Steel workers may be denied pension rescue

Threat from lifeboat scheme over controversial government plan

MORE than 134,000 steelworkers could see their retirement nest eggs barred from the national pensions lifeboat.

Savers in the British Steel Pension Scheme have been told that the plan could be blocked from the Pension Protection Fund if the Government pushes ahead with radical proposals to separate it from owners Tata Steel.

It would mean that the pensioners had no protection if the scheme went bust in the future – putting at risk their life savings. Tata Steel has been consulting on proposals to withdraw from the UK, but a sell-off of its business has been hampered by British Steel pension scheme which has a £485m black hole.

In order to save thousands of jobs the Government has drawn up four proposals to separate the scheme to make the sale of Tata’s assets more appealing.

Options include having it run as a stand-alone business or getting an insurer to take on the assets. Pensioners could also see the way their benefits build up slashed. Some of these options would require a change in the law.

But now the Pension Protection Fund has warned that there were significant risks for relatively limited gains.

It said if the Government planned to move ahead with any of the options ‘it should seriously consider making any such scheme ineligible for PPF protection’.

This would be an unprecedented move for the PPF, which is funded by the pensions industry and provides a guaranteed income to savers in other schemes where the employer has gone bust.

The PPF’s intervention comes as evidence grew that Tata may abandon the sale of its Port Talbot site in South Wales having forced the Government to offer a string of concessions.

Tata was supposed to have already whittled down a shortlist of buyers interested in its UK assets. Instead it was reported to be pushing ahead with the sale of just two divisions.

It is thought that this means it may call off the sale of the bulk of the business and retain it.

Bidders will be handed sale documents for Tata’s pipeline tube operations and speciality steels division in the next few days, it is thought.

This would suggest the business may be further broken up after Tata already sold its long products unit to investment firm Greybull Capital.

To help smooth the sale, Business Secretary Sajid Javid made a drastic proposal in the hope of saving £2.5bn and making the former British Steel pension scheme more attractive. His proposal would see the rate at which pension benefits build up switched from the higher inflation rate of retail price index to the lower consumer price index which is favoured by the Government.

Over time this could mean that pensions are worth 15pc less than if they had been building up at a higher amount.

Independent pension consultant John Ralfe said: ‘This is a dangerous precedent which could be seen as dismantling defined benefit schemes in the UK.’