Tens of thousands of British steelworkers are in line for a potential boost to their retirement incomes from a £2bn deal being explored by pension bosses.

Sky News has learnt that the trustees of the Old British Steel Pension Scheme (OBSPS) have informed more than 31,000 members that they are examining a deal that would see an insurance company buy it out and take on responsibility for paying their benefits.Sponsored link

The development has emerged more than two years after the OBSPS entered an assessment period overseen by Britain’s pensions lifeboat – the Pension Protection Fund (PPF).

While the majority of the British Steel Pension Scheme’s (BSPS) roughly 120,000 members opted to transfer to a new scheme in 2018, the remainder chose to move into the PPF – where their retirement benefits would be guaranteed, but at a lower level than they had accrued during their careers.

However, in a letter to OBSPS members last month, trustees said its funding had been in a better position than expected.Advertisement

That paves the way for pensioners potentially to be paid more by an insurer than they would be by the PPF.

A spokesperson for Open Trustees Limited, which acts as the OBSPS’s trustee, said: “If it’s possible to secure OBSPS members’ benefits with an insurer by way of a buyout contract, members would be paid directly by the insurer at levels which would be the same or better than the PPF if members retire at normal retirement age.

“It’s too early to say whether a buyout is going to happen.

“However, we’ve recently approached a number of different insurers to help determine the feasibility of a buyout for OBSPS.”

If a buyout deal took place, it would represent a rare piece of good news for workers at the former British Steel, which then became Corus before being sold to India’s Tata Steel in 2007.

Growing pressure on European steelmakers has prompted a number of restructurings at Tata Steel, which owns the vast Port Talbot plant in south Wales.

Thousands of people are employed at the steelworks in Port Talbot
Image:A 2017 deal to keep Port Talbot open included a major restructuring of its pension liabilities

In 2016, Tata tried to sell the UK business but eventually retained it following months of talks with ministers and trade unions.

The price extracted by the company for keeping Port Talbot open was a major restructuring of its pension liabilities, which included closing the company’s final salary pension scheme and replacing it with a less generous alternative.

An agreement in 2017 involved Tata Steel injecting a £550m lump sum and handing a 33% stake in its UK business to the PPF.

There remain questions about the value of and security provided by that equity stake ‎given the torrid conditions in the UK steel industry.

Sky News revealed last month that Tata Steel had asked the government for a £500m loan to help it weather the coronavirus pandemic.

The restructuring of the company’s pension liabilities generated fresh controversy when it emerged that‎ workers at Port Talbot were being targeted by unscrupulous financial advisers.

More than 800 steelworkers were persuaded to give up their guaranteed pensions by moving out of the scheme, a subsequent mis-selling inquiry by the Financial Conduct Authority discovered.

Separate talks are ongoing about an insurance deal with the much larger BSPS, which would be worth more than £10bn.

The OBSPS, meanwhile, had assets of roughly £1.9bn as at 31 March.

Of its 31,670 members, half are deferred members and the other half pensioners drawing their retirement incomes.

The PPF said on Tuesday: “The Old British Steel Pension Scheme’s better than expected funding position has opened up the possibility of it securing member benefits outside the PPF.

“At this stage it’s too soon to know whether the scheme will be able to buy out or instead transfer to the PPF.

“In the meantime OBSPS members can be reassured that they remain protected by the PPF.”