Unions cautious as Tata begins to restructure steelworker pensions
Steel giant Tata has announced the first step in restructuring the pensions of thousands of UK steelworkers, although unions say they will seek further assurances.
Members of three trade unions backed a rescue deal in February aimed at safeguarding jobs and guaranteeing investment, with th e final salary pension scheme closing and replaced with a less generous one.
The Indian firm said intensive discussions had been held with the Pensions Regulator and the Pension Protection Fund (PPF), leading to terms of a so-called Regulated Apportionment Arrangement (RAA).
Tata said in a statement: "If agreement is reached and the necessary approvals are obtained, the RAA will become effective once agreed conditions are satisfied, including the payment by a member of the Tata Steel group of an agreed settlement amount of £550 million to the British Steel Pension Scheme (BSPS) and the provision of a 33% equity stake in Tata Steel UK."
Tata said it had agreed in principle that subsequent to an RAA, it would sponsor a closed new pension scheme which would have lower future annual increases for pensioners and deferred members than the BSPS and therefore an improved funding position which would pose the company "significantly less risk".
"There is presently no certainty with regards to the eventual existence, size, terms or form of the new scheme and the funding position and membership of any new scheme would be dependent on a voluntary membership transfer exercise."
Community, Unite and the GMB unions issued a joint statement saying the announcement is a "stepping stone" to securing members' benefits in a new scheme.
But they added that when workers voted to accept Tata's turnaround plan, they did not vote to allow the firm to put the BSPS into the PPF, a Government-backed pensions lifeboat funded by a levy paid by UK pension schemes.
"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 unions said.
"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 RAA announcement leads to the choice that our members expect."
A PPF spokesman said: "We can confirm that the key commercial terms of an RAA have been agreed in respect of the British Steel Pension Scheme and anticipate discussions concluding in the near future.
"This would meet our published principles, including that an insolvency event of the scheme's sponsoring employer, Tata Steel UK, would otherwise be inevitable. Any RAA is subject to a 28-day period following an agreement leading to Pensions Regulator approval and PPF non-objection."
Lesley Titcomb, chief executive of The Pensions Regulator, said: "Good progress is being made in our discussions with Tata Steel UK and the trustees about the future of the British Steel Pension Scheme."
The key commercial terms of a regulated apportionment arrangement (RAA) have been agreed in principle between the company and the BSPS trustee.
These appear to be in line with our published principles.
"However, there are still important details to be finalised before we are in a position to approve the RAA and we are considering these carefully in light of their impact upon the 130,000 pension scheme members and PPF levy payers."