BRITAIN said last Thursday (26) it had started discussions on overhauling the deficit-laden British Steel Pension Scheme, a major stumbling block for potential buyers of Tata Steel’s UK assets.
With serious offers now on the table for Tata Steel UK, Britain is racing against time to find a way to put the company’s British pension fund on a sound footing to help facilitate a sale.
The consultation is looking at separating the pension scheme from Tata Steel and reducing its outgoings, while avoiding a collapse into the Pension Protection Fund (PPF), a government safety net that would leave many pensioners worse off.
Steel industry trade unions said it would be an “unmitigated disaster” if the scheme were allowed to fall into the PPF.
The British Steel Pension Scheme (BSPS) is one of the country’s largest defined benefit plans, with 130,000 members. Even with a solvent employer sponsoring it, the scheme’s £14 billion of liabilities exceeds its £13.3 billion in assets.
Britain’s steel industry has been hit by cheap Chinese imports, high energy costs and a global supply glut.
India’s Tata said in March it wanted to sell its remaining plants in the country, putting 15,000 jobs at risk and adding to the political pressure to find a rescue plan
The consultation process concludes on June 23, the date of the referendum on Bri- tain’s membership of the European Union.
The government said it was giving con- sideration to a proposal put forward by the BSPS and supported by Tata.
This would keep the pension scheme intact but require new legislation to allow a reduction in future benefits – an almost impossible task under current regulations. “Although this would entail future pension increases being cut back from their current levels, benefits would be more generous than those provided by the PPF for the vast majority of scheme members,” said Allan Johnston, chair of the board of trustees of the BSPS.
Its annual increases in pension payments are linked to retail price inflation, but the new legislation would allow the BSPS to benchmark them against consumer price inflation (CPI), which is much lower.
“Moving to CPI is likely to reduce pension liabilities by around £2.5 billion,” said Clive Fortes, partner at pensions consultancy Hymans Robertson.
The government said this proposal would be a one-off, given the size of the BSPS and the urgency of resolving its problems ahead of a sale of Tata Steel’s UK assets.
“Any resolution must ensure that it avoids setting a dangerous precedent for the millions of other occupational pensioners who currently enjoy RPI indexation rights,” Labour’s Angela Eagle told parliament. (Reuters)
Workers protest over shortlist delay
HUNDREDS of Tata Steel workers held a rare rally in central London last Wednesday (25) as the company’s board in Mumbai said it had yet to shortlist any bidders for the sale of its loss-making British assets. Wearing safety helmets and Tata’s yellow jackets, protesters chanted the slogan “Save Our Steel!” as they marched past the Houses of Parliament.
“We want somebody who will invest in the industry, support the industry and preferably keep us together, keep the plants together,” Tony Pearson, who has worked in the sector since 1977, said.
Indian Tata Steel is the UK’s biggest steel employer and the fate of around 12,000 jobs in Britain depends on a sale process it launched earlier this year.
British business secretary Sajid Javid held discussions with Tata Group chairman Cyrus Mistry last Tuesday (24), a day after a deadline passed for interested parties to submit bids to acquire the assets. The company said it had yet to shortlist bidders out of the seven who expressed interest.
“We are evaluating offers. We would like to figure out how many bidders we would take along to the next stage based on the bids they gave,” group executive director Koushik Chatterjee said.
Chatterjee refused to identify the bidders, or how many there are, stressing that Tata Steel was in the “confidential
phase” of the sale process. “We hope to close the deal shortly and have made good progress with constructive meetings with board members,” he add- ed, as he announced Tata Steel’s Q4 quarterly earnings.
Tata Steel posted a net loss of `32.1 billion (£326 million) in the three months to March 31, from a loss of `56.7 billion a year earlier.
“The UK steel operations continued to be exposed to volatile currency and low priced imports into the country,” Tata Steel said.
“The Tata Steel Europe Board under the advice of the Tata Steel Board is reviewing all options for the UK Business including a potential sale of the business.
” Labour leader Jeremy Corbyn and Trades Union Congress general secretary Frances O’Grady also joined the pro- test in London. Corbyn said:
“The industry must not be destroyed, and we-britain mulls overhaul to ease sale of indian company’s assets.
