Unions representing employees of Tata Steel UK have advised their members to vote "yes" to a deal to close their defined benefit pension scheme to future accrual.
The deal, first revealed in December, would channel future pension contributions into a defined benefit scheme at a "competitive" rate.
It would guarantee members contributions of 16 per cent of earnings - 10 per cent coming from Tata Steel, and 6 per cent from the employee.
The December deal also stated that, subject to the "structural de-risking and de-linking of the British Steel Pension Scheme fund from the business", Tata Steel UK would commit to keeping the Port Talbot business open until 2021.
A spokesperson for the firm would not reveal what "de-risking" and "de-linking" would actually mean, but stressed that the imminent union vote would only apply to the proposal to close the scheme to future accrual.
In a joint statement yesterday (26 January), the three unions representing the steelworkers - Unite, GMB and Community - said they had unanimously agreed to recommend their members vote "yes" on the deal.
"We do not make this recommendation lightly," the statement read.
"Nobody is saying that the proposal on the table is without issues. We fully understand the concerns of members, particularly around the BSPS.
"But as we have said before what you are voting on is the best outcome that could be achieved through negotiation. It is our collective view, supported by our independent experts, that this is the only credible and viable way to secure the future."
The unions claimed the deal was "the only way to protect the benefits" already accrued, and provided "a chance" to prevent the BSPS from falling into the Pension Protection Fund - an event which forces members to take a 10 per cent cut to their pension benefits.
The unions warned members that a "no" vote would not necessarily prevent the DB scheme from closing to future accrual.
Hugh Nolan, president of the Society of Pension Professionals and director of Spence & Partners, said, given pension contributions are an integral part of overall pay, the Tata workers were effectively being asked to accept a cut in pay.
However, he said low interest rates and investment returns, forced enhancements to benefit promises, and increases in longevity, meant it was "hardly surprising that competitive industries have been forced to cut back on these excellent pension benefits to survive".
“The good news for Tata staff is that the proposed replacement with employer contributions of up to 10 per cent of earnings now on the table, still compares favourably to the typical scheme offered to employees in many other industries across the UK," he said.
"A decent pension scheme with sustainable employment does seem like a better outcome for members than a fantastic pension scheme that leaves them jobless. Having negotiated the improved offer, I think the unions are doing the right thing recommending this deal to their members."