£520m bid to dump steel pension scheme
Indian giant makes fresh offer so it can walk away from savings of 130,000
THE Indian giant trying to offload its British steel plants has offered to pay £520m to wash its hands of responsibility for the pensions of 130,000 workers.
Tata Steel is struggling to find a partner willing to take on the pension scheme, which has a deficit of around £1bn.
German rival ThyssenKrupp is interested in a merger, which it is hoped would secure the longterm future of the company and its thousands of UK workers, centred on the vast Port Talbot steelworks in Wales.
But it is not keen to take on the £15bn British Steel Pension Fund. So now Tata has offered £520m to break a financial guarantee that links the pension scheme and Tata’s own Dutch steelworks. That would be a big step in Tata’s efforts to separate the scheme.
A spokesman for the scheme’s trustees said: ‘The Trustee, Tata Steel, and the various regulatory bodies are continuing to hold constructive discussions and it is too early to speculate on how these might conclude.’
Tata closed the 130,000-member pension scheme to future accrual in March after trustees warned its deficit could top £1bn.
Unions agreed to the closure as part of a plan including guarantees on jobs, investment and production, at a time of huge uncertainty for the company.
Company bosses, regulators and trustees are now thrashing out the details about what to do with the fund, into which Tata paid more than £120m last year. Many members hope it will not fall into the Pension Protection Fund (PPF), which would lead to a 10pc cut in benefits.
One option is a rare measure that can free companies close to insolvency from pension liabilities. It is understood that Tata was hoping to convince pension authorities that the parlous state of its UK business would make this possible.
But a recovery in the steel market is thought to have weakened the company’s case.
Tata Steel’s UK workers and pensioners have faced huge uncertainty since last March when it announced it was putting its UK operations up for review, as it was struggling with mounting losses in a tough market.
But it dropped plans to sell the business and started talks with German conglomerate ThyssenKrupp, which is unwilling to take on pension liabilities.
Yesterday trustees said they were trying to secure an arrangement where members could stay in the scheme or transfer to a new one with modified benefits.
A spokesman said: ‘For the vast majority of members and pensioners, the modified benefits provided by the new scheme would be better than PPF compensation.’
A Pensions Regulator spokesman said: ‘There are still significant issues to be resolved and we will consider all proposals carefully in light of their impact upon the 130,000 pension scheme members and PPF levy payers.’
Tata Steel declined to comment but said before the scheme was closed: ‘We believe that structurally de-risking and de-linking the pension scheme from the UK business is a crucial part of its ongoing transformation plan.’