Deal agreed 'in principle' to save British Steel Pension Fund with Tata Steel injecting £550m

By Scunthorpe Telegraph | Posted: 18 May 2017

A DEAL has been agreed in principle to save the British Steel Pension Fund (BSPF) ,which has an estimated 20,000 stake-holders in North Lincolnshire

Tata Steel, the former owners of the Scunthorpe steels works, has agreed to inject £550 million into the Glasgow-based fund which is 50-years-old this year.

It is understood that the cash injection will save the scheme from being forced to cut retirement incomes for its 130,000-plus members by ten per cent.

The deal is subject to setting up a regulated apportionment arrangement (RAA).

The boost from Tata came after the Indian owners announced an annual pre-tax profit of £536 million for their European operations compared to a £52 million loss in 2015-16.

Tata Group executive director Koushik Chatterjee said: "We are in positive discussions with the trustees, the Pension Regulator and the Pension Protection Fund in relation to an RAA and we are hopeful of reaching final agreement shortly."

Allan Johnston, the chairman of the BSPF trustees, said: " I am pleased that agreement in principle has been reached with Tata Steel UK about sponsorship of a modified pension scheme subject to qualifying conditions.

"Although the Pension Protection Fund (PPF) is an important safeguard for pension schemes generally, the Trustee believes that the BSPS has sufficient assets to offer members the potential for better outcomes by enabling them to transfer to another scheme offering modified benefits.

"For most scheme members, these modified benefits are expected to be of greater value than those they would otherwise receive by transferring into the PPF.

"Tata Steel'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.

"Discussions are progressing constructively and we expect to be in a position to communicate the final outcome to members soon."

Consultations over the future of the British Steel Scheme, which has a reported black-hole of £485 million to meet long-term liabilities, ended last June. But the Department for Work and Pensions has yet to announce the outcome.

The steel trade unions, Community, GMB and Unite have agreed to close the final salary pension scheme in order to safeguard jobs in the UK.

A spokeswoman for the Pension Protection Fund said: "We can confirm that the key commercial terms of a Regulated Apportionment Arrangement (RAA) have been agreed in respect of the British Steel Pension Scheme and anticipate discussions concluding in the near future.

"This would meet our published principles, including that an insolvency event of the scheme's sponsoring employer, Tata Steel UK, would otherwise be inevitable. Any RAA is subject to a 28 day period following an agreement leading to Pensions Regulator approval and PPF non-objection.

"Following the RAA, it is anticipated that if risk-related qualifying conditions relating to funding and size can be satisfied, a new pension scheme sponsored by TSUK will be set up.

"Members would then be given the opportunity to move to this new scheme prior to the existing scheme being assessed for entry to the PPF. Members of the scheme can be reassured that we are there to protect them throughout this process and they will be able to receive at least PPF levels of compensation, should they remain in the scheme and BSPS enter the PPF assessment period."

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