Tata Steel offers £550m to resolve long-running pensions row. Indian-owned company would help prevent its UK business going bust by paying into former British Steel scheme. Tata Steel has taken a step towards helping secure the future of its UK operations – including the Port Talbot works in south Wales – by reaching an outline agreement over the restructuring of its pension scheme.
Unions reacted cautiously to the announcement by the Indian-owned company that it would pump £550m into the British Steel pension scheme – one of the UK’s largest, with liabilities of £15bn and 130,000 members, including former employees from the days when it was part of a state-owned company. The scheme will also get a 33% stake in Tata’s UK business.
The pension scheme has been a stumbling block to Tata Steel merging itsEuropean steel operations with German company ThyssenKrupp, and analysts at Berenberg said that joint venture could now be agreed by the end of June.
The funding proposal has been announced after intensive talks between Tata, the Pensions Regulator and the Pensions Protection Fund, a government-backed pensions lifeboat that will take over the scheme. Workers paid out through the PPF would take a 10% cut in their benefits, although existing pensioners are not affected.
However, unions said that last year, when they backed Tata Steel’s turnaround plan, they were assured that members of the pension fund would be given a choice between a PPF deal or a move to a new, modified scheme.
“This is the commitment Tata has given to the workforce, and the trade unions will hold them to the promises they have made,” the unions of Community, Unite and the GMB said in a joint statement. “This announcement is a stepping stone in the process to secure BSPS members’ benefits in a new, modified scheme sponsored by Tata Steel UK,” the unions said.
A spokesperson for the PPF said it “expected discussions to be completed in the near future”. There were no details immediately available about the alternative scheme, but Allan Johnston, chairman of the pension scheme trustees, said: “Although the PPF is an important safeguard for pension schemes generally, the trustee believes that the BSPS has sufficient assets to offer members the potential for better outcomes by enabling them to transfer to another scheme offering modified benefits. For most scheme members, these modified benefits are expected to be of greater value than those they would otherwise receive by transferring into the PPF.”
Tata Steel said the new scheme – subject to approval – would have “ lower future annual increases for pensioners and deferred members” than the current scheme and “therefore an improved funding position which would pose significantly less risk”.