Defined Benefit  

Tata Steel pension scheme transfers double

Tata Steel pension scheme transfers double

Senior managers with Tata Steel transferred their pensions out of the company pension fund as the steelmaker negotiated a deal to cut the retirement incomes of the scheme’s 126,000 members, according to a Financial Times report.

The trustees of the British Steel Pension Scheme, BSPS, confirmed to FTAdviser's sister newspaper that senior managers were among current and former unretired employees of Tata Steel to have cashed in their final salary pensions. 

The numbers transferring out of the BSPS fund have more than doubled as employees have been attracted by the rise in the value of transfer values made to those leaving defined benefit schemes over the past two years.

Speaking to the Financial Times, the BSPS trustees said: “The number of transfers completed during the year to 31 March 2017 was 482 (the comparative figure for the previous year was 170).

“Included within the figure of 482 would be a very small number of current and former senior managers, consistent with the numbers overall.” 

Details of the transfer activity came a month after Tata announced it had reached a deal with BSPS to decouple the £15bn retirement fund from the business, after more than a year of intensive talks with The Pensions Regulator.

The trustees have backed the plan to separate the scheme from Tata, which would involve benefit reductions for tens of thousands of members but keep members out of the pensions lifeboat fund, where compensation could be lower for some.

Writing in a trustee update to members on 16 May, the BSPS trustee chairman, Allan Johnston, said:  “Although the Pension Protection Fund is an important safeguard for pension schemes generally, the trustee believes that the BSPS has sufficient assets to offer members the potential for better outcomes by enabling them to transfer to another scheme offering modified benefits.

"For most scheme members, these modified benefits are expected to be of greater value than those they would otherwise receive by transferring into the PPF."

John Ralfe, an independent pensions expert, told the Financial Times: “BSPS has improved its cash transfer values in the last few months, to reflect the scheme’s lower risk investment strategy.

“The fact that a member transferring now gets more cash, may explain the marked increase in the number of people transferring.”

Tata declined to comment. 

Last year, the trustees wrote to members setting out proposals to separate the pension plan, with an estimated £400m deficit at the time, from the business with the fund seen as a financial drag on the company.

Under the terms of the deal announced last month, both unretired and retired members of BSPS will see lower payouts.

The 482 members who had opted to quit the scheme by taking their future pension as a lump sum will not be affected by the arrangement, yet to be approved by the regulator.

About 33,000 of the scheme’s 126,000 members had been potentially eligible to cash in their pensions. 

stephanie.hawthorne@ft.com