British Steel Pension Scheme – major changes
In August this year, The Pensions Regulator (TPR) in the UK gave approval to a type of restructure (known as a Regulated Apportionment Arrangement or RAA) of the British Steel Pension Scheme (BSPS), based on a proposal from Tata Steel UK (TSUK), to help prevent the company becoming insolvent.
This necessary restructure affected the estimated 130,000 members of the BSPS and left them with a choice to make regarding their pension benefits in the BSPS.
As a result of the restructure, all members of the BSPS, have to choose by 11th December 2017, as to whether they:
- want to remain in the existing plan - which will be moved to the Pension Protection Fund (PPF), or
- want to be transferred to a new scheme being created, called BSPS II.
The existing BSPS closed to future accrual from 31st March 2017 with all member’s benefits, being moved to the PPF after 11th December 2017. By way of explanation, the Pension Protection Fund’s main function is to provide a safety net to members of eligible defined benefit pension schemes, when there is a insolvency issue in relation to the employer funding the pension scheme. The Pension Protection Fund is a statutory fund run by the Board of the Pension Protection Fund – which is a statutory corporation established under the provisions of the Pensions Act 2004. This means, for members choosing to remain in the original BSPS, their retirement benefits will be paid from the PPF instead of the BSPS.
The benefits paid from the PPF will be lower than the existing BSPS and any automatic increases will also be lower.
The new British Steel Pension Scheme (BSPS II) will look to pay the same benefits as existing BSPS but any increases to the pension paid, will be lower than the current BSPS.
It is important to also consider other factors, other than pension benefits (such as spouse pensions or dearth benefits), before making your decision – and you may need to take advice on this.
There are 43,000 members who are “deferred” members of the BSPS (ie existing members of the BSPS who no longer work for British Steel), and for those members a transfer out of the BSPS to a private pension scheme in the UK (or a QROPS) is a potential third option.
If you are deferred member of the BSPS it is important that you receive impartial, specialist pension transfer advice from a firm, such as bdhSterling to fully investigate as to whether it is a better outcome for you remaining with BSPS or holding your retirement funds elsewhere.
If you want advice as whether you should remain in the British Steel Pension scheme or transfer to another pension arrangement, please contact bdhSterling to speak to an adviser.
Remember, if you do not make decision by 11th December 2017, your BSPS benefits will automatically be switched to the Pension Protection Fund.