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Tata Steel unions in the UK have welcomed the latest developments relating to Tata Steel’s pension arrangements in the UK, including the agreement on the main commercial terms of a “Regulated Apportionment Agreement,” under which Tata Steel will contribute £550 million, and a 33 per cent equity stake in its UK operations, and sponsor a new closed pension scheme.
“This announcement is a stepping stone in the process to secure British Steel Pension Scheme members’ benefits in a new modified scheme,” said unions in a joint statement. “The new scheme must be delivered and we will be seeking further assurances to ensure that this regulated apportionment arrangement announcement leads to the choice that our members expect.”
On Tuesday, Tata Steel had said that following discussions with the Pensions Regulator (TPR), the British Steel Pension Scheme (BSPS) trustee, and the Pension Protection Fund (PPF), the main commercial terms of a Regulated Apportionment Arrangement (RAA) had been agreed, subject to formal approval by the TPR, which it expects shortly. The agreement will involve a payment of £550 million by Tata Steel to the pension scheme, and a 33 per cent equity stake in Tata Steel UK.
Following the Regulated Apportionment Arrangement, Tata Steel UK will sponsor a closed pension scheme to which members of the BSPS could transfer. “The new scheme will have lower future annual increases for pensioners and deferred members than the BSPS, and therefore, an improved funding position which will pose significantly less risk for Tata Steel UK,” the company said.
The pensions regulator said that while good progress had been made, there were still important details to be finalised.
“Pension restructuring which involve an RAA are rare, and we will only approve an RAA when stringent tests are met, so they are not abused by employers seeking to inappropriately offload their pension liabilities.”
A PPF spokesperson said it expected to conclude discussions on a Regulated Apportionment Arrangement “in the near future”.
“This would meet our published principles, including that an insolvency of the scheme’s sponsoring employer, Tata Steel UK, would otherwise be inevitable.”
The BSPS trustee said that should a new pension scheme come into effect it will be subject to certain qualifying conditions relating to size and funding level.
“Should these qualifying conditions not be met, the new pension scheme, would not come into effect and all members of the BSPS would receive PPF compensation,” adding that the assets transferred into the scheme will include a proportion of the equity stake in Tata Steel UK.
“TSUK’s willingness in principle to sponsor a new scheme post RAA, subject to conditions agreed with the BSPS Trustee, paves the way to allowing members to make a choice based on their personal circumstances,” it added.
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