A major deal that could enhance more than 30,000 British Steel pensions has been agreed, with a £2 billion buy-in from a new insurer.
Pension Insurance Corporation will secure the liabilities of the members, paving the way for the Old British Steel Pension Scheme to leave the Government's Pension Protection Fund safety net it had been placed in two years ago.
More than 120,000 former steelworkers moved to a new scheme in 2018, when the Ƶ operations of Tata Steel were restructured and the heavily indebted scheme closed. One fifth chose to remain - entering the PPF, which guaranteed benefits, albeit at a lower level than those accrued.
This deal, first flagged in April, raises the prospect of better pay-outs.
Jonathan Hazlett, managing director of Open Trustees Ltd, which since March 2018 has been the trustee of the scheme and is owned by international law firm, Osborne Clarke, said: “When we were first appointed 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.
“OBSPS members can take comfort that their benefits will be looked after by an insurer, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority, as well as being committed to the highest levels of customer service.”
Exact figures for members won’t be known until the buy-out completes towards the end of 2021.
Rosie Fantom, partner at Barnett Waddingham, led on the deal. She 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. “Rigorous work carried out over the last two years allowed the scheme to take full advantage of bulk annuity pricing.”
The scheme takes in employees from around the country, with sites branded as Corus, then Tata Steel as it switched from British, to Dutch and then Indian ownership in 2007.
Huge industry pressures led to the restructuring which ultimately saw the long products division return to the British Steel name as a new company in 2016. It has since been rescued by the Chinese Jingye Group after entering compulsory insolvency in May last year.
PIC has a portfolio of almost a quarter of a million pension scheme members with £47.7 billion in financial investments. Clients include FTSE 100 companies, multinationals and the public sector.
Uzma Nazir, head of origination structuring at PIC, said: “This is a significant transaction, guaranteeing the benefits of the more than 30,000 pension scheme members who have faced a long period of uncertainty about the level of their benefits, and providing many with an uplift over PPF levels. We are delighted to have been able to work so closely with the Trustee and Barnett Waddingham and ultimately deliver what was required in the biggest and most significant transaction of the year.”
