Around 50,000 members of the second British Steel Pension Scheme (BSPS II) will receive a shared one-off payment of £58m after the scheme recorded a better-than-expected surplus at its 31 March 2021 valuation.

When the scheme was set up in 2018, the trustee and Tata Steel UK made an agreement that if the scheme’s financial position was better than expected in March 2021, certain members could receive an additional payment.

Scheme members will be eligible for the payment if they were receiving a pension at both 31 March 2021 and 31 March 2022, and earned some or all of that pension before April 1997.

The scheme noted that the payment was intended to provide some compensation for the period between 2018 and 2021 as it does not provide inflationary increases on any pension earned before April 1997 (above any GMP element).

As at 31 March 2021, the scheme surplus was £492m, down from the £668m as at 31 March 2018.

Asset values totalled £10,333m and liabilities were £9,841m, while its funding level was 105 per cent.

BSPS II said that although its surplus had declined since March 2018, this was largely due to factors “outside of the trustee’s direct control”, such as the impact of the pandemic and the government’s changes to how RPI inflation will be calculated from 2030 onwards.

Eligible members will receive a letter from the trustee in June with the amount being paid to them, with the majority expected to receive a lump sum of at least £250, before any income tax is deducted.

Commenting within the News Brief sent to members, British Steel Pension Fund Trustee chairman, Keith Greenfield, wrote: “If part of your scheme pension currently in payment was earned from service before April 1997, you will have a special interest in the outcome of the 2021 valuation.

“The agreement to set up the new scheme included provisions for a potential additional payment for this category of members if the 2021 valuation resulted in an ‘unexpected surplus’. I am pleased to say that this condition has been met.

“Over time (as the scheme matures), the BSPS funding level is expected to improve further and ultimately reach 103 per cent on the ‘buyout’ basis. If and when that happens, benefits are expected to be secured with one or more insurance companies, and the 3 per cent surplus will be used to increase members’ benefits in accordance with the provisions agreed when the new BSPS was established.

“Achieving the funding level to trigger this additional payment to members and secure their benefits remains the key priority for the trustee.”

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