Reports say Tata Steel is set to announce deal to detach the £15bn British Steel Pension Scheme

Tata Steel is set to announce it has formally struck a deal to detach its £15bn British Steel Pension Scheme according to a report by Sky News.

The Mumbai based firm has already agreed in principle on key commercial terms of a Regulated Apportionment Arrangement (RAA) with the British Steel Pension Scheme back in May.

The latest report this afternoon suggests Tata will announce on Friday afternoon that it has formally agreed on the RAA with UK pensions bodies and the company’s pension trustees.

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 stake in the UK steel business which includes the Shotton plant.

The restructure of Tata steel pensions liabilities could signal the start of the proposed merger with Germany’s Thyssenkrupp who would see the move as ‘de risking’ Tata’s pension.

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

Sky News say “sources close to the talks, which produced an outline agreement in May, confirmed that The Pensions Regulator (TPR), Pension Protection Fund (PPF) and BSPS trustees were all preparing to make statements acknowledging the Tata Steel agreement.”

“The stakeholders were hopeful of announcing a deal on Friday, although the timing remained subject to change.”

The signing of the RAA is expected to trigger the placing of the BSPS into the custody of the PPF, the industry lifeboat for members of defined benefit scheme.

Members of the BSPS will then have the option of transferring to a new Tata-sponsored scheme, under which they would see lower future increases to their pensions than would otherwise have been the case.

If they choose not to transfer, they would remain with the PPF.