Tata Steel (TSUK) has agreed the terms of a regulated apportionment arrangement with the trustee of the British Steel Pension Scheme (BSPS), which includes a payment of £550m.
The scheme closed to future accrual in March this year following a consultation with members and unions, with members becoming deferred pensioners. The last triennial valuation, as at 31 March 2014, found the scheme had a funding deficit of £90m.
In its full year results for the year end 31 March 2017, Tata Steel said “key commercial terms” of an RAA have been agreed in principle between TSUK and the BSPS trustee including the payment by a member of the Tata Steel group of an agreed settlement amount of £550m to the BSPS and the provision of a 33 per cent equity stake in TSUK.
“The RAA is subject to detailed documentation and formal approval by TPR and non-objection from the PPF. All parties are in positive discussions, hopeful of reaching final agreements shortly,” it said.
In addition, TSUK has agreed that following an RAA, it will sponsor a new scheme, which will be offered as a voluntary option to existing members of the BSPS, as an alternative to the Pension Protection Fund (PPF). It will have lower future annual increases than the BSPS but would be better than PPF benefits and would “pose significantly less risk” for TSUK.
Commenting, The Pensions Regulator chief executive Lesley Titcomb said: “Good progress is being made in our discussions with TSUK and the trustees about the future of the BSPS. The key commercial terms of a RAA have been agreed in principle between the company and the BSPS trustee. These appear to be in line with our published principles.
“However, there are still important details to be finalised before we are in a position to approve the RAA and we are considering these carefully in light of their impact upon the 130,000 pension scheme members and PPF levy payers. Pension restructurings which involve an RAA are rare, and we will only approve an RAA where stringent tests are met, so that they are not abused by employers seeking to inappropriately offload their pension liabilities.
“We also continue to work with TSUK and the trustee in respect of the proposal to offer members an option to transfer to a new scheme sponsored by TSUK, which may occur should the approval to the RAA be granted, or stay in the BSPS and receive PPF compensation. The successor scheme would be subject to qualifying conditions.”
