The assets and liabilities of National Grid UK Pension Scheme’s section B could be moved to a new pension fund following the sale of the gas transmission and metering business to an investor consortium at the end of January. The transfer is proposed for autumn this year. 

 

Trustees told members that over the past year, they have been working closely with National Grid regarding the pensions implications of the company’s sale of a 60% stake in National Grid Gas, the gas transmission and metering business, which sponsors section B of the scheme. 

 

The new company, National Gas, said it will set up its own defined benefit pension scheme and plans to request the transfer of all the assets, members and liabilities of section B. This requires the consent of the trustees, who have the sole power to grant a transfer out of the scheme and said they will take legal and actuarial advice on the matter. It is proposed that the transfer will take place during autumn 2023.  

 

“Discussions are at an early stage and the trustees and NGT are working collaboratively to agree the next steps of the process,” the trustees said. 

 

They added: “We don’t yet know how the transfer of section B to the new scheme will proceed, but there should be no change to how pensions are paid... how benefits are calculated, how the section is funded as the new scheme going forward, or in the standard of service.” 

 

The section is “well funded”, according to the trustees, who also said that National Gas will need to set up a new trustee board.  

 

In 2021, National Grid announced its intention to sell National Grid Gas Transmission. In early 2022, it revealed that Australian infrastructure specialist Macquarie Asset Management and British Columbia Investment Management Corporation, which invests on behalf of public sector schemes in Canada, will take a 60% equity stake in NGG, with an option to buy the remaining 40% expiring at the end of June. 

 

This is not the first section that is being moved out of the National Grid scheme. The pension scheme currently has two sections, A and B, but was originally split into three sections in 2017 when National Grid sold its gas distribution business to Cadent Gas. When it sold the remaining stake two years later, Cadent agreed to set up its own DB pension scheme, which took on the assets and liabilities of section C in autumn 2020.   

 

Section A, which will be the only one remaining in the National Grid scheme, is sponsored by the commercial businesses of National Grid which are not regulated by Ofgem. It is not clear how large the different sections are. The latest company annual report shows UK pension plan assets of £16.9bn and liabilities of £14.2bn for March 2022. 

 

National Grid also sponsors three sections of the industry-wide Electricity Supply Pension Scheme and a legacy scheme called WPUPS, which mallowstreet understands to be the Western Power Utilities Pension Scheme. 

 

In late 2019, Legal & General had announced a £1.6bn buy-in with section B covering 6,000 pensioners, while Rothesay Life sealed a £2.8bn buy-in for section A members. This was followed in 2020 by an £800m buy-in with Rothesay, also covering section A members.