The prospects of a rescue deal for Tata Steel UK have been boosted as the pension scheme can be restructured without entering the Pension Protection Fund (PPF), said the pension trustees behind Tata Steel UK.
A serious obstacle for a rescue deal for Tata Steel UK and the Port Talbot steelworks in Wales is the British Steel Pension Scheme as it has caused liabilities of £15bn and a deficit of as much as £700m by some measures.
After talks with the business secretary and the Pensions Regulator, Tata Steel which employs 11,000 people, is increasingly confident about securing the future of its UK business. Merging with the business of ThyssenKrupp, the German conglomerate, and the European operations of Tata Steel, including the UK business is being planned by the Indian steel manufacturing company. However, the U.K. government providing financial support and restructuring of the British Steel Pension Scheme are preconditions for the deal.
The scheme could avoid falling into the PPF if the benefits for workers were modified, Allan Johnston, chair of the pension trustees, said.
Tata Steel and ThyssenKrupp are keen to keep its liabilities under control even with the deficit narrowing to £300m on some measures and even though it is well-funded compared with other schemes.
Taking on responsibility for funding the current and future deficit for the joint venture or any buyer of Tata Steel UK “would not be realistic”, accepted the trustees, Johnston said. The workers would have to accept reduced terms is it is entered in to the PPF and hence it would be more attractive to modify the benefits of the scheme, he added.
However, it could still sell Port Talbot, warned Tata Steel sources. Guarantee the future of the steelworks has been used as a bargaining chip in talks with the British government as the company has consistently refused to provide such a guarantee since talks began about the future of its UK business in March.
The Indian conglomerate wants to make its steel business “more sustainable”, Koushik Chatterjee, executive director of Tata Steel Europe, said.
Chatterjee insisted the scheme is well-funded and said that talks to restructure the pension scheme were progressing. He said this while speaking at the sidelines of Tata Steel’s annual meeting in India.
“We are discussing with various stakeholders, including the British government and other stakeholders like the government of Wales and so on. There is a recognition that pension has a certain impact in a commodity business like steel, so we have to find a structural solution, which does not impact the business going forward,” Chatterjee said, according to the Times of India.
Tata Steel will welcome the willingness of the pension trustees to cooperate in talks to restructure the scheme.
In addition to limiting future increases in pension payments to the minimum required by law, shifting how the annual inflation-based increase in benefits is measured from the retail price index to the lower consumer price index are included in the potential changes to the scheme.
“The trustee and its advisers have provided Tata Steel, the government and the Pensions Regulator with compelling evidence of the scheme’s ability to pay modified benefits indefinitely and on a low-risk basis outside the Pension Protection Fund,” Johnston added.
A serious obstacle for a rescue deal for Tata Steel UK and the Port Talbot steelworks in Wales is the British Steel Pension Scheme as it has caused liabilities of £15bn and a deficit of as much as £700m by some measures.
After talks with the business secretary and the Pensions Regulator, Tata Steel which employs 11,000 people, is increasingly confident about securing the future of its UK business. Merging with the business of ThyssenKrupp, the German conglomerate, and the European operations of Tata Steel, including the UK business is being planned by the Indian steel manufacturing company. However, the U.K. government providing financial support and restructuring of the British Steel Pension Scheme are preconditions for the deal.
The scheme could avoid falling into the PPF if the benefits for workers were modified, Allan Johnston, chair of the pension trustees, said.
Tata Steel and ThyssenKrupp are keen to keep its liabilities under control even with the deficit narrowing to £300m on some measures and even though it is well-funded compared with other schemes.
Taking on responsibility for funding the current and future deficit for the joint venture or any buyer of Tata Steel UK “would not be realistic”, accepted the trustees, Johnston said. The workers would have to accept reduced terms is it is entered in to the PPF and hence it would be more attractive to modify the benefits of the scheme, he added.
However, it could still sell Port Talbot, warned Tata Steel sources. Guarantee the future of the steelworks has been used as a bargaining chip in talks with the British government as the company has consistently refused to provide such a guarantee since talks began about the future of its UK business in March.
The Indian conglomerate wants to make its steel business “more sustainable”, Koushik Chatterjee, executive director of Tata Steel Europe, said.
Chatterjee insisted the scheme is well-funded and said that talks to restructure the pension scheme were progressing. He said this while speaking at the sidelines of Tata Steel’s annual meeting in India.
“We are discussing with various stakeholders, including the British government and other stakeholders like the government of Wales and so on. There is a recognition that pension has a certain impact in a commodity business like steel, so we have to find a structural solution, which does not impact the business going forward,” Chatterjee said, according to the Times of India.
Tata Steel will welcome the willingness of the pension trustees to cooperate in talks to restructure the scheme.
In addition to limiting future increases in pension payments to the minimum required by law, shifting how the annual inflation-based increase in benefits is measured from the retail price index to the lower consumer price index are included in the potential changes to the scheme.
“The trustee and its advisers have provided Tata Steel, the government and the Pensions Regulator with compelling evidence of the scheme’s ability to pay modified benefits indefinitely and on a low-risk basis outside the Pension Protection Fund,” Johnston added.
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