As things stand, I got made redundant from Allied Steel & Wire and, after joining British Steel, transferred all of my AS&W pension funds into the British Steel Pension Scheme. But what if I had managed not to be made redundant, or having been made redundant, found a job in a place where the pension scheme was not so well regarded as that of British Steel?
In the first case, I would have continued to build my pension in the AS&W scheme until the company’s collapse in 2002, in the second case, chances are that I would have left my money built up until 1995 in their scheme. And in both cases I would lost it all, or at the very least most of it.
Meaning that, if I managed to find a job either after the redundancy or after AS&W’s collapse, I would have to work until at least age 65 in order to build up a pension of a suitable size. At the age of 40 I would have rated my chances of finding a new job pretty good, but if I hadn’t pulled it off, I might have considered the offer of my sister in Australia, and emigrated there with her as a sponsor.
Unlike earlier counterfactual speculations, the possible outcomes of this one is becoming harder to predict, and presumably that will become even more so with future counterfactual blogs that delve deeper into the past.
Thinking back to the dying days of Ebbw Vale: it was June 2001 and a 2-month secondment to Trostre was coming to an end. I had hoped to use my stint there as a means find a different job, but so far no luck.
That’s when I made a call to Ian Hobson to see if there was a chance to continue working in Ebbw Vale for the final year, thereby giving me another year to complete my job search. As it was, he was under the impression that I had already left Ebbw Vale and found myself another job, and was surprised that I hadn’t.
Now suppose that I hadn’t made that phone call, or that Ian was not available to take the call when I did ring him. That would have meant unemployment aged 45, with not enough success under my belt to storm the interview ladder, and far too green in IT to make a success of my recently acquired Java certificate (see blog “Computeach“).
It’s a toss of a coin whether my job search would have been successful, and if it hadn’t been, unemployment would have been harder to break in your mid forties than it had been a decade, or even five years, before. And with only a measly 11 years of pension accumulated, that part of the equation didn’t look too rosy either.
As it was, traffic lights came and made my name, and it set me on course for the next 15 years in the Corus / Tata fold.
This is the first in a series of possible events where I took one decision and not another. In all of them I intend to explore what the consequences of an alternative history might have been. Of necessity the outcome of older events is less easy to predict, but there you go.
The first one definitely would have immediate and well-known consequences in the here and now, and that is: what if I had not decided to retire aged 60 on the 31st of March 2016?
As of the first of April 2016 I would no longer be able to retire at 60 without a 25% penalty to my pension, meaning that for all intents and purposes I would be forced to work until I was 65. At the time of the change the carrot was dangled that after a few years the penalty would decrease and my pay would go up to the point that my pension would have increased to the level of 31 March 2016.
So in essence I would have worked for about two years for no increase in pension at all. But that’s not the worst of it. Most people who have followed events will be aware that the British Steel Pension Scheme closed its doors to all comers on 31 March 2017, and from that moment on I would have been a deferred pensioner. Meaning that there would be no effect of any pay increases on the pension, just a lessening of the penalties as I approached 65.
So chances are that I would have resigned myself to have to work until December 2020. In addition, I would also have the luxury of having the third choice of opting out of the defined benefits scheme altogether, whereas now it’s only a choice between PPF and PSPS2 (see blog “BSPS2“). Although I’m pretty sure that I would have made the same decision and go for BSPS2, it would have meant a lot more worry and soul-searching to ensure I made the correct decision.
To say nothing about the potential cloud hanging over Port Talbot from the proposed merger with Thyssen-Krupp. No, all in all, the decision to retire on 31 March 2016 definitely was the correct one.
So the days of the old BSPS are numbered. At some point in the next few months it will be absorbed by the Pension Protection Fund (PPF). In the meantime a second incarnation of the British Steel Pension Scheme, with less generous CPI-based annual increments, is being proposed, and the personal papers have been sent out to all existing members.
There are also public meetings planned. Although already started in the north, South Wales will have to wait till the middle of November for them to take place. I have booked mine for Port Talbot on the 15th of November. Although to be fair, in my case the choice is a no-brainier: if I follow the BSPS into the PPF, I immediately take a 10% cut in my pension, something that never will be recovered by future pay increases.
People who haven’t retired yet have a third option, which is to take their money out of either scheme and try their luck in investing it in a form of defined contribution scheme. Fortunately that’s not an option for me. I say fortunately, because if this goes wrong it could become the next financial miss-selling scandal. At least in my case it doesn’t come as a total shock, unlike some people who retired ages ago, and had thought themselves set up for the rest of their days.
Especially since pensions earned prior to 1997 are not index-linked at all. Although I’m partly affected there (my first year at British Steel together with my Allied Steel & Wire transferred Pension), at least it’s not the total disaster it is for people who have all or most of their service in that period.
So where does this leave me? Not over the moon, but also with the thought that it could have been so much worse. By the time inflation starts to erode my current pension, maybe the state pension can come to the rescue.
This is the last regular post I intend to make on this blog – from time to time there may be the occasional addition, but from now on they will be the exception rather than the rule.
The reason ? I think I’ve more or less exhausted the major stories from my career in steel between the days I started my studies in 1973 and the day I retired in march 2016. No point in mulling over stale topics, and I thought that the first anniversary of my retirement might be a good point in time to stop.
In a way, retirement has been as expected, although the possibility of coming back on a part-time basis to help out did not materialise. As far as the business and the pension scheme is concerned, things are still up in the air. Even though the financial situation of both has improved, neither can claim to be futureproofed to any major extent.
Granted that Tata had their wish in getting the defined benefits scheme shut (I haven’t heard of any date when this closure will happen), and that as a result Port Talbot’s blast furnaces were given a five year lifeline, but to be honest that’s not exactly a secure long-term future. As for the pension scheme, Tata’s ultimate goal to completely divorce itself from the British Steel Pension Scheme is only partially achieved with the closure of the defined benefits scheme, and the possibility of the Pension Protection Scheme still hangs over the proceedings.
The potential merger with Thyssen-Krupp appears to have faded away. One of the possible reasons being, ironically enough, the fact that Thyssen-Krupp’s pension is only kept afloat by the good financial results of its parent company. Would Tata really want to ditch one pension scheme only to lumber itself with another one with equal potential for economic damage ?
Whatever the case, the year since my retirement must have been filled with insecurity for all parties involved. To be honest, even I feel that I would want things to be put to bed as far as the pension arrangements are concerned. The British Steel Pension Scheme has not given any further updates since last January, probably meaning that there’s no clear way forward yet.
Until that happens, I won’t have properly retired.