Steelworkers cheer £2bn pension deal: 30,000 set for retirement boost as insurance firm agrees to buy out the old British Steel Scheme
Thousands of steelworkers will be hoping to receive a boost to their pension pots following a £2billion deal.
Specialist insurance provider Pension Insurance Corporation (PIC) has agreed to buy out the Old British Steel Pension Scheme and take responsibility for more than 30,000 workers’ retirement funds.
The scheme was dumped into the Government’s pensions lifeboat, the Pension Protection Fund (PPF), after former owner Tata Steel restructured its business in 2017.
Pensions rescue: Specialist insurance provider Pension Insurance Corporation has agreed to buy out the Old British Steel Pension Scheme
The PPF spent more than two years analysing it and in the spring concluded its funding was more robust than expected.
This meant the scheme did not need to stay in the fund and could be taken over by an insurance firm.
What members can receive by being in the PPF can differ depending on a variety of factors.
PIC says that under the deal every pension will now be ‘at or above’ the levels that would have been received in the protection fund.
Many will take home more because the extra funding available will be distributed into their pension pots.
The arrangement has been praised by the industry and unions.
A spokesman for steelworkers’ union Community said: ‘This is welcome news as it means many scheme members should be better off than they would otherwise have been.
‘The buy-in supports what the trade unions have always said, that the British Steel Pension Scheme was a well funded scheme that could not be allowed to collapse into the PPF.’
An industry source said the deal would be ‘like Christmas’ for those who had been expecting to receive the PPF’s terms.
But PIC has not revealed any details. It has not said who will get more than they would have done had the scheme remained in the protection fund, or how much any uplift might be.
Those in the scheme will not find out what they are owed until the deal completes at the end of next year. About half of the 30,000 members receive a pension.
PIC has around £48billion in assets and manages pension schemes for the likes of BHS, Cadbury and the London Stock Exchange Group.
It is tightly regulated but if it runs into difficulties, its shareholders, which include the Abu Dhabi Investment Authority and South Africa’s wealthy Rupert family, will be forced to pay up and cover the costs of the pensions.
If PIC were to collapse, then all members’ pensions would be covered fully by the Financial Services Compensation Scheme.
Jonathan Hazlett, managing director of Open Trustees, which is running the scheme, said: ‘Whilst the PPF provides a valuable safety net and a significant level of protection, many members will now receive higher benefits than they might otherwise have expected had the scheme entered the protection fund.’
The British Steel pension scheme is not related to British Steel, the company that operates steelworks in Scunthorpe and bought out of liquidation by Chinese group Jingye.
The pension scheme dates back to 1967 when it covered employees at the former British Steel, which then became Corus in the 1990s before being sold to India’s Tata Steel in 2007.
Tata, which operates the sprawling Port Talbot plant in South Wales, wanted to sell its UK business in 2016 but agreed to keep it on following an outcry from ministers and unions.
The retirement scheme had been a millstone around Tata’s neck and it eventually struck an agreement to hold on to its UK arm in return for a major restructuring of its pensions liabilities.
Under the deal, Tata agreed to shut the final salary pension scheme and replace it with a less generous alternative.
Tata also injected a £550million lump sum into the fund and gave the PPF a 33 per cent stake in its UK business.
Most of the British Steel Pension Scheme’s 120,000 or so members chose to transfer into a new fund in 2018.