Companies

Pension fund closure: trade unions accuse Tata Steel of breach of trust

Vidya Ram Chennai | Updated on January 15, 2018 Published on November 10, 2016

Tata steel

Plans to close the scheme to avoid a £60-m payment due by March

Unions have accused Tata Steel of a “serious breach” of trust following reports that Tata Steel is set to close its defined benefit pension scheme, the British Steel Pension Scheme.

The company plans to close the scheme to avoid a 60 million pound payment due by March 2017, the Financial Times reported on Wednesday, quoted an anonymous source. The move would potentially remove an obstacle to the company’s talks with German steel producer ThyssenKrupp.

“If it’s true that Tata are looking to avoid this payment to the scheme, then they’re being underhand in reneging on agreements that date back five years to the 2011 valuation. Said Alan Coombs, a senior representative of the Community Union, at Tata Steel’s Port Talbot plant in Wales, pointing to the agreement reached last year. Tata Steel narrowly avoided industrial action after reaching an agreement with unions that kept the scheme open. “Even last year, steelworkers reluctantly agreed to changes to the scheme in the knowledge that the company would continue to make contributions to address the deficit. “

Responding to the FT report, Tata Steel said it was in “active dialogue and engagement” with all stakeholders to develop a sustainable future for the business, and the costs and risks to the pension scheme and Tata Steel. “These discussions are currently ongoing with stakeholders as it is important to continue to explore viable alternatives for the BSPS.”

In May the government launched a month long consultation on the 13.3 billion pound pension scheme, examining its options for helping the scheme, which has around 130,000 member, 14,000 of whom are currently employed by Tata Steel or other employers under the scheme. “Were Tata to sell Tata Steel UK it is highly unlikely that a purchaser would be willing to take on the pension scheme as a part of the deal – the cost and risk to the purchaser would be too high for a successful sale. The scheme therefore needs to be separated from Tata Steel U.K,” the consultation document said.

“Tata Steel is committed to working with the pension scheme trustee, the trade unions and relevant regulatory and government bodies to achieve a fair outcome for the British Steel Pension Scheme and its members against the backdrop of the difficult business conditions and the structural challenges the steel industry is currently facing,” Tata Steel added on Wednesday.

Published on November 10, 2016
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