Around 4,600 member of the British Steel Pension Scheme (BSPS) have been given an extension to their decision deadline, to 22 December, due to a new law solving an anomaly at the Pension Protection Fund (PPF) still being in consultation.
Around 130,000 steelworkers will have to choose to move their defined benefit (DB) pension pots to a new plan being created, BSPS II, or stay in the current fund, which will be moved to the PPF, by 11 December.
However, with the current rules, the BSPS bridging pensioners would be better off if they move to the pensions lifeboat.
Bridging pensions allow individuals who retire before reaching state pension age to be paid a higher rate of pension initially.
The bridging pension then reduces when the individual begins to receive their state pension or reaches an age specified in their pension scheme rules.
At the moment, the PPF doesn’t have the ability to reduce the members’ pensions, which means that some individuals would be financially better off in the PPF than they would have been under the rules of their scheme, which is the case of BSPS.
The Department for Work and Pensions (DWP) launched a consultation on the draft rules to change this anomaly in August, which closed on October 1.
However, the government opened a technical consultation this month on the new rules and how these should be applied, which only terminates on 3 December.
According to Stefan Zaitschenko, a former Tata steelworker who helps run a Facebook group for members of the old scheme with 4,300 participants, this date would be very close to the original deadline for BSPS members to choose the best option for their future pension, and the original rules might not have changed by then.
Mr Zaitschenko, who is himself a bridging pensioner, is expecting that the change to the PPF rules will be approved and signed off by the government.
He said: “If the law didn’t change, the best solution for these members would be the PPF.
I would be a lot better off [with the original rules], but it would be selfish, because I would be taking some of the assets that should be allocated to all PPF members.”
In August, Tata Steel UK (TSUK) got the go-ahead to offload BSPS and create a new DB fund.
As part of the deal, The Pension Regulator gave its formal approval to a regulated apportionment arrangement (RAA).
Mr Zaitschenko explained that this agreement triggered the change in the rules of the pensions lifeboat.
He said: “It would have cost so much [to take on BSPS members with the current rules] that the PPF and the levy payers wouldn't accept that.
“The only way to deal with it without changing the rules would be for the PPF to get an extra £600m, which would have affected the assets for BSPS II, and possibly make it unaffordable.”
Other members have been requesting an extension to their deadline to make a decision about their pensions, due to a lack of data in the information packs sent by the scheme trustees.