 "Workers hold placards and banners as they wait for Britain's Business Secretary Sajid Javid to leave the Tata Steel plant in Port Talbot, South Wales")
Tata Steel’s pension obligations, a cause of much concern, have come down by 35 per cent in the financial year 2015-16 (FY16) to Rs 1.2 lakh crore, thanks to changes in the British pension scheme.
At the beginning of FY16, it was Rs 1.8 lakh crore; now, it has come down to Rs 1,20,758 crore, according to the company’s annual report.
“The main factors explaining the decrease in pension obligations for FY16 were a credit line of £872 million (Rs 8,589 crore) in respect of changes to the British Steel Pension Scheme and a settlement of £113 million (Rs 1,113 crore) arising from the reclassification of the Stichting Pensioenfonds Hoogovens scheme from defined benefit to defined contribution,” a company spokesman said.
This is a result of the consultation with the labour unions last year on changes to the British Steel Pension Scheme (BSPS) contribution and benefits framework.
At the beginning of FY16, it was Rs 1.8 lakh crore; now, it has come down to Rs 1,20,758 crore, according to the company’s annual report.
“The main factors explaining the decrease in pension obligations for FY16 were a credit line of £872 million (Rs 8,589 crore) in respect of changes to the British Steel Pension Scheme and a settlement of £113 million (Rs 1,113 crore) arising from the reclassification of the Stichting Pensioenfonds Hoogovens scheme from defined benefit to defined contribution,” a company spokesman said.
This is a result of the consultation with the labour unions last year on changes to the British Steel Pension Scheme (BSPS) contribution and benefits framework.
“During the year, the unions had planned to take industrial action in dispute over Tata Steel UK’s proposal to modify the BSPS contribution and benefits framework. In its efforts to resolve the pension dispute, TSUK approached the Advisory Conciliation and Arbitration Service (ACAS) to help facilitate talks between the parties. As part of the negotiations, the unions confirmed that their ballots on the pension scheme were in favour of proposed modifications to the scheme,” the annual report read.
The unions didn’t respond to a mail from Business Standard, but at the time of settlement, they had issued a statement that the union action had brought the company to the table with an improved offer. Also, the BSPS had been kept open and a deal over early retirement had been reached. The unions had finally recommended members to vote for the deal.
For the Stichting Pensioenfonds Hoogovens (SPH) scheme, Tata Steel Nederland BV has entered into an agreement with the SPH Board that allowed the scheme to be classified as a defined contribution rather than defined benefit.
“Defined benefit is more favourable for the employees. It specifies what an employee’s pension would be after retirement. Defined contribution, on the other hand, tells the employee only the monthly contribution level, but not what the future pension amount would be,” said ICRA Senior Vice-President Jayanta Roy.
The net gain from the consultations on pension benefits may not have much of an impact for the moment, but the company’s future liability has come down.
“There is no immediate cash impact of this, but future liability has come down. As on March 31, 2015, liabilities were more than assets, which means that the company would have to make additional contribution to increase its asset base. In FY16, as a result of the changes in the scheme benefits, asset base is now more than liabilities, so the company has a cushion and no additional contribution is required,” Roy said.
The big positive would be the outcome of the UK government’s consultations on the British Steel Pension Scheme, which closed on June 23. The UK government is yet to announce its decision.
