Maria Espadinha’s excellent article in the FT’s Advisor clarifies to financial advisers that were Greybull to go into administration, there would be no impact on the new BSPS. It’s a timely reminder as there will undoubtedly be increased vulnerability amongst traumatised British Steel workers in Teeside and Scunthorpe.
The Facebook page that members of the new BSPS use to talk with each other , post her article to clarify the position for pensioners and deferred members of the scheme. The scheme does not depend on Greybull’s money and therefore it is business as usual for BSPS. As ever, it is Stefan Zait who provides the information.
Such articles keep the lead generators stay away from these sites.
British Steel’s Workplace Pension
The FT article ends with sombre words from Paul Stocks
“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.”
With the jobs come pensions , not the defined benefit accrual of yesteryear but a healthy contribution into a Legal and General workplace pension that covers the staff in the Teeside and Scunthorpe plants.
It is a good plan with very low charges and a high contribution rate (relative to auto-enrolment minima).
The plan , like Tata’s equivalent (which is with Aviva), is little discussed but it too is under threat from the very probable collapse of Greybull. The plan was funded to offer some continuity with what came before. But if Greybull’s business does get taken over, it is only too likely that what will replace the current contribution rate, will be something a lot less generous.
It is in the nature of modern pension policy that the minimum viable product is set at the bare bones auto-enrolment rate. Let’s hope that Greybull survives, but if it doesn’t, let’s hope that the jobs of the British Steel workers are preserved – with salaries and pensions unreduced.
Putting staff last
We have now reached a point in corporate management where pensions are considered as “costs” rather than “benefits”. The business of private equity firms such as Greybull is to reduce costs, part of the attraction of British Steel to them was that it came without the long-tail pension liabilities that stayed with Tata.
The sorrow is that even with their pension-lite staff liabilities Greybull has not been able to turn British Steel into a viable business.
As with Monarch Airlines , Comet and Ryland Snooker Halls (all funded by Greybull Capital) the debt that has been pumped into British Steel has been created by the Greybull management and it looks very likely that that debt will be the first credit in line , if British Steel crashes.
As this article in the Guardian points out, the financiers of Greybull are unlikely to have suffered if British Steel goes under.
The people who will suffer as Paul Stocks reminds us – are the staff.
Workplace pensions matter too
There is currently protection for defined benefit promises through the PPF, but there is no protection to employees for the loss of future defined contributions into workplace pensions.
The implied contract between employer and staff to meet pension contributions lasts only as long as the employer chooses to fund both salary and pension.
While the funds which have been built up to date are safe, the future pensions that they buy are now under threat as the jobs that fund the pensions are axed.
It would seem that at British Steel, the future of the British Steel workplace pension is so small a matter as to not be mentioned in any article I have read on the impending closure.
But the workplace pension does matter, it comes with the job and the funding of the workplace pension reflects the importance historically that pensions played to steel workers.
A pension is a pension
If you are a British Steel worker, you will probably not be thinking about your workplace pension right now. You will hopefully be consoled by Maria’s article that your rights under new BSPS are secure. But your rights to future contributions into your workplace pension are under threat and those rights are part of your remuneration package.
While the eyes of the world have been on the defined benefits within BSPS, you have been building up a personal pension with Legal and General which supplements your state pensions and any DB rights you have.
I wrote at the beginning of last year that both Tata and Greybull have under-promoted their workplace pensions and you can see why.
They did not want these workplace pensions connected in any way with BSPS transfers. They succeeded, the Tata and Greybull workplace plans were treated as irrelevant then so that they can now be sidelined. That’s what’s happening.
I have pointed out on this blog that Aviva and Legal and General – their management and their IGCs stood to one side and did not promote their workplace pensions to Tata and British Steel staff (respectively). I have complained that these excellent plans, capable of taking transfers, were ignored by IFAs and by the FCA and tPR. Had these plans been promoted , rather than some of the SIPPs into which steelworker’s “wealth” were invested, many of the problems that are emerging today would have been avoided.
Where was the protection for staff interests from the employers? Why did the plan providers stand back and where were the Regulators? Who was protecting your BSPS pension then and who is protecting your workplace pension now?
You deserve protection and so do your pension contributions. If your defined benefits were at risk (and there is every chance that Tata Steel will come under pressure following the break up of Thyssen Krupp’s partnership) then the Pensions Regulator and the Work and Pensions Select Committee will swing into action.
But a pension is a pension and who is fighting for you and your workplace pension?