Nostalgia?
Once again the future of the Port Talbot steelworkers is under threat. Al Rush makes an explicit link to the situation steelworkers found themselves in the summer of 2017.
Another threat. Why the men and women of BSPS had finally had enough in 2017 and saw transfer as a means of saving their retirements – not making a million quid.
— Rush (@exRAF_Al) July 22, 2022
Al’s comment is acute. Pension decisions are usually taken by the household, by men and women. It is also acute in linking the future of the pension and the plant – amongst BSPS members.
The British Steel Pension Scheme resonates with the nationalisation of the steel industry in 1967. That nationalisation only lasted 21 years but the link to the taxpayer remains. In 1999, British Steel PLC came to an end, to become Corus
Tata is asking for £1.5bn from the Government to dismantle the blast furnaces at Port Talbot and turn the plant into a recycling centre.
For the heritage of Port Talbot, it would mean the loss of many of the 8,000 jobs the plant currently supports . It will be seen as a downgrade of its principle industry, even if an agreement with Government is reached. If no agreement is reached, the impact on the town will be very serious.
It is easy to fall into nostalgia, but there is nothing sentimental about a blast furnace or a pension scheme.
The households of Port Talbot who decided they did not want to rely on Tata to sponsor their retirements were acting on sentiment not financial sense. Rather than offering a different perspective, the rogue advisers threw petrol on the flames, encouraging steelworkers to abandon a wage for life for a large invested pot which they promised to manage better.
An indication of the trust steelworkers place in IFAs during Time to Choose.
For this , the advisory industry is now paying a heavy price.
A necessary casualty?
Decarbonising the UK steel industry is vital if the country is to meet its pledge to reach net zero greenhouse gas emissions by 2050. The Climate Change Committee, a government advisory body, has advised that the sector needs to be “near zero” by 2035.
According to the FT
In 2020, the (steel) sector accounted for 11.1 per cent of Britain’s industrial emissions and 2.6 per cent of all UK greenhouse gas emissions.
There is no room for sentimentality here either. Last week was a wake up call for anyone who thought climate change isn’t happening.
How this should be managed..
Tata’s appeal to Government comes at a bad time. There is no real Government till well past September when the new Prime Minister , cabinet and ministerial teams are in place. The timing of the Tata announcement coincided with the first day of the summer recess. This has not got off to a good start as the people of Port Talbot now have to wait to see whether Government and Tata can find a way forward. If they can’t – all steel activities in the town could be wound down.
On a more positive note, Tata’s plan at least secures a greener future for Britain and its steel industry and provides some prestige to Port Talbot which may become a focus of the green economy. I welcome the plan, but worry about its impact on the people I’ve met in Port Talbot.
What must not happen, is further destabilisation of Port Talbot’s households hopes for their financial futures. This may be a threat to jobs, but it is not a threat to pensions, other than the workplace pension Tata offers to active steelworkers. BSPS, reincarnated from the PPF is bound for buy-out with Legal & General. Earlier this month LGIM announced it would be taking full control of the assets of the scheme, with the BSPS internal management team being absorbed into the insurer by the end of the year.
The future of BSPS is very secure with the Scheme being well funded.
And what of those who left BSPS during the Time to Choose?
As my articles this week have tried to explain, many steelworkers who have been poorly advised and badly protected by both TPR and the FCA, are still comfortable with the decision they and their households took. Some took the decisions with good advice and will not complain and some will simply not complain.
But most steelworkers will make a complaint through FOS and will get compensation or perhaps restitution. I support the principle of restitution as an option but not as a replacement for financial compensation. PIMFA’s proposals for restitution or nothing is based on restitution being available – either into the PPF or into some other lifeboat (possibly a Superfund, possibly an a bulk annuity specialist).
The PPF has no mechanism for accepting individual members and providing scheme pensions in exchange for a DC pot has too many dependencies to it, to provide resolution to a problem that is already 5 years old. The time for such plans may have passed (this blog did suggest it as possible last year).
For those who have left the scheme, the pension pot is likely to provide them with their ongoing financial security. The gap between the cost of replacing pot with forsaken pension is unlikely to be met by compensation and these households are increasingly financially resilient (not least due to the effort of Al Rush and others ).
It is up to FCA, FOS and FSCS to ensure that all who claim are treated fairly. This includes those who have already accepted meagre compensation. Everyone should be levelled up to the deal that is currently being consulted on.
The compensation scheme is even more important, as the plant’s future comes under renewed threat.
The future of pensions and of plant are linked
Al’s tweet is doubly acute. He knows, from living in Port Talbot these past years that the pension and the plant are linked – when Tata lost the confidence of the town in the future of the plant, the town lost confidence in Tata and its sponsorship of the pension.
I think it unlikely that there will be another run on BSPS, if inquiries are received, I suspect they will not find an adviser.
But I suspect that many households which relied on BSPS and now rely on the transfer and market returns, will be making the adjustments to a new greener future over the next year. It won’t be easy, it would be easier if their financial future had been more certain. Which is all the more reason that the compensation that they receive is full and fair.
The future of pension and plant are linked, but only by history. Going forward BSPS members should have confidence in their Scheme,