Roughly 83,000 members of the British Steel Pension Scheme (BSPS) have opted to transfer to a new version of the scheme to be set up in March, its trustees have announced.

BSPS trustees have been consulting members on a restructuring of the £14bn (€16bn) pension fund since late last year, after sponsoring employer Tata Steel UK warned it would go bust if it was forced to continue supporting the scheme.

BSPS and Tata subsequently agreed with the regulator to launch a new scheme – BSPS2 – still sponsored by Tata but with lower annual benefit increases. They offered members the option of switching to this or remaining with the old scheme. The old scheme is to transfer to the Pension Protection Fund (PPF).

After an extensive communication exercise, the trustees said today that 97,000 of the scheme’s 122,000 members had responded to the consultation, with 86% opting for the new scheme. The remaining 14% chose to go into the PPF. 

Those joining BSPS2 were estimated to represent 80% of assets and liabilities, the trustees said, meaning the new scheme would be roughly £11bn in size and the PPF would take on approximately £3bn.

The figures are expected to be confirmed by mid-March, with the formal split taking place on 28 March.

The Pensions Regulator (TPR) will now assess the data and the trustees’ plans for BSPS2 before deciding whether it is strong enough to be set up. 

Allan Johnston, chair of the trustee board, said: “[BSPS2] offers benefits that for most members are the same or better than the PPF and around 83,000 members have chosen to switch to the new scheme. 

“The PPF provides a valuable safeguard for members of occupational pension schemes and around 39,000 scheme members will remain in the current scheme when it starts its formal PPF assessment period at the end of March unless they take a transfer. Their benefits will be aligned to PPF compensation levels.

“Work is now under way to allocate the members and scheme assets between [BSPS2] and the old scheme. Central to this work is the requirement to ensure that, from 29 March 2018, pensioner members receive their appropriate pension payment depending on which arrangement they will be moving into.”

BSPS: How it happened

December 2016: Tata Steel UK launches a consultation to close BSPS to future accrual and enhance its defined contribution offering as part of a bid to sustain the company’s operations in Port Talbot, Wales.

January 2017: Trustees claim BSPS can continue to pay benefits outside of the PPF and without the support of its sponsoring employer. They set out the case for entering into a “regulated apportionment arrangement” (RAA). 

May 2017: BSPS and Tata agree the terms of an RAA in principle with the regulator, with the existing scheme set to take a 33% equity stake in the employer and a £550m cash injection.

August 2017: TPR agrees to an RAA, with Tata Steel UK continuing to sponsor a new scheme with lower annual benefit increases. 

November-December 2017: Financial advisers flag concerns about advice being given to BSPS members to take their pension savings out of the scheme. The Financial Conduct Authority (FCA) investigates and politicians launch an inquiry.

January 2018: The FCA says a third of all pension transfer cases involving BSPS members were “unsuitable”.

March 2018: Subject to regulatory approval, BSPS will split in two with one section entering the PPF’s assessment period and the other, larger section becoming a new scheme, BSPS2.

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