Tata Steel sheds £15bn UK pension fund

The agreement secures the future for tens of thousands of former steelworkers, thousands of them in the Black Country, who worked for Corus and British Steel over the years.

Indian-owned Tata employs 8,500 steelworkers in the UK – more than 600 of them in the Black Country at sites in Wednesfield, Walsall and Brierley Hill – but the £15 billion British Steel Pension Scheme (BSPS) it inherited has more than 125,000 members.

Earlier this year it struck a deal to offload the pension fund in return for a new pension for current workers and a £550 million payment to the BSPS along with a one third stake in Tata Steel UK. It has also promised further investment in its UK steel business.

Yesterday it said it had received confirmation from The Pensions Regulator that it has approved the deal, called a Regulated Apportionment Arrangement (RAA).

Tata Steel UK has agreed to sponsor a proposed new pension scheme and all members of the BSPS will be invited to transfer to the new scheme. The new scheme would have lower future annual increases for pensioners and deferred members than the British Steel Pension Scheme, giving it an improved funding position which will pose significantly less risk for Tata Steel UK.

Steelworkers from Unite, Community and the GMB unions say they agreed the deal to avoid the collapse of the company. In a statement, the combined National Trade Union Steel Co-ordinating Committee said: "We do not celebrate the confirmation of the RAA, but under the circumstances this represents the best outcome for members of the BSPS. All of the experts, and the independent Pensions Regulator, have concluded that had the scheme not been separated it would have meant the inevitable insolvency of Tata Steel UK and the PPF for all members.

"Members will now be able to choose whether they want to keep their pension in the BSPS, and so receive PPF compensation, or transfer their pension to a new scheme with the same benefits as the BSPS but with reduced annual increases. This will be an extremely difficult choice for many people and it is vital that every member receives the support they need to make the right decision for them and their families.

"Now the RAA has been confirmed the company and trustees need to start communicating and deliver all the information necessary to enable members to make a properly informed choice. We would urge members to engage in the forthcoming consultations and roadshows."

Koushik Chatterjee, Tata Steel’s group executive director, said: “The completion of the RAA follows many months of hard work to provide the most sustainable outcome for pensioners, current employees and the business.

“I would once again like to extend my gratitude to all the stakeholders – in particular The Pensions Regulator, Pension Protection Fund, the Trustee of the British Steel Pension Scheme, its members, the unions, our employees and the governments of the UK and Wales. Without their significant time and effort, as well as constructive engagement, this process would not have been completed.

“Although much work is still needed to ensure the business is competitive in future, the next step in this pensions process involves necessary formalities to set up the new scheme with a lower risk profile following the necessary member consent process led by the trustee. This will take some time to implement given the wide membership base of the scheme.”