Tata Steel pension deal paves way for merger
TATA Steel has signed a deal to cut its UK pension liabilities in a move that could clear the way for the merger of its European steel business with Germany’s Thyssenkrupp.
The pension plan will be separated from Tata Steel UK as a result of the deal, which will see the Indian conglomerate inject £550m and a 33pc stake in its UK steel business into the scheme.
While the plan’s members will be eligible to join the Pension Protection Fund (PPF), a lifeboat for insolvent schemes, Tata Steel also plans to sponsor a new pension scheme which will have lower benefits than the old scheme but better ones than the PPF.
The deal “represents the best possible structural outcome for the members of the British Steel Pension Scheme (BSPS) and for the Tata Steel UK business,” Koushik Chatterjee, Tata Steel’s group executive director, said yesterday.
Workers voted earlier this year to accept lower retirement benefits after Tata promised to invest £1bn into its UK operations over the next 10 years and to keep Port Talbot steelworks operating.
The Indian conglomerate had warned that BSPS’S £15bn liabilities – covering 125,000 current and former steel workers – could risk the future of its UK steel business. The business currently employs just 8,000 workers.
Politicians and unions welcomed the deal yesterday. Frank Field, chairman of the Commons Work and Pensions Committee, said: “It is always disappointing when pension promises are not met in full, but this deal should be cautiously welcomed as potentially preserving jobs and providing more certainty for British Steel pensioners.”
The steel trade unions, Community, Unite and GMB, said in a statement: “We welcome the announcement which includes a commitment that Tata will stand behind a new scheme with reduced annual increases.
“For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.”
Thyssenkrupp, meanwhile, said yesterday that it would now study the terms of the pension deal closely.
Separately yesterday, Tata was fined £1m after five workers were exposed to toxic benzole gas in 2011 at its Scunthorpe steelworks.