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Tata Steel is close to finding a solution to its longstanding pension issue in the UK, with the employees’ union agreeing to the company’s proposal to close the British Steel Pension Scheme and offer a competitive defined contribution scheme.
The three employees’ unions of Tata Steel UK — Unite, GMB and Community — have advised staff to vote in favour of the Tata Steel proposal in the poll to be conducted on Monday. The move would save 11,000 jobs at Port Talbot, which was put on the block after sustained losses of £1 million a day.
In a joint statement issued on Friday, the unions said the offer was not without issues but was the “only credible and viable way to secure the future”.
Talks for a merger of Tata Steel’s UK operations with German major ThyssenKrupp have come to a standstill after Cyrus Mistry was ousted from the company’s board last November. ThyssenKrupp CEO Heinrich Hiesinger told German media that Tata must first resolve the pension deficit at its British and Dutch operations before talks could proceed.
In a bid to revive business prospects in the UK, Tata Steel last month committed to invest £1 billion over 10 years to make the business sustainable, if employees agreed to the new pension plan.
Tata also committed to keep both of Port Talbot’s blast furnaces open for five years, and to invest in a steel-making furnace at the site.
Pension fund deficitMeanwhile, in a letter to members, Allan Johnston, Trustee Chairman of the British Steel Pension Scheme, said the pension fund could report a deficit of £1-2 billion at its next valuation in March. Without a deal on the table, the trustees said Tata Steel UK would likely have to make contributions of £100-200 million a year for 15 years to plug the funding gap.
The letter added: “If Tata Steel UK is no longer able to access additional capital from the wider Tata Steel Group for continuation of business, the Trustee would have to adopt more risk-averse investment policies that are expected to produce lower investment returns. TSUK has confirmed that, given its current and projected performance, it does not expect to be able to pay the contributions required to close this deficit.”
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