Tata Steel agreed a settlement “in principle” to end the pensions saga at its UK business yesterday (16 May).
Tata took on the scheme when it bought Corus in 2007 for £6.2bn, and the funding deficit has been an increasing problem.
The proposal is that the scheme is separated from Tata through a regulated apportionment arrangement (RAA). The trustees of Tata wrote to The Pensions Regulator in January, pressing for such an arrangement.
Lesley Titcomb, chief executive of The Pensions Regulator, said that good progress is being made but “there are still important details to be finalised before we are in a position to approve the RAA.
“Pension restructurings which involve an RAA are rare, and we will only approve an RAA where stringent tests are met, so that they are not abused by employers seeking to inappropriately offload their pension liabilities.”
The deal gives the scheme’s 130,000 members the option to transfer to a new scheme backed by Tata, or to take compensation from the Pension Protection Fund. Both options involve cuts in their benefits.
The deal could remove the last hurdle to a merger of the group’s European steelmaking operations with those of German rival ThyssenKrupp.
The deal “in principle” would mean handing over £550m and a 33 per cent stake in the UK subsidiary to the retirement fund.
The deal, if approved by The Pensions Regulator, will end Tata’s liabilities for the scheme. It has been agreed with the scheme’s trustees.