As BSPS2 is still up and running I assumed it was an open scheme even though it is closed to new members and future accrual…….I appear to be mistaken?
Even so, I am baffled why The Pensions Regulator doesn’t seem to be supporting the Bowles Amendment to the Pension Schemes Bill which is to ensure that open DB schemes may remain open, continue to provide the high-quality pensions they have provided for decades, and that no new costs or impediments are added to their operations?
This is a comment from a steelworker who has kept faith with the British Steel Pension Scheme. He is as baffled as a non-cricketer is baffled when he’s told he has to go out as he’s “in” . To him his scheme is open, it is not closed because it has not been bought out by an insurer or been moved into the Pension Protection Fund.
And as a steel worker, taking an interest in pensions, this fellow asks reasonably what the Pensions Regulator is doing to keep high-quality pensions going. I am quite sure that the Pensions Regulator are not saying publicly that they oppose or support the Bowles amendment, it is not its job to interfere with the process of Government. But everything in the DB funding code suggests that the direction of travel, is in their direction of scheme closure, and so far Government is not making its intentions clear with regards the Bowles amendment.
The Bowles amendment is an attempt , by certain members of the House of Lords, to help DB occupational schemes that want to take on new liabilities , to do so.
The steelman’s views, which you can read in the comments section to Iain Clacher and Con Keating’s blog on this subject, can be read by following this link.
The right of everyone to understand their pension
Considering how important pensions become to those in their later years, it is surprising that the kind of debates that happen on this blog are assumed to be confined to academic and professional circles. Yesterday, in yet another delay to the long term strategy of USS, the Trustees announced they were putting back the start of the consultation on the valuation methodology to Sept 7th, the consultation will not be with members but with the employers . The consultation which will run to October 30th will run in parallel with the debate on the Bowles amendment.
It is sad that voices like that of this steel worker are not informing either the consultation at USS or indeed in parliament. It is thought I suppose that these matters are beyond the interest or comprehension of members who have not been equipped with the Trustee’s toolkit.
This is not the case. I regularly read and occasionally comment on the debates of the steel workers about their pensions future. I am privileged to have been in the British Steel Pensioners Facebook group since early 2017 and have followed the self-education of many steel workers as they grappled with their Time to Choose and with questions about the (lack of ) revaluation of certain pre 1997 benefits, the preservation of scheme benefits such as partner’s pensions and questions about the distribution of surpluses (above technical provisions).
I’ve watched them see their scheme move from the kind of arrangement Sharon Bowles is trying to support to a scheme that is on a “flight-path to buy-out”. Many steel workers feel locked out of any further improvement to their benefits and are fearful of the consequences of buy-out.
The standard of debate on the Facebook page of the pensioners page is extraordinarily high. Take this recent comment from a steelworker from the north east.
I have posted about a buyout and what the Trustees intentions are following the Gov’t consultation in 2016 on the old BSPS.They have always stated that the long term future of the scheme (which became BSPS2). They said
“33.According to December 2015 figures, the scheme has assets of £13.3 billion and liabilities based on running on with a solvent sponsoring employer of around £14 billion, so has a deficit estimated at around £700 million on a technical provisions basis. However, the scheme is around £1.5 billion short of what would be needed to BUY OUT benefits equivalent to Pension Protection Fund compensation levels (this is known as a section 179 basis in pensions legislation). The deficit to buy out the benefits in full is estimated to be around £7.5 billion.”
This was when they hoped the Gov’t would approve reduction in benefits without members consent – which of course didn’t happen. We had to opt in to BSPS2 thereby giving consent.
Note they say PPF compensation levels which are less that BSPS2 benefits.
Extrapolating to now with fewer members and liabilities, the scheme is in a very strong position with a surplus. We are approaching BUY OUT level for a PRIVATE insurer BULK ANNUITY which requires assets to be at least 103% of liabilities on a different calculation (IAS 19 I believe).
In a nut shell:
1/ We are currently still tied to TSUK as sponsor for BSPS2 which means we could be forced into PPF assessment if they become insolvent.
2/ That would most likely lead to a BUYOUT at PPF levels of compensation (less than we have now).
3/ The Trustees are building the assets through a low risk investment strategy so that they can control the outcome and choose the insurer to give us a better outcome that PPF compensation. (This is exactly the same as Open Trustees Ltd are doing with the old BSPS members who went into PPF assessment).After a Buy Out our benefits would be paid through an annuity – ie pensioners would see no difference or potentially better than now.
There is still a lot of work to be done and we will not know the details for some time. It was expected that the assets would have grown sufficiently by next April 2021. The Trustees have said they would consider restoration of some portion of pre-97 service benefits at the same time.
(July 2019 – Rothesay Life, L&G and Pension Insurance Corporation are among the parties thought to be interested in completing a deal.)
So what are we doing for deferred and actual pensioners?
Coincidentally, I spoke with someone involved in the management of pensions that have bought out yesterday. We discussed what insurers like Rothesay Life , Pensions Insurance Corporation and Legal & General can do for their annuitants.
it seems clear that many of them have a need to be informed about their pensions and will continue to want to be treated as customers of whoever buys them out. They are used to having been in a trustee led community and see the future as a transfer of responsibilities to their new employer. To all intents and purposes that is what a pension scheme is to a working person who stops working.
To the list of buy-out specialists we know about, will be added Clara, Superfund and maybe others, who will become the “new employer” to many more pensioners.
These pensioners and soon to be pensioners do not see their pension schemes as closed because they are still paying them money. A pension scheme is closed when it stops paying pensions.
For pensioners, pensions are very much open. We need to think more about how these DB pensioners are treated and start thinking of their needs for understanding and for financial services.
A south Wales sunset, photographed at Port Talbot by Al Rush