Controversial steel pension plan ditched by ministers

A CONTROVERSIAL plan to change the law to restructure the British Steel pension scheme has been abandoned by the Government.

Sources say a proposal by former business secretary Sajid Javid to slash the pension of thousands of steelworkers by 15pc to save the UK steel industry was now ‘politically difficult’.

The change in Prime Minister and the cabinet means there is little appetite for action which would have seen annual cost of living rises go up at a lower rate.

It now seems likely that the scheme, which is thought to have a £700m black hole, liabilities of £15bn, and 134,000 members, maybe forced into the Pension Protection Fund, a lifeboat for savers, unless a deal can be struck with new buyers.

Tata put its Port Talbot plant up for sale this year but bidders refused to take on the pension liability. The jobs of thousands of steelworkers were at risk and the Government stepped in.

Javid’s proposal would have seen the rate at which pension benefits build up switched from the higher inflation rate of retail prices index to the lower consumer prices index. Over time this would have meant that pensions would be worth 15pc less.

The Department for Work and Pensions is reviewing options, but this element has been quietly dropped. Experts thought it could have been used by other firms to water down pension liabilities on problem schemes.

However the British Steel Pension Scheme chairman was still backing the idea yesterday.

Allan Johnston said: ‘The Trustee and its advisers have provided Tata Steel, the Government and the Pensions Regulator with compelling evidence of the scheme’s ability to pay modified benefits indefinitely and on a low-risk basis outside the Pension Protection Fund.’

Last month Tata raised eyebrows by pulling the sale of the business and holding talks with German engineer ThyssenKrupp about a joint venture. Talks are understood to be going well.

New business secretary Greg Clark flew to India on Wednesday to hold talks with Tata chairman, Cyrus Mistry, ahead of yesterday’s annual meeting.