Steel unions in the UK have called off a one-day strike set for Monday after Tata Steel made a new offer that will keep the existing defined benefit pension scheme open but in a modified form. Other forms of industrial action will also remain suspended.

The Community, Unite, GMB and Ucatt unions will ballot their members on the new proposals, the unions said in a joint statement on Saturday following a meeting of 100 trade union representatives. The proposals were put forward by Tata Steel during the week during talks mediated by conciliation service ACAS. "This is a massive turnaround and means there is the opportunity for their British Steel Pension Scheme to provide dignity and security in retirement for many more steelworkers in the future," said Roy Rickhuss, general secretary of Community.

Tata Steel closed the 14 billion pound scheme to new employees last year. It began talks with unions on tackling an estimated 2 billion pound deficit, but after failing to reach an agreement began consulting on closing the scheme and moving existing employees to a defined contribution scheme. In May unions voted for industrial action over the proposals and were set for a one day all out strike on Monday.

The breakthrough happened last weekend when Tata Steel approached ACAS. Tata Steel welcomed the decision by unions and their positive reception of the company's "fair and balanced" offer to keep the scheme open in a revised form. "The decision recognises the substantial shortfall in the pension fund and the need to jointly address it, given the challenging business environment in the UK," the company said in a statement.

Should unions vote to accept the terms it will mean that Tata Steel will have ended the biggest industrial dispute faced by the British Steel sector in decades.