The £15bn (€17.5bn) British Steel Pension Scheme (BSPS) insists it will not pose a significant risk to the Pension Protection Fund if it is allowed to continue without sponsor support, as it renewed its call for an overhaul of its indexation.

Allan Johnston, the scheme’s chair of trustees, said he submitted “compelling” evidence to the government and the Pensions Regulator (TPR) that BSPS would be able to continue paying benefits indefinitely if a proposed change to indexation were legislated.

Both the government and BSPS have been looking at ways to reduce the scheme’s deficit after Tata Steel announced plans to sell its UK business.

A consultation considering changes to the fund’s indexation rate was launched in May, and the scheme itself has said it would implement a cashflow-orientated investment strategy if the link to Tata were severed.

Johnston said the fund had seen its deficit, when measured on an ongoing basis, drop to around £300m in the year to March 2016, and had weathered the turmoil in the wake of the UK’s vote to leave the European Union.

“Our investment strategy has meant that the scheme’s funding position has not been affected by recent falls in Gilt yields in the same way as many other UK pension schemes, and we remain confident of the scheme’s ability to provide modified benefits as proposed on a self-sufficient basis,” he said. 

A statement from the trustee board added that a shift to a cashflow-orientated strategy would stand it in good stead in future.

“Even allowing for the recent falls in interest rates, the scheme would still have a very significant financial buffer available to protect against residual risks,” it said.

“Those risks would be much lower than the risks being run by most other pension schemes in the UK, and lower than those of the PPF itself.

“This means that, even if these risks were to materialise, the net result for the PPF should still be better than if BSPS went into the PPF now, and, if the risks do not materialise, the buffer could be used to reinstate future pension/benefit increases.

However, the PPF has argued in favour of barring BSPS from joining the lifeboat fund if it is allowed to sever ties to its sponsor, saying the approach amounted to a “one-way bet” against those paying the PPF levy.

According to the PPF’s own estimates, the entry of BSPS into the lifeboat scheme without changes to indexation would only see its surplus decrease from its current 115% to 108%.