The British Steel Pension Scheme has signed a £2.7bn buy-in with Legal & General under an existing umbrella contract, making the £7.5bn scheme the UK’s largest to be fully insured, the insurer has said.  

  

Under the fourth and final buy-in since November 2021, the remaining 40% of liabilities of the scheme sponsored by Tata Steel UK were insured, meaning L&G now covers £7.5bn of the scheme’s liabilities, including the benefits of all of the roughly 67,000 retired and deferred members.   

 

L&G said by completing the transaction, the scheme has reached a funding level that will allow the trustees to make additional payments to members under the agreement reached when the scheme was set up.    

 

Last year, the scheme’s in-house investment management transferred to Legal & General Investment Management to implement a strategy aimed at improving the funding level by aligning investments with L&G’s pricing.  

 

Independent trustee Keith Greenfield, who chairs the scheme, said: “Since the new scheme was established, the trustee’s overall objective has been to reach full funding on a solvency or 'buyout' basis.” 

 

This provides members with the greatest possible comfort that benefits will be paid in full, he said. 

  

“I would like to thank my fellow trustee directors, scheme officers and advisers and counterparts in Tata Steel and Legal & General for working together in partnership to deliver this outcome many years earlier than expected when the new scheme was set up,” Greenfield added.  

 

The chief executive of L&G Retirement Institutional, Andrew Kail, said: “These kinds of outcomes are only achieved with the hard work and support of a wide group of people following a carefully considered and well executed plan. By working in partnership with the trustees and sponsor to bring together expertise across L&G, we secured all members’ benefits far faster than initially anticipated.” 

  

Clive Wellsteed, head of buy-in practice at LCP, which advised the trustees on the insurance strategy and execution of the buy-ins, said the design of the partnership between the trustees and insurer was central to its success, “delivering exceptional pricing and the unique ability to transfer a significant portfolio of property to L&G”.   

 

Travers Smith provided legal advice to the trustees. The sponsor took advice on the transactions from Mercer and law firm Slaughter and May, while law firm CMS advised L&G.  

 

The new BSPS was set up in 2018 after British Steel had been restructured, while the Old BSPS entered Pension Protection Fund assessment. The Old BSPS has since exited PPF assessment and, having concluded a buy-in for more than 30,000 members with Pension Insurance Corporation, has been undergoing a data and benefit review. It is expected to buy out at PPF+ levels with PIC later this year. 

 

BSPS has become synonymous with poor advice as nearly 8,000 defined benefit members were persuaded to transfer out of the scheme amid the uncertainty of the restructuring between 2016 and 2018, often to their financial detriment, causing a national scandal. The Financial Conduct Authority found almost half (46%) of the advice it reviewed relating to BSPS was unsuitable. Following intense public interest and political scrutiny, the regulator issued rules about redress last year, estimating that 1,100 steelworkers would receive about £49m in aggregate. 

   

On Monday, the FCA publicly censured advisory firm Lighthouse for its role in the scandal.  

   

 

Has the BSPS saga come to a satisfactory conclusion in your view?