Tata Steel has clinched a deal to detach its £15bn British Steel Pension Scheme (BSPS) in a move described as offering greater certainty for its 130,000 members.
The announcement, confirming a Sky News exclusive earlier this week, could also pave the way for the Indian steelmaker to merge its European operations with German rival Thyssenkrupp.
Under an agreement with UK pensions bodies and the company’s pension trustees – welcomed by unions – Tata will inject £550m into the now-closed BSPS.
It is also handing the scheme a one-third stake in the ongoing UK operations, which include the giant Port Talbot steel works in south Wales.
The announcement formally confirms details of a deal called a Regulated Apportionment Agreement (RAA), a mechanism allowing a financially troubled employer to detach itself from defined benefit scheme liabilities.
Tata Steel said the agreement offered “more sustainable outcomes for pensioners, employees and the business”.
It will offer members the choice either to transfer a new pension scheme sponsored by Tata, under which they will see lower future increases to their pensions than would otherwise be the case.
If they choose not to they could remain in the existing scheme which will transfer to the “lifeboat” Pension Protection Fund (PPF).
The benefits offered by the new scheme are expected to be better for most members than those on offer for those from the PPF.
Koushik Chatterjee, group executive director, said it was “one important milestone in Tata Steel UK’s journey towards a sustainable and enduring future”.
He added: “Considering the continued challenges in the global steel industry as well as the uncertain global political-economic environment, the RAA represents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business.”
The GMB, Unite and Community unions said in a joint statement: “For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.”
RAAs can be controversial because they are supposed to be approved by the industry regulator only when “the alternative would have to be that the employer would become insolvent”.
The Pensions Regulator (TPR), which has approved the Tata deal, said it offered greater certainty to members.
TPR chief executive Lesley Titcomb said: “We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very difficult situation.”
The crisis at Britain’s biggest steel producer erupted last year, when Tata put its entire UK operations up for sale amid a deteriorating industry environment.
In February, the company’s British employees voted to accept proposals to close the existing pension scheme to new contributions, in exchange for greater certainty about the future of its 8,500-strong workforce.
Tata Steel said more than a year ago that it would seek to merge its European operations with the steel division of Germany’s Thyssenkrupp.
Doubts have arisen in recent weeks about whether the merger will proceed, however, even with a resolution of the pension issues.
Source: Sky News