The British Steel Pension Scheme (BSPS) has completed a fourth and final buy-in deal worth £2.7bn with Legal & General (L&G), making the scheme the largest in the UK to have fully insured all its members’ benefits.
The deal covers the remaining 40% of the scheme’s liabilities to be insured by L&G, which has now insured £7.5bn of the scheme’s liabilities, securing the benefits of all 67,000 retired and deferred members, it was announced.
The sponsoring company, Tata Steel UK Limited, part of the Tata Steel group, is the UK’s biggest steel manufacturer with sites across the country.
Today’s announcement marks the scheme’s fourth transaction since November 2021, the latest being just a few months ago worth £2bn. Through a series of phased buy-ins the full process ran over an 18-month period.
By completing the latest transaction, the scheme has now reached a funding level that will allow the trustees to make additional payments (restoration) to members under the agreement reached when the scheme was set up, BSPS revealed.
To insure benefits at this scale, L&G worked in partnership with the trustees, sponsor, the scheme’s in-house teams and advisors. This included establishing an umbrella contract with the trustees in 2021, which allowed them to complete each transaction quickly and easily on pre-agreed contractual terms.
It also saw the scheme’s in-house investment management transfer to Legal & General Investment Management (LGIM) in 2022 to implement a strategy to improve the scheme’s funding level by aligning investments with L&G’s pricing.
Through a series of well-timed transactions since the establishment of the umbrella contract, “the scheme took advantage of volatile markets and acted decisively to capture attractive pricing to achieve the trustees’ and Sponsor’s objective of full insurance,” it said.
The trustees were advised on the insurance strategy and execution of all four buy-in transactions by LCP and legal advice was provided by Travers Smith. The sponsor was advised on the transactions by Mercer and Slaughter and May. CMS Cameron McKenna Nabarro Olswang provided legal advice to L&G.
Keith Greenfield, chair and independent trustee director at BSPS, said: “Since the new scheme was established, the trustees’ overall objective has been to reach full funding on a solvency or buyout basis. There were two reasons for this. Firstly, it provides members with the greatest possible comfort that benefits will be paid in full as and when they fall due. Secondly, achieving this objective allows us to make additional payments to members under the agreement reached when the new BSPS was set up.”
DWP opens auto-enrolment consultation for defined benefit schemes
The UK’s Department for Work & Pensions (DWP) has launched a consultation on automatic enrolment for defined benefit (DB) pension schemes looking to to ascertain whether the government’s policy intentions in this area are continuing to be being achieved, in particular how the simplifications and flexibilities introduced under the test work in practice, and whether any new issues have arisen since the last triennial review in 2020.
Regulations made under Section 23A(1) set out the alternative quality requirement for DB pension schemes that are used for auto-enrolment. The requirements allow for simpler alternative tests to be used so that a scheme can demonstrate that it is of sufficient quality to be used by employers to fulfil their auto-enrolment duties.
The consultation – Automatic enrolment: Alternative quality requirements for defined benefits and hybrid schemes being used as a workplace pension – is aimed at employers, employee representatives and pension industry professionals, including scheme administrators, actuaries, independent financial advisers and employee benefit consultants and any other interested parties.
For the 2023 review, DWP is also including collective defined contribution (CDC) schemes, which need to satisfy the quality requirement for UK money purchase schemes under section 20 of the Pensions Act 2008 in order to be a qualifying scheme for auto-enrolment purposes.
The consultation closes on 19 June 2023. DWP will aim to publish the government response to this call for evidence online, with the report setting out the conclusions of the statutory reviews into the alternative quality requirements conducted by the department.
Direct Line Group Pension Trustee picks LifeSight as master trust provider
LifeSight, WTW’s UK defined contribution (DC) mastertrust, has been appointed as master trust for Direct Line Group Pension Trustee’s deferred UK DC pension scheme members. The scheme has 16,500 members with £425m in assets under management that have been transferred to LifeSight.
The Direct Line Group DC Pension Scheme contains deferred-only members, meaning members are no longer accruing retirement contributions in that scheme. LifeSight has now taken on the entire management of the scheme, including independent trustee oversight, administration and investment management.
As part of the transition, LifeSight developed a microsite in order to help Direct Line’s trustees communicate with members and host details of the new arrangement. LifeSight also arranged the bulk transfer of assets, with equivalent investments provided for all members, in line with members’ preferences.
Jelena Croad, head of LifeSight UK, said: “LifeSight has grown significantly in recent years, but we remain disciplined as to the frequency of new clients that we take on board, in order to maintain our very high level of service to clients and members who often have complex and highly tailored requirements.”
LifeSight now looks after the pensions for 325,000 members with approximately £14.5bn of assets secured under management.