Tata Steel in UK, warned its employees, on Friday that the new pension scheme is heading for a huge shortfall of 2 billion pounds ( $3 billion).The warning comes even as unions are preparing to announce the results of a ballot to determine industrial action against the Indian steel giant.
Chief executive officer of Tata Steel's European operations Karl Koehler's letter accepting "genuine concerns" over the proposed changes came as unions prepared to announce the results of a ballot to determine industrial action against Tata Steel.
"Our actions have been aimed at developing an affordable and sustainable pension scheme through changes that are fair and balanced for all those who work for us – from the younger generation to our longer serving team members who have given most of their lives to the UK steel industry," Koehler said in his letter, marking the close of a two-month consultation process with employees.
It adds: "The past few years have seen the UK – and most of the world – go through the worst financial crisis for generations. One of the consequences has been record low interest rates."
"And like savings in the bank, our pension scheme's assets have not been growing fast enough to keep up with increases in the expected cost of providing benefits. The result has been a huge shortfall of up to 2 billion pounds which is clearly not sustainable."
"I want to assure you that I do appreciate there are genuine concerns and we have made clear to the trade unions that we are looking at ways of lessening the impact of these issues. Indeed, we will be writing to our UK colleagues again within the next few weeks following the end of the consultation to respond to these issues," it said.
Unions representing Tata Steel workers - Community, GMB, UCATT and Unite -are expected to announce the results of a ballot for strike action. The industrial action ballot of nearly 17,000 steel workers is sought by unions to decide between a strike, lock-out and action short of a strike based on the majority view of the employees.
The dispute centres around Tata Steel's proposal to replace the existing British Steel Pension Scheme (BSPS) with a "money purchase" pension scheme in which employees, the government and the employer will make definite contributions. It would also hike the retirement age from 60 to 65. The unions have rejected it on the ground that it would increase the financial burden on the employees.