New British Steel Pension Scheme Goals Met

After meeting certain qualifying conditions, the new British Steel Pension Scheme (BSPS) will continue as planned.

The new fund, backed by Tata Steel UK, a division of India’s Tata Steel, has met the minimum size and initial funding test level, which will allow for a merger with Germany’s Thyssenkrupp.

According to Allan Johnston, the new BSPS trustee chairman, the plans will move forward on March 28, with the BSPS closing to future accrual on March 31.

“This is very good news for the 83,000 members who wanted to receive their benefits from the New Scheme and chose to switch to it,” Johnston said in a statement.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Last year, the British pensions regulator approved a deal where a one-time £550 million ($768.6 million) payment to the BSPS would allow for Tata Steel UK to cut pension benefits and create a new BSPS.

Reportedly some 25,000 scheme members declined to opt into the new BSPS, leaving them in the care of the Pension Protection Fund, which could potentially reduce their pension transfer value.

Following the 2017 pension predicament, Thussenkrupp and Tata announced a deal to merge their European steel operations, which is expected to close later this year. Should the agreement go through, the merger will create Europe’s second-largest steelmaker.

Tags: British Steel Pension Scheme, Pension, Tata Steel UK, UK

Canada’s Ontario Superior Court of Justice has appointed Toronto-based law firm Lax O’Sullivan Lisus Gottlieb as litigation investigator to review C$3 billion ($2.34 billion) in dividends paid out to Sears Canada’s shareholders, including Sears Holdings Corp. Chief Executive Edward Lampert.

The appointment was requested by members of Sears Canada’s underfunded pension, who are looking to recoup some of their losses after the pension was closed following the company’s 2017 bankruptcy.

According to FTI Consulting, which is the court-appointed monitor in the Sears Canada restructuring proceedings, Lax O’Sullivan Lisus Gottlieb will create a report to send to a creditors’ committee, which will include, among other things, recommendations regarding a proposed litigation plan. The committee will be comprised of members appointed by, or on behalf of, various creditor groups, and will consult with the law firm.

In a blog post, Lampert argued that the Sears pension funds weren’t as bad off as they were perceived to be. He said that as of the end of 2016, the Sears Canada pension plans had more than C$1 billion in assets, and argued that the frequently-cited deficit figure of C$266.8 million is misleading. He said the figure conflates two different obligations—the defined benefit retirement plan, and an unfunded, nonregistered “other benefits plan,” which covers health, dental, and life insurance, not retirement benefits.

For more stories like this, sign up for the CIO Alert newsletter. 

Sears Canada made some real estate deals that generated cash proceeds of C$213 million in 2012, and C$906 million in 2013, according to Lampert. With more than C$1 billion in cash as a result of these sales, the Sears Canada board of directors decided to make distributions to shareholders of C$102 million and C$509 million in 2012 and 2013, respectively. Lampert was among the recipients of these distributions.

“These dividend payments did not deprive the company of the cash needed to fund operations or to pay pension obligation,” said Lampert. “Assuming a reasonable rate of return on its C$1 billion in assets and accounting for the increase in interest rates, Sears Canada should be able to meet its pension obligations.”

He said the controversial dividends paid in 2012 and 2013 represented approximately half of the proceeds Sears Canada received from the sale of assets in those years, and that the company retained more than C$500 million in cash after the dividend payments, with virtually no funded debt.

“This substantial amount of cash was available to be used in the company’s operations going forward,” he said.

Tags: Litigation, Pension, Sears, Sears Canada