Old British Steel Pension Secures $2.6 Billion Buy-in; Buyout Expected in 2021

The trustees of the Old British Steel Pension Scheme (OBSPS) have secured a £2 billion ($2.6 billion) pension insurance buy-in with the Pension Insurance Corporation, with a buyout expected to be completed by the end of next year.

Under a buy-in, the plan sponsor is responsible for the payments to the participants and beneficiaries, while in a buyout, the insurance company takes over responsibility for paying participants directly, and the plan is shuttered. Open Trustees Limited has been the plan’s trustee since March 2018.

The move guarantees future pension payments for the more than 30,000 members at, or above, levels of compensation provided by UK pension lifeboat the Pension Protection Fund (PPF). The plan entered PPF assessment in 2018 following the restructuring of Tata Steel UK Limited.

“It has been difficult for the OBSPS members over the last few years,” Jonathan Hazlett, managing director of Open Trustees, said in a statement. “Whilst the PPF provides a valuable safety net and a significant level of protection, many members will now receive higher benefits than they might otherwise have expected.”

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The purpose of the PPF’s assessment process is to determine the funding position of a plan to decide whether or not the agency needs to take responsibility for it. If a plan is underfunded, it will be transferred to the PPF, and if it’s overfunded, it will look to a buyout with an insurer and exit assessment.

The PFF said that the as the Old British Steel Pension progressed through its assessment process, its funding position turned out to be better than expected. It was this improved funding that allowed the trustee to explore the possibility of securing member benefits outside the PPF.

“With this buy-in policy in place, we expect the scheme will be able to exit our assessment process and complete a buyout,” the PPF said in a statement. “This is expected to happen towards the end of next year. Until then, members will continue to receive their benefits from the scheme in line with our compensation levels and can be reassured they remain protected by us.”

The plan now goes through a period of reconciling member benefits and calculating uplifts where applicable, while the overall benefits are guaranteed by the Pension Insurance Corporation within a buy-in structure. The process is expected to be completed by the end of 2021, when the members will come out of the PPF and become direct Pension Insurance Corporation policyholders.

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Tags: buy-in, buyout, Financial Conduct Authority, Old British Steel Pension Scheme, Open Trustees, Pension Insurance Corporation, Pension Protection Fund, Pension Risk Transfer, PPF, Prudential Regulation Authority, Tata Steel

A group of some of the largest institutional investors in the world sent letters to 47 of the largest US-based corporate greenhouse gas emitters, pressing them to disclose their climate lobbying practices to make sure they align with the goals of the Paris Agreement.

The 47 companies are among the 161 focus companies of Climate Action 100+, an initiative on climate change that is backed by more than 500 investors with a combined $47 trillion in assets under management (AUM).

In letters addressed to CEOs and board of director chairs, the group warned companies to make sure their climate lobbying, including indirect lobbying through their trade associations, is consistent with the Investor Expectations on Corporate Lobbying on Climate Change that was released last year. The investors also called on the firms to take corrective action if there is any misalignment with those expectations.

“We urge you to make the climate lobbying issue a high priority for your government affairs office and board public policy committee in their work with top management to address rising expectations regarding climate policy advocacy,” said the letter.

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To align with the goals of the Paris Agreement, the investors requested the companies set strong governance of their climate lobbying activities and provide full public transparency of their lobbying activities. The investors group said the latest science indicates that limiting global temperature rise to 1.5 degrees Celsius is required to avoid the most catastrophic outcomes, including droughts, floods, extreme heat, and poverty for millions of people.

“As long-term investors, we need to see our portfolio companies address the financial risks posed by climate change,” New York State Comptroller Thomas DiNapoli, who is among the letter’s signatories, said in a statement. “In order to assess these risks to our portfolio companies, we need greater transparency and accountability, especially when it comes to lobbying.”

Other signatories of the letters include BNP Paribas Asset Management, Boston Trust Walden, the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), Mercy Investment Services, the New York City Comptroller’s Office, the New York State Common Retirement Fund, and Wespath Benefits & Investments. All the investors are also signatories to Climate Action 100+ and members of the Ceres Investor Network on Climate Risk and Sustainability, which includes more than 175 institutional investors, managing more than $29 trillion in assets.

Earlier this year, the Climate Action 100+ focus companies were notified that their climate progress would be benchmarked against a set of indicators that reflect the goals of the initiative. The full assessment is expected to be released early next year.

“The urgency of the climate crisis means that companies must not only take bold in-house actions to reduce emissions to net-zero and improve governance of climate risk,” said Ceres CEO Mindy Lubber, “they must also look beyond their four walls and publicly advocate for federal and state policies to mitigate climate change.”