Tata Steel has offered to make a one-off payment of £520m into the British Steel Pension Scheme in a move to offload the scheme completely.
FTAdviser understands that payment - which has not yet been accepted by the scheme trustees - would eventually allow the Indian steelmaker to separate itself from the pension scheme, making a sale or merger easier.
The pension scheme, which is heavily in deficit, would then become a so-called "zombie scheme" - meaning it would have no sponsoring employer to underwrite its liabilities.
This would put the scheme in a tiny but growing class of zombie defined benefit pension schemes, alongside the Kodak and BHS schemes.
Such a move would prevent the scheme from falling into the Pension Protection Fund, saving yet-to-retire members from taking the mandatory 10 per cent benefit haircut.
However, it would still result in a reduction in benefits for members, most likely through switching annual increases from the retail price index to the lower consumer price index.
It is understood that the trustees and unions would accept such a move in principle, although it is not yet clear whether this specific offer would be acceptable to them.
The scheme's deficit currently stands at somewhere between £1bn and £2bn, meaning the £520bn offered by Tata Steel would fall far short of filling the gap.
Any move to turn the BSPS into a zombie scheme would also require the approval of The Pensions Regulator.
A spokesperson for the BSPS said: "The Trustee, Tata Steel, and the various regulatory bodies are continuing to hold constructive discussions and it is too early to speculate on how these might conclude.
"The Trustee remains committed to securing the best possible outcome for Members and believes this would be achieved by allowing members to choose between staying in the BSPS (and so getting PPF compensation) and transferring to a new scheme that would provide modified benefits.
"For the vast majority of members and pensioners, the modified benefits provided by the new scheme would be better than PPF compensation. BSPS assets transferred to the new scheme would be used to provide the modified benefits with a high level of security and the possibility of progressive reinstatement of pension increases as and when circumstances allow."
A spokesperson for Tata Steel declined to comment.
Tata Steel is currently in merger talks with German company Thyssenkrupp. If the deal went ahead, it would potentially save thousands of UK jobs.
However, the pension scheme deficit is reportedly proving to be a sticking point in the negotiations.
Richard Farr, managing director convenant consultancy Lincoln Pensions, said that "any attempt to forge a joint venture with Thyssen Krupp" would lead to "further restructuring".
"A complete separation from the British Steel Pension Scheme looks like the only credible answer for Tata Steel," he said.
Last month the PPF introduced new rules specifically for zombie schemes, a move many read as a clear sign similar structures were likely to emerge in the future.
james.fernyhough@ft.com
