Travers Smith LLP has advised the trustee of the British Steel Pension Scheme on the separation of the scheme from Tata Steel.
The Pensions Regulator today issued a determination notice and clearance statement for a regulated apportionment arrangement (RAA) to separate the British Steel Pension Scheme (BSPS) from Tata Steel.
Terms of separation
When the RAA takes effect, Tata Steel will pay £550 million into BSPS and will also give BSPS a 33% equity stake in Tata Steel UK Limited (TSUK).
Members of the BSPS will have the option of switching to a new scheme (the New BSPS) or moving with the old BSPS into the Pension Protection Fund (PPF). For the New BSPS to come into effect, it must meet certain qualifying conditions relating to factors such as size and funding level.
The New BSPS will be sponsored by TSUK, meaning that TSUK would have legal obligations to fund the New BSPS if it fell into deficit.
The detailed terms for the RAA were formally agreed between the BSPS Trustee and Tata Steel after prolonged and intense discussions that also involved the Pensions Regulator (TPR) and the PPF.
Directly affected parties must now be allowed 28 days to refer TPR's determination to the Upper Tribunal. Neither the Trustee nor Tata Steel intends to make such a referral. The RAA is therefore expected to take effect on or about 11 September 2017.
After the RAA takes effect, the old BSPS will continue to pay benefits in full until it goes into a PPF assessment period, which is planned for the end of March 2018. From that point, BSPS benefits will be at the amount the PPF will pay when the old BSPS finally goes into the PPF at the end of the assessment period.
Before the old BSPS goes into a PPF assessment period, all members will have the option to switch to the New BSPS.
The New BSPS will pay the same benefits as the old BSPS except that future increases will be lower. The modified benefits offered by the New BSPS are expected to be better than PPF compensation for the vast majority of current pensioners and for many other members.
Role of Travers Smith
Travers Smith LLP has been the BSPS trustee's legal advisers since before Tata Steel acquired Corus in 2007.
Travers Smith advised the trustee board throughout its discussions with Tata Steel, the Government, the Pensions Regulator and the PPF.
Travers Smith advised on: the conditions and terms for the RAA, including the release of the security package and the 33% equity stake in TSUK; the terms for the New BSPS, including qualifying conditions, constitution, benefits, governance, funding, investment and risk management; and the terms for transferring members and assets from the old BSPS to the New BSPS. We also advised on the preparations for and conduct of the arrangements for members to be informed of their options and to make their choices, and for the old BSPS in due course to go into a PPF assessment period.
The BSPS trustee was also advised by Willis Towers Watson, Penfida, and BDO.
Tata Steel was advised by Slaughter and May and by PwC.
Travers Smith team
The Travers Smith team included the following lawyers:
Finance: Jeremy Walsh (Partner, recently retired), Ed Smith (Partner), Natalie Scoones (Associate)
Corporate: Adrian West (Partner), Jonathan Walters (Associate)
Tax: Richard Stratton (Partner), Jonathan Woodall (Associate)
Finance - Derivatives and Structured Products: Jonathan Gilmour (Partner), Joe Wren (Associate)
Financial Services and Markets: Tim Lewis (Partner)
Allan Johnston, the BSPS Trustee Chairman, said: “From the outset the Travers Smith team shared the Trustee's wish to secure the best possible outcome for BSPS members in very challenging circumstances and provided tremendous support, commitment and technical expertise throughout.”
Paul Stannard said: "We are very pleased to have helped the trustee reach this important milestone in achieving the best outcomes for scheme members."
David Patient, the firm's Managing Partner, said: "This has been a critical project for a long-standing client which has drawn on the breadth and strength of the firm's market-leading experience and expertise in advising pension fund trustees."