Defined Benefit  

British Steel pensions safe amid company trouble

British Steel pensions safe amid company trouble

It will be business as usual for the British Steel Pension Scheme II even if the company goes into administration, as the plan is being sponsored by a different employer.

According to FTAdviser's sister newspaper the Financial Times, British Steel has asked the government for tens of millions of pounds in emergency funding, as it battles to avoid collapse.

The company blamed uncertainty caused by Brexit as it confirmed it was in talks with ministers about "a package of additional support", which one person briefed on the discussions said was for £70m-£80m.

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Despite uncertainty about their employment, BSPS II - the steelworkers' defined benefit scheme – is safe, as the new scheme doesn’t have any links with the ailing company.

British Steel, the company, was formed after investment firm Greybull bought Tata Steel’s Scunthorpe steelworks in 2016 and renamed it British Steel.

But Tata had already taken on the British Steel pensions when it bought Corus in 2007.

The funding deficit of the scheme was an increasing problem which led to the company and regulator agreeing a restructuring of the scheme in 2017 through a regulated apportionment arrangement.

As a result of the RAA, BSPS members were asked to decide by December 2017 whether to move their defined benefit pension pots to a new plan, BSPS II, or stay in the existing fund, which was then moved to the Pension Protection Fund as part of a restructuring of pension liabilities.

A spokesperson for TPR said: "This is a difficult time for employees of British Steel. Many British Steel employees in the UK were previously members of the BSPS and so made a decision about what they wanted to do with their BSPS pension in 2017.

"Their decision at that time and the security of their benefits as a result of that decision would not be impacted if British Steel went into administration. The company had no ongoing link to the BSPS after it was purchased in June 2016."

Stefan Zaitschenko, a former Tata Steel worker who helps run a Facebook group for members of the old scheme with 5,100 participants, told FTAdviser steelworkers are concerned about the future of the scheme.

He said: "The deferred members are questioning how it affects them as they are concerned they will lose their employment. But the scheme is unaffected."

Mr Zaitschenko added BSPS II was in good financial health.

The new scheme's actuarial valuation showed a surplus of £668m on technical provisions, which represented a funding level of 106.3 per cent.

But on a buy-out basis – the cost for an insurer to take on the liabilities of the scheme – the funding level was 90 per cent.

Paul Stocks, financial services director at Dobson & Hodge, said whilst there "may be a little relief that their DB pensions are no longer at risk from British Steel’s potential failure, for the majority this will be scant comfort given that their livelihoods (and those of families, friends and neighbours) are on the line."