The Old British Steel Pension Scheme is back from the dead!

This blog is about a minority of British Steel Pension Scheme members who either chose not to move to the new schemes or transfer benefits , or who made no decision and ended up in a scheme, heading for the Pension Protection Fund. For them, their journey has taken an unexpected route.

There is good news for people who chose to stay in the old BSPS scheme which was heading for the Pension Protection Fund. It’s not heading for the PPF anymore, in fact it left the PPF assessment period on November 9th and people who didn’t choose to transfer to the new BSPS scheme in the “time to choose”, will now get their benefits paid to them in full by an insurance company – Pension Insurance Corporation (PIC).

For many people, including people who made no choice at all, the old BSPS benefits are likely to pay not just more than the PPF but more than the new BSPS scheme. This eventuality was not one that was expected and has happened because the investments in the old BSPS scheme have done better than expected.

It’s not all good news though. Because of various legal technicalities (such as the execution of  GMP equalization), the buy-out of the old BSPS by PIC won’t happen till next summer, meaning that payments at the generally lower PPF levels will continue for another two quarters.

In August 2019, the new Trustees of the old scheme , wrote to members

Our administrators Barnett Waddingham
have begun an exercise to look at how a
sample of members’ benefits have been
calculated.

This is to check that members
are receiving, or are due to receive,
the correct benefits in line with the
Scheme rules. This exercise will continue
into 2020.This work could take about
two more years

As you can see, there is a lot of work
involved in completing the assessment
period tasks. At the moment, it is
possible that the assessment period
could continue into 2021. We will keep
you up to date on our progress.

This is a classic case of the law over-riding common sense, but that’s pensions. The adjustments in benefits are extremely unlikely to benefit members as much as the payment of pre- PPF benefit levels from 2021 (when the buy-out was meant to go ahead). The law can be an ass and pension law is no different.


Transfer  opportunities are back – but…..

What will grab headlines is that there is now a window for members who did not choose to transfer away from old BSPS prior to the scheme going into the PPF in March 2018, to do so now. Good luck finding an adviser who will help you with that choice! BSPS was initially a goldmine for advisers who saw the choice as PPF or new BSPS or a transfer into another pension with a cash equivalent transfer value. Advisers have since been paid for the advice, and where the advice was to transfer, have often benefited from advisory and even management fees on the money transferred.

But the goldmine has turned into something quite different as the FCA encourages those who have transferred to seek compensation through the Financial Ombudsman and from the Financial Services Compensation Scheme or directly from the advisers (if they have financial capacity). In practice, many advisers involved with transfers have had to close. This is why the likelihood of advisers taking on more of such business today is  slim.

No doubt, some will apply for transfer values which may turn out to be even higher than those offered in Time to Choose when values were reduced to reflect the deficit the Scheme found itself in. It may well be that the actuarial factors used to make the calculations have moved in favor of transfer values, the trustees of the scheme wrote to remaining members in 2019 confirming that

We .. made some changes to our
Scheme’s assets so that they are now
invested in line with our investment
strategy. It is important to have an
investment strategy that reflects the
fact that the Scheme is in a PPF
assessment period.

Such changes are likely to result in higher security for members and larger CETVs.  It may be that a few steelworkers who have seen some of their colleagues see pension pots prosper in largely benign markets, will be tempted by the opportunity.

But the FCA are making it very clear in their statement issued yesterday (Dec 6th) that this is unlikely to be a good idea.

The FCA, TPR and MoneyHelper believe transferring out of a DB pension scheme is unlikely to be in the best interests of most consumers. Any scheme members looking for impartial guidance, or thinking of transferring out, should contact MoneyHelper on 0800 011 3797 before taking any further action.


So what should steelworkers make of this?

Back at the Time to Choose, no-one was predicting that the old BSPS would recover as it did. Few would have picked staying in the old BSPS as anything better than a passport to the PPF. Members who transferred to the new BSPS may well feel that in retrospect, they could (and maybe should) have stayed put.

Members who have transferred out of BSPS because they saw the choice of PPF v new BSPS as Hobson’s choice, may feel that they took the decision without properly understanding the upside of staying in old BSPS. This may further fuel any sense of injustice against the advice they were given – or even the guidance from their old Trustees.

But all that is to miss the bigger point, which is that after four years of uncertainty, the future is looking brighter for remaining members of Old BSPS, that New BSPS members remain well protected in a well run scheme and that the clement investment conditions of the past three years mean that those who have exposed their retirement savings to the market,  should be seeing their pots in good shape.

There is no way back to either BSPS or new BSPS for those who transferred away, but let’s hope that the financial services industry can come up with some help for steelworkers who want a simple wage in retirement, with rather greater certainty than many currently enjoy.

 

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , . Bookmark the permalink.

6 Responses to The Old British Steel Pension Scheme is back from the dead!

  1. Stefan Zaitschenko says:

    Henry,

    Good factual piece but I find your opinion that “members …may feel that they took the decision without properly understanding the upside of staying in old BSPS” does not reflect the position at TTC and why I think “This may further fuel any sense of injustice against the advice they were given – or even the guidance from their old Trustees” is over the top and potentially scaremongering.

    Roadshows attended by the PPF were used to explain the position very clearly. Indeed, as you know, this information about PPF assessment and the pros and cons of each option were explained. I don’t remember any of the expert voices, including yourself, making any predictions about the PPF assessment outcome which depended on members assets transferred and future growth. I do remember it being said that achieving a buy out required billions more than were in the old BSPS fund.

    The Trustees and TSUK made us all aware of the potential buyout of BSPS2 – primary objective to release the sponsor TSUK. The Trustees have also told us that they will make good on the promise to provide some compensation to BSPS2 members for loss of pre-1997 indexation (however modest).

    I am now trying to defuse the concern raised by your posting of the link to this article on our FB group and explain why your opinion” Members who transferred to the new BSPS may well feel that in retrospect, they could (and maybe should) have stayed put.” is not useful.

    Stefan

    • henry tapper says:

      Stefan, no-one has done more than you to keep BSPS members informed. I agree with your criticism of experts (including me) that we did not anticipate or communicate the possibility of BSPS leaving PPF assessment and that is only one of the things we didn’t get right.

      We did point to the PPF as having advantages. We don’t yet know how much better the PIC offer will be than the PPF- one of the very many reasons why no-one can make a decision on transferring with much certainty.

      Indeed , the whole business of asking members to take such important decisions as Time to Choose did. looks even more unfair today than it did at the time. Time to choose was avoidable – had the RAA not made it necessary. The RAA was avoidable and – as now turns out to be the case – it served little good purpose and has caused enormous upset.

      What tPR and others need to face up to, is that giving people the freedom to choose is no freedom, but a terrible bind. The same may well be said about the 2015 pension freedoms.

      I hope that the NAO, when they conduct their inquiry, ask some questions as to the advisability of the RAA, which appears to have been a total disaster.

  2. Eugen N says:

    @Stefan

    I disagree.

    The issue here is just a result of numbers. Too many deferred members chose to transfer out or chose BSPS2.

    In the BSPS remained mainly retirees who were above age 65 (or 60 benefiting from previous reductions in personal) with those above age 65 not affected by the pension reduction, plus a few who made a conscious decision for the PPF, based on early retirement factors and PCLS multipliers. The number of deferred members who chose this PPF option was rather small, and as a result the investment return on the assets held for people already retired was enough to pay them full pensions.

    Now, some deferred members with the same pensionable service in BSPS2 and in the original BSPS will have a very different pension, some will have pension rights worth 30% or so more.

    For me this is enough to think that members of BSPS2 should have the same entitlement, and all this “Option to choose” was a sham. They were not told that in fact under the current pension law, the BSPS could exit the PPF and may be able to pay benefits higher than PPF or even the original benefits!

    • henry tapper says:

      Eugen, your analysis may well be right. The exodus of younger people from old BSPS may well be the reason for its current buoyancy. It will be interesting to know what floated the BSPS boat away from the lifeboat – if anyone has that information , I would like to hear from them.

      • Eugen N says:

        I think it is worthwhile looking into this.

        Could it be some mortality gain due to Covid which also influenced this?

  3. Gwylym Wilkins says:

    As someone who transferred my BSPS fund into a private pension I’d like to know as BSPS is now thriving does that mean I will not receive the 5% of my fund that was deducted from my fund to support the shortfall in BSPS?

Leave a Reply