Documents signed to secure 'sustainable' pensions for steelworkers
The final move to secure the pensions of tens of thousands of steelworkers has been announced, ending any fresh doubts about future payments.
Steel giant Tata gave details of a new scheme to replace the British Steel Pension Scheme (BSPS).
Workers voted earlier this year to accept lower benefits in return for investment which will secure jobs.
Finalising the pension arrangements is expected to clear the way for Tata to merge its European steel business with German firm Thyssen Krupp.
Tata Steel UK said it had signed the documentation for a so-called regulated apportionment arrangement (RAA) with the Trustee of the British Steel Pension Scheme, offering "more sustainable outcomes" for pensioners, employees and the business.
When the RAA takes effect the British Steel Pension Scheme will be separated from Tata Steel UK and a number of affiliated companies.
The steel 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.
"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, w orkers will be able to join a new BSPS, which will have lower future annual increases for pensioners and deferred members, which will give it an improved funding position which would pose "significantly less risk" for Tata, said the company.
Koushik Chatterjee, Tata Steel's Group Executive Director, said: "The RAA process has been a long and detailed one, and I would like to thank the Pensions Regulator, Pension Protection Fund, the Trustee of the British Steel Pension Scheme, its members, the unions and employees - indeed, all our stakeholders, including the Governments of the UK and Wales, for their constructive engagement through the process.
"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.
"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 net financial impact of the RAA including the payment of the agreed amount would be reflected in the Q2 FY18 financials for the company."
The union statement added: "We fought to ensure that our members can choose whether they want to transfer to a new modified scheme, underpinned by Tata, or to remain in the BSPS and therefore receive Pension Protection Fund (PPF) compensation. Now that this choice is being delivered, the company and the trustees must step up to provide the necessary information and guidance to enable every member to make an informed decision in their best interests.
"Our members have been extremely disappointed at the unacceptable lack of communication in recent months, and this has to change immediately. The company and the trustees must remember they are dealing with people's long-term future, their life savings, and their family's financial security; it is vital members are given all the support that they need."
Workers will now have a choice of joining the new scheme or come under the PPF, a lifeboat for when pension funds become insolvent.
A PPF spokesman said: "Members of the British Steel Pension Scheme will have seen a lot of speculation about the future of their pensions, so we want to reassure them the PPF is there to protect them throughout this process.
"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."
BSPS Trustees chairman Allan Johnston said: " The BSPS Trustees are pleased that Tata Steel UK has agreed to sponsor the new scheme, subject to qualifying conditions.
"Although the Pension Protection Fund is an important safeguard for pension schemes generally, the trustees believe that the BSPS has sufficient assets to fund benefits in the new scheme that will be better than PPF compensation for most members, and to do so on a low-risk basis sustainably into the future.
"We are satisfied that separation of the BSPS from Tata Steel is necessary to avoid an insolvency of Tata Steel UK. The terms agreed for separation will secure a better outcome for the BSPS and its members than insolvency. It is the best outcome that could be achieved in the circumstances."
Lesley Titcomb, Chief Executive of the Pensions Regulator (TPR), said: "We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very difficult situation.
"TPR is willing to work closely and constructively with employers who face real challenges in meeting their pension obligations due to difficult trading conditions. Our focus will always be on protecting members and the PPF. We have worked closely with the scheme trustees and the Pension Protection Fund to maximise the value received by the scheme.
"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.
"We are pleased that the employer has also agreed to sponsor a new scheme which has the potential to deliver higher benefits than PPF levels."
Shadow business secretary Rebecca Long-Bailey said: "This is a welcome announcement which finally puts an end to the months of uncertainty that tens of thousands of steelworkers have faced.
"Trade unions representing steel workers have worked tirelessly to secure workers' futures and protect Britain's steel industry, which people and communities across the UK rely on.
"The company must ensure they continue to engage with unions so their members get the support and guidance they need."