Tata Steel Signs RAA to Detach Pension

Steelworkers

"There remains no certainty with regards to the eventual existence, size or form of the new scheme and the funding position and membership of any new scheme is still dependent on the results of the proposed voluntary membership transfer exercise", said Tata Steel.

The BSPS had been the major hurdle to any future plans for Tata Steel in the United Kingdom and the latest move has been welcomed by workers unions who had voted in favour of a deal earlier this year.

The Pensions Regulator (TPR) has given its initial approval to the deal, and issued a determination notice and a clearance statement in response to Tata Steel's application for clearance and approval in respect of the RAA.

Tata Steel signed an agreement on segregating the company's United Kingdom business from its pension scheme that will potentially free it up to pursue strategic options for the unit, including a possible merger with Thyssenkrupp AG of Germany.

Tata Steel Group Executive Director Koushik Chatterjee said the deal was an "important milestone in Tata Steel U.K.'s journey towards a sustainable and enduring future, with pension obligations whose risk profile would be consistent with the underlying business".

The new entity will be represented by the Trustees of the British Pension Scheme and they will hold 33 percent in Tata Steel UK.

Tata Steel UK has signed a regulated apportionment arrangement (RAA) with the trustee of the £15 billion ($19.5 billion) British Steel Pension Scheme (BSPS) that will separate the pension from Tata Steel UK, in exchange for of £550 million and 33% stake in the company.

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Finalising the pension arrangements is expected to clear the way for Tata to merge its European steel business with German firm Thyssen Krupp.

That would mean cuts to promised pensions of around 10%, primarily affecting the 58,000 of the scheme's 130,000 members who have yet to retire.

The terms of a new pension scheme, have also been agreed, to which members of the existing one would be invited to transfer, following the RAA, which would have lower future annual increases for pensioners and deferred members, posing "significantly less risk" for TSUK.

Unions welcomed the agreement, saying it helped end members' uncertainty about their retirement income.

When the RAA takes effect as planned, it would separate the British Steel Pension Scheme from Tata Steel UK and the pension scheme's other participating employers (certain subsidiaries of Tata Steel UK).

"Now that this choice has been delivered, the company and the trustees must step up to provide the necessary information and guidance to enable every member to make an informed decision in their best interests. The company and the trustees must remember they are dealing with people's long-term future, their life savings, and their family's financial security; it is vital members are given all the support that they need". Tata Steel has been involved in ongoing discussions with the BSPS, the Pensions Regulator, and the Pension Provident Fund (PPF) over the settlement of liabilities.

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