Deal to save steelworks to be confirmed asTata ditches its £15bn UK pension fund
STEEL giant Tata is expected to confirm this week it has formally ditched its £15bn UK pension fund – following a deal safeguarding its primary steel making business at Port Talbot.
In a deal with unions early this year on the pension fund, in return for committing to maintaining production at Port Talbot for the next decade alongside a £100m investment – providing certain profit targets are met – it was agreed that it would close the existing defined benefit pension scheme, which has 130,000 members, the vast majority of which are former or retired steelworks.
Detaching itself from the fund is seen as a key requirement for any planned merger between Tata’s European steel business with that of German steelmaker ThyssenKrupp.
The Indian-owned steelmaker, that directly employs 6,000 in Wales, had been in discussions with the UK pension bodies and trustees of the BSPS, to allow it to fall into the UK’s pension lifeboat for members of defined benefit schemes – the Pension Protection Fund (PPF).
The signing of what is known as Regulated Apportioned Agreement formally triggers the placing of the BSPS into the custody of the PPF.
Now that process has been finalised.
Members of the BSPS would 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 – which would been seen as a less financially favourable option than joining a new sponsored scheme.
Under the deal the steelmaker has also agreed to inject £550m into the closed BSPS.
It will also hand the scheme a onethird stake in the ongoing UK operations, which include its primary steelmaking Port Talbot plant.
Pension expert and partner with Cardiff firm Quantum Advisory, Stuart Price, said: “Tata Steel will continue to sponsor the scheme and will stand behind it and pay in more money if needed to keep the scheme well funded.
“Going forward, members will be worse off than if the British Steel pension scheme had stayed in place but it’s better than the alternative with the PPF.”