Old British Steel Pension Scheme secures £2bn buy-in with PIC

The Old British Steel Pension Scheme (OBSPS) has secured a £2bn buy-in with the Pension Insurance Corporation (PIC), guaranteeing future payments for all members at or above Pension Protection Fund (PPF) levels.

The scheme, which has over 30,000 members, initially entered PPF assessment in 2018 following the restructuring of Tata Steel UK.

However, the PPF stated that as the scheme progressed through the assessment process, its funding position was found to be better than originally anticipated.

Scheme trustees subsequently worked with PIC to establish whether there were sufficient funds to support a buyout, and crucially, to improve members’ benefits above those payable by the PPF, with rumours of the negotiations emerging last month.

Structured initially as a buy-in transaction, the OBSPS will go through a period of reconciling member benefits in order to calculate uplifts where applicable, with the overall benefits guaranteed by PIC within a buy-in structure.

This is predicted to be completed towards the end of 2021, when it is expected that the scheme will exit the assessment process and complete a buyout.

The PPF confirmed that, until that point, members will continue to receive their benefits from the scheme in line with its own compensation levels, and can be “reassured” they remain protected by the PPF.

Open Trustees Limited, who has represented the scheme since March 2018, was advised throughout the transaction by Barnett Waddingham and Hogan Lovells, whilst PIC was advised by HSF.

Commenting on the transaction, Open Trustees managing director, Jonathan Hazlett, stated: “We are delighted to have entered into this buy-in policy with PIC.

"This transaction will eventually see OBSPS members receive benefits either at the same PPF level as those currently provided or, for many members, an uplift above that amount.

“It has been difficult for the OBSPS members over the last few years.

"Whilst the PPF provides a valuable safety net and a significant level of protection, many members will now receive higher benefits than they might otherwise have expected.

"OBSPS members can take comfort that their benefits will be looked after by an insurer which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority, as well as being committed to the highest levels of customer service.”

PIC head of origination structuring, Uzma Nazir, added: “This is a significant transaction, guaranteeing the benefits of the more than 30,000 pension scheme members who have faced a long period of uncertainty about the level of their benefits, and providing many with an uplift over PPF levels.

"We are delighted to have been able to work so closely with the trustee and Barnett Waddingham and ultimately deliver what was required in the biggest and most significant transaction of the year.”

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