THE UK GOVERNMENT is considering radical changes to the British Steel Pension Scheme in order to make TATA Steel’s UK holdings more attractive to potential buyers. The Govern ment has also raised the spectre of TATA continuing to own UK steel plants, including works at Trostre and Port Talbot.
However, the controversial changes, which are being considered by Business Secretary Sajid Javid, would be particular to Tata’s pension scheme and would not be more broadly applied.
Tata has claimed that the deficit in the pension scheme it inherited from British Steel is making it more difficult to offload its steel-making operations in the UK.
In response, Mr Javid has started a public consultation aimed at those who work in steel-making communities and those concerned in paying into the Pension Protection Levy that protects pensioners of bankrupt schemes.
THE BIDS
The deadline for potential buyers to make formal bids closed on Monday, but Tata has not revealed how many bids it received for its UK operations.
At First Minister’s Questions on Tuesday, Carwyn Jones observed that although the Excalibur bid had considerable technical expertise, it was yet to raise funding. He has suggested that two of the bidders, Liberty and Excalibur, pool their resources – financial, technical, and managerial – to present a combined bid, a solution known to be favoured by the UK Government.
THE PROPOSAL
The consultation document states that: ‘The exceptionality of the situation means that we need to think seriously about all possible options.
‘The legislative and parliamentary process is also such that, in order to have changes to regulations in place if that is what is required to enable a satisfactory resolution for steel production, the Government needs to start the consultation process in before the hope of any deal is confirmed’.
It continues to state: ‘The financial situation of the British Steel Pension Scheme is not responsible for the wider issues in the British steel industry.
“However, the scheme does itself give rise to issues that need to be resolved as a part of any long-term viable solution for Tata’s steelmaking operations in the UK and to provide clarity and security to the members of the British Steel Pension Scheme. The Scheme has therefore asked the Government to look into various options that would increase its chances of a sustainable future’.
‘NO DECISION HAS
BEEN MADE’
Mr Javid stressed that: “No decision has been made. We are wary of setting a precedent. This is very much about this scheme and this scheme only, in very unique circumstances.”
One option under discussion is to base the scheme’s annual increase on the Consumer Prices Index (CPI) inflation measure, which is usually below the Retail Prices Index (RPI) measure currently used.
This is the path favoured by the British Steel Pensions Scheme as they say it would leave most of the pension holders either better off or no worse off, compared with entering the Pension Protection Fund (PPF), which is the likely alternative.
On Tuesday (May 24). hundreds of steelworkers from across the country demand the government firstly ensure the responsible sale of Tata Steel’s UK assets and secondly deliver a proper industrial strategy that supports the entire steel sector throughout the current crisis and into a profitable future.
UNIONS WELCOME CONSULTATION
The steel trade unions – Community, Unite and GMB – have been in dialogue with the UK Government and Tata Steel for a number of weeks to secure a sustainable future for the steel industry. A number of bidders have made it clear that the British Steel Pension Scheme (BSPS) presents a major challenge to any sale.
A statement from the Community Trade Union said: ‘We fully understand the great importance of this pension scheme to both current and former steelworkers and steel communities across the UK.
‘There has been a lot of speculation that any sale of Tata’s assets would involve the BSPS going into the Pension Protection Fund (PPF). The trade unions believe that such a move would be an unmitigated disaster.
‘The PPF is a financial safety net but it would see every member of the scheme take an unnecessary cut in pension benefits. The financial health of the BSPS is such that going into the PPF can certainly be avoided.
‘We welcome the announcement of a government consultation on the future of the BSPS and the trade unions will of course make a full submission in due course. It is important that all stakeholders continue to explore all available options that avoid the need for the scheme to go into the PPF, which would be the worst deal for scheme members.
SAFEGUARDS NECESSARY
‘We need to ensure that there are cast iron safeguards in place so this unique situation does not result in employers dodging their pensions’ responsibilities’.
The Union statement continues: ‘It is important to remember that Tata Steel remains the employer and sponsor of the BSPS. They have significant legal, social and moral responsibilities with regards to the British steel industry and those men and women who have worked and continue to work within it’.
On BBC News, one pension expert, Tom McPhail from Hargreaves Lansdown, said: “The potential deal on British Steel could rip a hole in one of the most fundamental principles of pension provision. It is well-established that pension benefits, once granted, cannot be taken away.”
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