Tata Steel enters new UK pension deal
The UK pensions regulator has given the go-ahead to Tata Steel UK’s plan to restructure its pension scheme as part of efforts to stave off insolvency.business Updated: Aug 11, 2017 22:48 IST
Tata Steel UK announced on Friday it had signed the documentation for a Regulated Apportionment Arrangement (RAA) with the trustee of the British Steel Pension Scheme, paving the way for a possible merger with German steel major ThyssenKrupp.
When the RAA takes effect, the British Steel Pension Scheme will be separated from Tata Steel UK and a number of affiliated companies, the company said, after Britain’s pensions regulator gave initial approval to its proposal affecting nearly 130,000 members.
The development commences a 28-day period, at the end of which, and in the absence of any referrals, it is expected that the regulator will confirm its approval of the RAA.
The RAA would take effect after Tata Steel UK makes a payment of £550 million to the British Steel Pension Scheme.
At the same time, shares in Tata Steel UK would be issued to the British Steel Pension Scheme trustee under the terms of a shareholders’ agreement, leading to a 33% economic equity stake in Tata Steel UK being held by the Trustee, the company said.
Tata Steel UK has also reached an agreement for the sponsorship of a proposed new pension scheme. All members of the British Steel Pension Scheme would be invited to transfer to the new scheme subsequent to the completion of the RAA.
If the qualifying conditions are met, members who choose to, will transfer to the new scheme.
Koushik Chatterjee, Tata Steel’s Group executive director, said: “Considering the continued challenges in the global steel industry as well as the uncertain global politico-economic environment, the RAA presents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business.
“The RAA is one important milestone in Tata Steel UK’s journey towards a sustainable and enduring future, with pension obligations, whose risk profile would be consistent with the underlying business. The net financial impact of the RAA including the payment of the agreed amount would be reflected in the Q2 FY’18 financials for the company.”
Lesley Titcomb, chief executive of the UK regulator, said: “We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very difficult situation.
“The regulator is willing to work closely and constructively with employers who face real challenges in meeting their pension obligations due to difficult trading conditions...This proposal brings greater certainty for pension scheme members and unlocks the possibility of restructuring the company, which in turn could lead to preserving jobs.”