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New Tata Steel scheme secures pensions for 130,000 workers New Tata Steel scheme secures pensions for 130,000 workers
(about 5 hours later)
The final move to secure the pensions of tens of thousands of steelworkers has been announced, ending any doubts about future payments. Tata Steel has reached an agreement over its £15bn pension scheme, in a move that the pensions regulator hopes will help secure jobs at the Indian-owned company that employs more than 8,000 people across the UK.
Tata Steel UK gave details on Friday of a new scheme to replace the British steel pension scheme (BSPS). The 130,000 members of the scheme – one of the UK’s largest – are to be contacted by the trustees to be told they will have an option to switch to a new scheme or move to the Pension Protection Fund (PPF), a government-backed pensions lifeboat.
Workers voted this year to accept lower benefits in return for investment which will secure jobs. The pensions regulator (TPR) said such arrangements over pensions were rare but necessary in this case to prevent the company becoming insolvent. “This proposal brings greater certainty for pension scheme members and unlocks the possibility of restructuring the company, which in turn could lead to preserving jobs,” said Lesley Titcomb, the chief executive of TPR.
Finalising the pension arrangements is expected to clear the way for Tata to merge its European steel business with the German firm ThyssenKrupp. The broad outline of the deal was announced in May when Tata agreed it would pump £550m into the British Steel pension scheme, which would also take a 33% stake in Tata’s UK business. It has also now confirmed it will set up an alternative to the PPF – where workers take a cut in their benefit.
Tata said it had signed the documentation for a so-called regulated apportionment arrangement (RAA) with the trustee of the BSPS, offering “more sustainable outcomes” for pensioners, employees and the business. Workers voted this year to accept lower benefits in return for investment, which will secure jobs. The hope now is that a major hurdle has been removed to any attempt by Tata to merge its European steel business – which includes the Port Talbot steelworks in south Wales – with the German firm ThyssenKrupp.
When the RAA takes effect the BSPS will be separated from Tata Steel UK and a number of affiliated companies.
The trade unions Community, Unite and GMB said in a statement: “We welcome the RAA announcement which includes a commitment that Tata will stand behind a new scheme with reduced annual increases. The trade unions Community, Unite and GMB said in a statement: “For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.”
“For over a year our members have feared for their security in retirement, and this announcement helps to bring that uncertainty to an end.”
When the RAA takes effect, workers will be able to join a new BSPS, which will have lower future annual increases for pensioners and deferred members, and will give it an improved funding position which would pose “significantly less risk” for Tata, said the company. Stephen Kinnock, the Labour MP for Aberavon, home of the Port Talbot steelworks, said: “Today’s news brings a welcome end to the uncertainty faced by 130,000 current and former steelworkers, their families and steel communities across Britain, including the thousands involved in the steel and connected industries in my constituency.
Workers will now have a choice of joining the new scheme or come under the Pension Protection Fund (PPF), a lifeboat for when pension funds become insolvent.
A PPF spokesman said: “The trustees will be providing them with lots of valuable information about their future options. We’d encourage members to consider the details and their position carefully and decide whether the new scheme or the PPF is the better option for them.”
Stephen Kinnock, Labour MP for Aberavon, home of the Port Talbot steelworks, said: “Today’s news brings a welcome end to the uncertainty faced by 130,000 current and former steelworkers, their families and steel communities across Britain, including the thousands involved in the steel and connected industries in my constituency.
“The Port Talbot steelworks is the beating heart of our local economy and community, so the past 18 months have been particularly tough for our town.”“The Port Talbot steelworks is the beating heart of our local economy and community, so the past 18 months have been particularly tough for our town.”
Koushik Chatterjee, Tata Steel’s group executive director, said: “Considering the continued challenges in the global steel industry as well as the uncertain global politico-economic environment, the RAA presents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business. Koushik Chatterjee, Tata Steel’s group executive director, said it was the best possible outcome for members of the pension scheme and for UK business. It was, he said, “one important milestone in Tata Steel UK’s journey towards a sustainable and enduring future, with pension obligations, whose risk profile would be consistent with the underlying business.”
“The RAA is one important milestone in Tata Steel UK’s journey towards a sustainable and enduring future, with pension obligations, whose risk profile would be consistent with the underlying business.” The trustees of the pension fund said information would be sent to members by October and that the new scheme being set up, alongside the lifeboat fund at the PPF, were expected to be better for the “vast majority of current pensioners and for many other members”.
“We are satisfied that separation of the BSPS [pension fund] from Tata Steel is necessary to avoid an insolvency of Tata Steel UK Limited,” said Allan Johnston, chairman of the trustees.
Frank Field, the chair of the House of Commons work and pensions select 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. It is vital that those pensioners are now properly supported in making important decisions about their retirement funds.”