Tata Steel is reportedly in talks with the Pension Protection Fund and The Pensions Regulator over a deal for the British Steel Pension Scheme.

The Sunday Times has reported that Tata wants to offload the £15bn British Steel Pension Scheme so it can save the Port Talbot site as well as other sites across the country. However, this would cut the retirement pay-outs for its members.

Tata Steel is allegedly hoping to come to an agreement with the regulator and the PPF for an unorthodox restructuring deal, which would allow for a merger of its European arm with Germany’s ThyssenKrupp.

The new talks, which started last month, hinge on using a regulated apportionment agreement. This rarely used framework allows companies to pump cash into a pension scheme in return for being allowed to continue trading without those liabilities. That usually results in the scheme being taken over by the PPF, the industry-backed pensions lifeboat, The Sunday Times reported.

It was previously expected that the government would amend the law to allow the pension scheme to change its indexation from RPI to CPI, cutting its liabilities, allowing it to seek a buy-out deal instead of falling into the PPF.
However, Business Secretary Greg Clark rejected the plans of his predecessor Sajid Javid to change the law.

The steel pension scheme is one of Britain’s biggest, with 130,000 retired and working members, £15bn of assets and a deficit that is expected to have increased significantly from last year’s level of £700m.

The PPF told the paper: “We understand that there are a number of options being considered for the scheme.”

Tata said it “continues to responsibly develop options to identify the best prospects for the future sustainability of our UK operations and the best outcome for members of the British Steel Pension Scheme”.

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