Tata Steel’s UK workforce has agreed to receive lower pension benefits in a bid to save their jobs.
Around three-quarters of British Steel Pension Scheme (BSPS) members voted to leave the final salary scheme and join a defined contribution (DC) system instead.
At the heart of the offer of lower pension benefits is a promise by Tata to invest £1bn in its struggling UK business over the next decade. The India-based group has also agreed not to make any compulsory redundancies for five years.
Tata has tried to sell its loss-making UK business without success. Making the company no longer responsible for the pension scheme appears to be plan b. This could help Tata UK continue to operate as it struggles against cheaper steel produced overseas.
The vote may have saved the pension scheme from falling into the care of the Pension Protection Fund (PPF). It also ends a period of uncertainty for the company’s 11,000 steelworkers in the UK.
Unite national officer Tony Brady said this is not a decision that the union’s members have taken lightly. “It has been a hellish time for them, their families and their communities as uncertainty has swirled around the steel industry over this past year or more,” he added.
Lincoln Pensions managing director Richard Farr said this process shows how difficult it is to move the pension obligation mountain.
“The bigger question has always been whether past benefits can still be protected,” he added. “Based on this ballot result, any move by the employer to cut prior benefits, which they might explore at some point, will need the imminent insolvency of UK Steel to force it through.”
This was not the only offer that the British Steel Pension Fund’s trustees had to consider. In January they rejected an offer from financier Edi Truell to take responsibility for the scheme’s £15bn of assets.
This was reportedly due to concerns that Truell wanted a share of future profits but would provide limited downside risk cover. His offer also depended on raising capital from the government and Tata Steel.
