On the go: The British Steel Pension Scheme II has secured a second buy-in with Legal & General, insuring around 25 per cent of its liabilities.
In an update published on May 27, the £10.3bn scheme trustees stated that this transaction brings the total liabilities insured to just under 30 per cent.
At the end of 2021, the scheme agreed to a buy-in also with L&G, covering around 5 per cent of liabilities.
“In order to ensure that BSPS benefits can be paid in full, not just now but into the future, the overall objective of the scheme is to reach full funding on a solvency or ‘buyout’ basis,” the update stated.
Besides giving the scheme the opportunity to “secure all liabilities with one or more insurers”, this route also allows BSPS II to reach the funding target of 103 per cent, which will allow the trustees to make additional payments to members under the agreement reached when the scheme was set up.
“The earlier we can do this, the greater number of members who will benefit,” it added.
When the new scheme was set up in 2018, as a result of a regulated apportionment arrangement approved by the Pensions Regulator, the trustee agreed with Tata Steel UK — the scheme’s sponsor — that if the financial position of BSPS II as of March 2021 was better than expected, an additional one-time lump sum payment could be paid out to certain pensioner members.
Pensions Expert reported in March that 50,000 BSPS II pensioner members would receive a one-time extra payment, worth collectively £58mn, due to the pension fund’s positive results.
According to a newsletter to members at the time, the scheme’s latest actuarial valuation “has shown that the conditions for making this one-time payment were met, and £58mn is to be shared out”.
The scheme’s latest actuarial valuation, as of March 31 2021, showed a 105 per cent surplus on technical provisions, slightly lower than the 106.3 per cent registered in March 2018.
The agreement for a one-time payout was made due to the fact that, unlike the old scheme, BSPS II does not provide inflationary increases on any pension earned before April 1997 above any guaranteed minimum pension element.
The payment is therefore intended to provide some compensation to members for this difference for the period between 2018 and 2021.
