Tata Steel has agreed on a settlement over pensions which it will see it pay in excess of £550m to the British Steel Pension Scheme (BSPS) and hand over a 33 per cent stake in the UK steel business.
In a statement published today, Tata said it had agreed on key commercial terms of a regulated apportionment arrangement with the British Steel Pension Scheme.
The Mumbai-based firm said the agreed deal is subject to formal approval by regulators.
The company also said it would sponsor a new closed pension scheme which would have lower future annual increases for pensioners and deferred members than those within the BSPS.
The British Steel Pension Scheme is one of Britain’s largest final salary schemes with 130,000 members.
BSPS Trustee Chairman, Allan Johnston, said:
I am pleased that agreement in principle has been reached with TSUK [Tata Steel UK] about sponsorship of a modified pension scheme subject to qualifying conditions.
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 tobe of greater value than those they would otherwise receive by transferring into the PPF.
Responding to today’s announcement from Tata the National Trade Union Steel Coordinating Committee (NTUSCC) said:
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 Pension Protection Fund (PPF) has a vital role in protecting people against losing their pension should their employer go bust.
However we should be clear that when the trade unions voted to accept Tata Steel’s turnaround plan our members did not vote to allow Tata to put the BSPS into the PPF and end their responsibilities to scheme members.
On the contrary the agreements we have reached with Tata are based on the understanding that all members will have the opportunity to choose whether to move to a new modified scheme or remain in the BSPS and so enter the PPF.
This is the commitment Tata has given to the workforce and the trade unions will hold them to the promises they have made.
The BSPS is well funded and our experts tell us a modified scheme would provide better outcomes than the PPF for the vast majority of members, and that the resources are there to pay in-excess of PPF benefits on an ongoing sustainable basis.
This new scheme must be delivered and we will be seeking further assurances to ensure that this regulated apportionment arrangement announcement leads to the choice that our members expect.