Tata Steel announced yesterday (May 16) an outline agreement on how it would restructure its pension scheme.
It pledged to pump £550m into the British Steel pension scheme and would also give it a 33 per cent stake in the business as the scheme is spun off to the Pension Protection Fund (PPF), a government-backed lifeboat that takes over schemes when businesses are on the brink of insolvency.
Earlier this year, Tata steelworkers voted to accept a deal that would see thousands of jobs preserved for a number of years as well as £1bn in investment – at the cost of having the BSPS closed to future accrual.
Tata has previously said that it will operate a modified scheme so that members can choose between being part of the new scheme or going into the PPF, which would entail a 10 per cent cut to members’ benefits.
Details of the modified scheme are yet to emerge but experts have said that the alternative scheme could offer more than the scheme now being transferred to the PPF.
“Although the PPF is an important safeguard for pension schemes generally, the trustee believes that the BSPS has sufficient assets to offer members the potential for better outcomes by enabling them to transfer to another scheme offering modified benefits,” said Pensions Scheme Trustees chairman Allan Johnston. “For most scheme members, these modified benefits are expected to be of greater value than those they would otherwise receive by transferring into the PPF.”
Unite and other Tata Steel unions GMB and Community cautiously welcomed the news but added that they would be “holding [Tata Steel] to the promises they have made”.
“This announcement is a stepping stone in the process to secure BSPS members’ benefits in a new modified scheme sponsored by Tata Steel UK,” said the unions, which together form the National Trade Union Steel Coordinating Committee (NTUSCC), in a joint statement yesterday (May 16).
“The Pension Protection Fund (PPF) has a vital role in protecting people against losing their pension should their employer go bust. However we should be clear that when the trade unions voted to accept Tata Steel’s turnaround plan our members did not vote to allow Tata to put the BSPS into the PPF and end their responsibilities to scheme members.
“On the contrary the agreements we have reached with Tata are based on the understanding that all members will have the opportunity to choose whether to move to a new modified scheme or remain in the BSPS and so enter the PPF,” the statement went on. “This is the commitment Tata has given to the workforce and the trade unions will hold them to the promises they have made.
“The BSPS is well funded and our experts tell us a modified scheme would provide better outcomes than the PPF for the vast majority of members, and that the resources are there to pay in-excess of PPF benefits on an ongoing sustainable basis. This new scheme must be delivered and we will be seeking further assurances to ensure that this regulated apportionment arrangement announcement leads to the choice that our members expect.”