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In 2017, the British Steel Pension Scheme (BSPS) was restructured after its principal sponsor, Tata Steel UK, experienced financial difficulty. The scheme’s members were offered two options, moving to a new scheme with the same pension benefits but lower future increases or remaining with the original scheme and likely receiving a reduced pension from the Pension Protection Fund.

7,834 of the approximately 130,000 members instead chose to leave the scheme completely. Many of those people were given unsuitable financial advice and may have lost significant amounts of their pension savings.

Tata Steel’s financial difficulties

The BSPS was a defined benefit scheme which provided a guaranteed income to its members in retirement. In March 2016, the scheme’s principal sponsor Tata Steel UK announced it had lost £2 billion in five years and was unable to continue covering these loses. The Government said the parent company wanted to move quickly to sell Tata Steel UK and it was likely that the BSPS would be separated from the business.

Restructuring the scheme

In August 2017, the Pensions Regulator agreed the key terms of a proposal from Tata Steel UK to restructure the BSPS through a Regulated Apportionment Arrangement. Such an arrangment allows a company to end its responsibility for a pension scheme, with the Pension Regulator’s approval, if continuing to support the scheme meant the company would inevitably become insolvent.

‘Time to choose’ exercise

As part of the restructure, the “time to choose” exercise gave members of the BSPS until 22 December 2017 to choose between two options:

  • Moving to a new scheme sponsored by Tata Steel UK which would provide the same benefits as BSPS but with lower future increases; or
  • Remain in the original scheme and likely receive a reduced pension from the Pension Protection Fund.

A 2019 independent review of the communication and support given to BSPS members (PDF) said “Members who had never previously thought much about pensions were now faced with making a very significant decision on a very complex issue to a very tight deadline.”

During the exercise, 7,834 of the approximately 130,000 members chose neither of the two schemes and transferred their pensions out of the scheme completely. These former members moved their savings to defined contribution schemes, which provide a savings pot rather than a guaranteed income. The value of the pot can change depending on the performance of investments. The Financial Conduct Authority, which regulates financial advice, suggests that 46% of these transfers were based on unsuitable advice.

Reviews of the British Steel pension case

The BSPS case and transfers out of the scheme have been examined several times since 2017.

What’s the proposed redress?

The Financial Conduct Authority launched a consultation in March 2022 on a proposed redress scheme for BSPS members who had suffered a loss because of unsuitable advice to transfer out of the scheme. The scheme will not cover people who have already accepted and received compensation following a review of the advice they received. When the consultation launched, the Financial Services Compensation Scheme had already received 1,300 claims and paid £37.3m in compensation relating to the scheme. An additional £15m had been paid to former BSPS members by firms who gave pension transfer advice to BSPS members after the Financial Conduct Authority asked them to review their previous business.

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