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Pension benefits may be cut in bid to solve Tata Steel crisis Tata Steel: Government warned over pension cut plan
(about 3 hours later)
The government is considering cuts to British Steel pension benefits in a bid to save Tata Steel's UK operations. The government has been warned that proposals to cut pension benefits to help save Tata Steel's UK operations could be a "dangerous path".
Unions are likely to support the proposals, on which ministers are expected to announce a consultation on Thursday, the BBC has learned. A £485m pension deficit has been deterring potential buyers.
The change would base the annual pension increase on the Consumer Price inflation measure, which is usually below the current Retail Price measure. The government is expected to propose basing the annual British Steel pension increase on the Consumer Price inflation measure, which is usually below the current Retail Price measure.
A £485m pension deficit may put at risk the sale of Tata's loss-making plants. Ex-pensions minister Steve Webb urged caution over "rushed changes".
In total the British Steel pension scheme has 130,000 members; it is not clear how many of those would be affected by the new proposals. But unions are likely to support the proposals, the BBC has learned.
Business Secretary Sajid Javid and Welsh First Minister Carwyn Jones visited Mumbai on Wednesday to meet Tata executives. In total the British Steel pension scheme has 130,000 members; it is not clear how many of those would be affected by the plan.
It was thought the company might announce a shortlist of bidders, but Tata would only say that bids were still under "active consideration". Further details are likely to emerge later when the government announces a consultation on the proposals in a written statement to the House of Commons.
'Pension security risk'
Former Lib Dem pensions minister Steve Webb said: "The government is going down a very dangerous path.
"Everyone has huge sympathy for steel workers and for efforts to protect jobs, but rushed changes to pension rules risk driving a coach and horses through the pension security of hundreds of thousands of workers well beyond the steel industry."
Owen Smith, the shadow work and pensions secretary, said steel workers' pensions "must be protected".
"If these reports are accurate, the secretary of state for work and pensions should come to the House to explain precisely what is being proposed, including how current and future steel pensioners will be affected and what precedents might be set by any changes to hard-won pension protection legislation," he added.
Analysis: Simon Jack, BBC business editorAnalysis: Simon Jack, BBC business editor
The pension fund and its deficit have been a source of unease for the current owners Tata and a deal-breaker for any would be buyers. The pension fund and its deficit have been a source of unease for the current owners Tata and a deal-breaker for any would-be buyers.
Reducing its burden will make a sale easier and may even convince Tata to hang on to its UK steel business.Reducing its burden will make a sale easier and may even convince Tata to hang on to its UK steel business.
Any such change would be very controversial as it would set what some would see as a dangerous precedent.Any such change would be very controversial as it would set what some would see as a dangerous precedent.
The move is evidence of the Business Secretary's sense of urgency to resolve an industrial crisis which has put 10,000 steel workers' jobs in imminent danger. The move is evidence of the business secretary's sense of urgency to resolve an industrial crisis which has put 10,000 steel workers' jobs in imminent danger.
The BBC understands that union leaders have accepted that this proposal is a better deal than seeing the pension scheme shunted into the lifeboat of the Pensions Protection Fund, which can see some members lose 10% of their payout immediately and see lower increments in future years.The BBC understands that union leaders have accepted that this proposal is a better deal than seeing the pension scheme shunted into the lifeboat of the Pensions Protection Fund, which can see some members lose 10% of their payout immediately and see lower increments in future years.
Who are the potential bidders?Who are the potential bidders?
Jack: How Excalibur and Liberty could join forcesJack: How Excalibur and Liberty could join forces
The rise and fall of Britain's steel industryThe rise and fall of Britain's steel industry
Business Minister Anna Soubry told Channel 4 News: "We have always said we would do everything we can to look at pensions. When asked about the proposal to cut the pension deficit, Business Minister Anna Soubry told Channel 4 News: "We have always said we would do everything we can to look at pensions.
"The Prime Minister said 'no stone to be unturned' and that is exactly what has been done." "The prime minister said 'no stone to be unturned' and that is exactly what has been done."
'Dangerous path' Welsh First Minister Carwyn Jones told the programme that there were better ways of dealing with the scheme than putting it in the Pensions Protection Fund, which would take on the deficit, but would also result in members losing some of their benefits.
Mr Jones told the programme that there were better ways of dealing with the scheme than putting it in the Pensions Protection Fund, which would take on the deficit, but would also result in members losing some of their benefits.
"The UK government has more levers it can pull than we can with its control of the tax system and pensions legislation," he said."The UK government has more levers it can pull than we can with its control of the tax system and pensions legislation," he said.
Owen Smith, Labour's shadow work and pensions secretary, said steel workers' pensions "must be protected". Business Secretary Sajid Javid and Mr Jones visited Mumbai on Wednesday to meet Tata executives.
"If these reports are accurate, the secretary of state for work and pensions should come to the House to explain precisely what is being proposed, including how current and future steel pensioners will be affected and what precedents might be set by any changes to hard won pension protection legislation," he added. It was thought the company might announce a shortlist of bidders, but Tata would only say that bids were still under "active consideration".
Former pensions minister Steve Webb warned: "The government is going down a very dangerous path. Everyone has huge sympathy for steel workers and for efforts to protect jobs, but rushed changes to pension rules risk driving a coach and horses through the pension security of hundreds of thousands of workers, well beyond the steel industry."
Earlier this month Tata said there had been seven expressions of interest in its UK business. Among those reported to have put their hats in the ring are Greybull Capital, which has already bought Tata's long products operations.Earlier this month Tata said there had been seven expressions of interest in its UK business. Among those reported to have put their hats in the ring are Greybull Capital, which has already bought Tata's long products operations.
The management buyout vehicle, Excalibur Steel, which is led by Stuart Wilkie, the head of Tata's UK strip steel unit based in south Wales, is another.The management buyout vehicle, Excalibur Steel, which is led by Stuart Wilkie, the head of Tata's UK strip steel unit based in south Wales, is another.
Sanjeev Gupta's Liberty House, which has acquired two of Tata's smaller mills, has also expressed an interest.Sanjeev Gupta's Liberty House, which has acquired two of Tata's smaller mills, has also expressed an interest.
While they have submitted independent bids, it is thought there is potential for them to work together.While they have submitted independent bids, it is thought there is potential for them to work together.
Others said to be in the running include JSW Steel, which is India's second biggest steel producer, China's Hebei Iron and Steel Group, and Endless, one of the UK's largest turnaround specialists, based in Leeds.Others said to be in the running include JSW Steel, which is India's second biggest steel producer, China's Hebei Iron and Steel Group, and Endless, one of the UK's largest turnaround specialists, based in Leeds.
Are you a steelworker? Are you the holder of a British Steel pension? Tell us your views. Email haveyoursay@bbc.co.ukAre you a steelworker? Are you the holder of a British Steel pension? Tell us your views. Email haveyoursay@bbc.co.uk
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