH STEEL PENSION SCHEME FROM TATA STEEL

The Pensions Regulator has today issued a determination notice and clearance statement for a regulated apportionment arrangement (RAA) to separate the British Steel Pension Scheme (BSPS) from Tata Steel. 

When the RAA takes effect, Tata Steel will pay £550 million into BSPS and will also give BSPS a 33% equity stake in Tata Steel UK Limited (TSUK).

Members of the BSPS will have the option of switching to a new scheme (the New BSPS) or moving with the old BSPS into the Pension Protection Fund (PPF).For the New BSPS to come into effect, it will be subject to certain qualifying conditions relating to factors such as size and funding level. 

The New BSPS will be sponsored by TSUK, meaning that TSUK would have legal obligations to fund the New BSPS if it fell into deficit.

The detailed terms for the RAA were formally agreed between the BSPS Trustee and Tata Steel after prolonged and intense discussions that also involved the Pensions Regulator (TPR) and the PPF.

Directly affected parties must now be allowed 28 days to refer TPR's determination to the Upper Tribunal.   Neither the Trustee nor Tata Steel intends to make such a referral. The RAA is therefore expected to take effect on or about 11 September 2017. 

The BSPS Trustee Chairman, Mr Allan Johnston commented:

"The BSPS trustees are pleased that Tata Steel UK Limited has agreed to sponsor the new scheme, subject to qualifying conditions.

"Although the Pension Protection Fund is an important safeguard for pension schemes generally, the trustees believe that the BSPS has sufficient assets to fund benefits in the new scheme that will be better than PPF compensation for most members, and to do so on a low-risk basis sustainably into the future.

"We are satisfied that separation of the BSPS from Tata Steel is necessary to avoid an insolvency of Tata Steel UK Limited.  The terms agreed for separation will secure a better outcome for the BSPS and its members than TSUK insolvency.  It is the best outcome that could be achieved in the circumstances.” 

Members' choices

After the RAA takes effect, the old BSPS will continue to pay benefits in full until it goes into a PPF assessment period, which is planned for the end of March 2018.  From that point, BSPS benefits will be at the amount the PPF will pay when the old BSPS finally goes into the PPF at the end of the assessment period.  Members who switch to the New BSPS will not be affected by PPF compensation limits.

All members will have the option to switch to the New BSPS.

The New BSPS will pay the same benefits as the old BSPS except that future increases will be smaller. The modified benefits offered by New BSPS are expected to be better than PPF compensation for the vast majority of current pensioners and for many other members. 

Details of the modified benefits were outlined in the Trustee's letter to members of 26 May 2016. This letter and other information is available on the Scheme website www.bspensions.com.

Allan Johnston continued:

“BSPS members are not being asked to make any immediate decisions.

"For almost all pensioners, the choice will be straightforward.  For other members, however, the best choice will depend on their personal circumstances and preferences. 

"The trustees will be writing to all members in the next couple of weeks to outline their options. We will also set out a timetable for when we will send members detailed information and guidance, and when members need to make their choices.

Members will be given detailed information and offered expert impartial guidance to help them make their choices.  Individual member information packs will be provided by October of this year.

“Members will be given plenty of time to make their choices. The right choice will be different for different members. It is very important that members make an informed choice after receiving detailed information about all their options and taking appropriate advice, including from an independent financial advisor, should they wish.  The choices members will be asked to make cannot be reversed, so it’s important that they’re not rushed.

"The trustees expect that the transfer to the new scheme will be completed by the end of March 2018 and that the old BSPS will go into a PPF assessment period by the end of that month.

"The qualifying conditions for the new scheme are necessary to ensure so far as possible that the new scheme will be sustainable over the many decades during which benefits will be payable. The trustees expect that the qualifying conditions will be met."