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Tata Steel has agreed to the key commercial terms of a deal to cut benefits and improve the funding position of its British pension scheme, it said on Tuesday.
The scheme was a major stumbling block during talks to merge Tata Steel’s British and European steel assets with those of Germany-based ThyssenKrupp. It was opposed to taking on Tata’s £15 billion for the UK’s pension liabilities. The deal, agreed with the scheme’s trustees, would see Tata plough £550 million into the final salary under the British Steel Pension Scheme (BSPS).
However, it is subject to formal approval by The Pensions Regulator, but Tata said it expected to get the approval shortly. Tata has also agreed to sponsor a new pension scheme, which would have lower benefits than those of the original scheme. It would also give the BSPS a 33 per cent equity stake in its UK business. With benefit cuts in place, the new scheme would pose less of a risk to the company, Tata said.
The BSPS is one of Britain’s largest final salary schemes with 130,000 members. The members who do not agree to move to the new scheme will automatically transfer to the Pension Protection Fund (PPF). All the scheme’s members, including those in the new scheme, are guaranteed PPF compensation levels.
