Doubts over the future of pensions at Tata Steel have ended after the firm announced it has formally struck a deal to detach its £15bn British Steel Pension Scheme from the business.
Tata Steel UK said they had also reached an agreement for the sponsorship of a proposed new pension scheme.
The Mumbai based firm had already agreed in principle on key commercial terms of a Regulated Apportionment Arrangement (RAA) with the British Steel Pension Scheme back in May.
The company today, Friday August 11, said it has signed the documentation for the RRA with the Trustee of the British Steel Pension Scheme, offering “more sustainable outcomes for pensioners, employees and the business.”
Under the terms of the deal, Tata will pay £550m into the 130,000 member British Steel Pension Scheme (BSPS) which is now closed, they will also hand over a 33 per cent ‘economic equity’ stake in the UK steel business which includes the Shotton plant.
The restructure of Tata steel pensions liabilities will no doubt signal the start of the proposed merger with Germany’s Thyssenkrupp who would see the move as ‘de risking’ Tata’s pension.
We welcome the RAA announcement which includes a commitment that Tata will stand behind a new scheme with reduced annual increases.
For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.
We fought to ensure that our members can choose whether they want to transfer to a new modified scheme, underpinned by Tata, or to remain in the BSPS and therefore receive PPF compensation.
Now that this choice has been delivered, the company and the trustees must step up to provide the necessary information and guidance to enable every member to make an informed decision in their best interests.
Our members have been extremely disappointed at the unacceptable lack of communication in recent months, and this has to change immediately.
The company and the trustees must remember they are dealing with people’s long term future, their life savings, and their family’s financial security; it is vital members are given all the support that they need.
The German company are still concerned about factors such as political uncertainty in the UK due to Brexit, and winning over German unions who are against the merger and the RAA still subject to legal challenge.
When the RAA takes effect as planned, it would separate the British Steel Pension Scheme from Tata Steel UK and the pension scheme’s other participating employers (certain subsidiaries of Tata Steel UK).
All members of the British Steel Pension Scheme will now have a choice of joining the new scheme or come under the Pension Protection Fund (PPF), a pensions lifeboat.
Koushik Chatterjee, Tata Steel’s Group Executive Director, said:
“The RAA process has been a long and detailed one, and I would like to thank the Pensions Regulator, Pension Protection Fund, the Trustee of the British Steel Pension Scheme, its members, the unions and employees – indeed, all our stakeholders, including the Governments of the UK and Wales, for their constructive engagement through the process.
“Considering the continued challenges in the global steel industry as well as the uncertain global politico-economic environment, the RAA presents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business.
“The RAA is one important milestone in Tata Steel UK’s journey towards a sustainable and enduring future, with pension obligations, whose risk profile would be consistent with the underlying business. The net financial impact of the RAA including the payment of the agreed amount would be reflected in the Q2 FY’18 financials for the company.”