Global steel producer Tata Steel has confirmed a deal,
revealed last month, with the U.K.s Pensions Regulator to
offload the £15 billion ($19.75 billion) British Steel
Pension Scheme and establish a new scheme.
Under the deal, Tata Steel U.K. will be allowed to separate
the scheme from the business and some other affiliated
companies, but it must pay £550 million into the defined
benefit scheme and it will also award the schemes
trustees shares in the U.K. business that are equivalent to a
33 percent equity stake.
Tata confirmed on Monday that it will also
sponsor a new pension scheme, which employees will have the
opportunity to transfer into. The company said while the new
scheme will offer lower future annual increases for pensioners
and deferred members than the existing scheme, it will
pose significantly less risk to the company.
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Members of the British Steel Pension Scheme will now have
the choice of switching to the new scheme or moving with the
old scheme into the Pension Protection Fund the
U.K.s lifeboat scheme, which pays pensions when an
employer can no longer afford to do so.
In a statement announcing the terms of the arrangement,
Koushik Chatterjee, group executive director for Tata Steel,
said the deal was the result of many months of hard
work, adding, Although much work is still needed to
ensure the business is competitive in future, the next step in
this pensions process involves necessary formalities to set up
the new scheme with a lower risk profile following the
necessary member consent process led by the trustee.
Chatterjee acknowledged that it will take some
time to implement the new scheme because of the wide
membership base of the original scheme, which has around
130,000 members. He added that the net financial impact of the
£550 million settlement amount will be reflected in the
second quarter 2018 financial statement of the company.
Tata Steel first announced its intention to close the
existing defined benefit scheme in March of this year, instead
offering a defined contribution scheme in its place. The
changes were the result of continuing discussions between the
company and trade unions about the sustainability of the U.K.
business and was one of the conditions for the company
continuing to employ staff at its plant in the Welsh town of
Port Talbot until 2021.
Representatives from the three trade unions involved with
the negotiations Community, Unite, and the GMB
released a joint statement on Monday saying that they hoped
this would offer their members some certainty in
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, a spokesman said in the
statement. Now that this choice is being 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.