Members of the British Steel Pension Scheme (BSPS), the defined benefit (DB) pension fund of Tata Steel UK (TSUK), are asking for billionaire founder Ratan Tata to intervene in this case.
Stefan Zaitschenko, a former Tata steelworker who helps run a Facebook group for members of the old scheme with 4,300 participants, is trying to contact Mr Tata in a last resort move to try to save members pensions.
He said: “Ratan Tata is a good man. I cannot believe he would be happy that pensioners are going to lose 20 per cent of their pension in real terms in 10 years.”
BSPS will be separated from Tata Steel, after The Pensions Regulator (TPR) gave its formal approval to a regulated apportionment arrangement (RAA).
Designed for multi-employer schemes, under an RAA the participating employer in a defined benefit pension scheme stops participating in the scheme, and the departing employer's share of the employer debt that would otherwise be due to the scheme is split among one or more of the remaining participating employers.
In this case, the BSPS will receive £550m from the parent Tata Steel Group, significantly more than it would receive in insolvency, and a 33 per cent equity stake in TSUK.
Following completion of the RAA, the scheme is now offering its 130,000 members the choice to either transfer to a new scheme (if they meet certain qualifying conditions) which will be sponsored by TSUK, or remain in the existing scheme which will transfer to the Pension Protection Fund (PPF).
Mr. Zaitschenko said the benefit structure in the new scheme has been agreed “to minimum levels established by law”.
Members and pensioners are now trying to reach Mr Tata as the scheme trustees say they cannot make any changes without company approval, he added.
He said: “We are trying to reach him in any way we can. We have tweeted to him, because we don’t have his personal email.
“We are begging him to take a look at this and see the harm this will cause.”
Frank Field, Labour MP and chair of the work and pensions select committee, wrote to the regulator expressing concerns about the restructuring of the scheme.
Mr Field has received “numerous representations from BSPS members who have serious concerns about the [restructuring] proposal, in particular relating to the indexation of benefits accrued before 6 April 1997”.
In the new BSPS, increases will be set at the statutory minimum, which means that there will be “no increases for pension benefits accrued before 6 April 1998”, Mr Field said.
Increases of benefits accrued between 6 April 1998 and 5 April 1997 will only apply to the guaranteed minimum pension element, subject to a 3 per cent cap, he added.
He said: “It has been estimated that the switch from [retail price index] RPI-indexation in the old BSPS to the statutory minimums offered by the new BSPS could result in a 60-year-old scheme member with all their service pre-1997 losing around 40 per cent of their pension.
“Many scheme members clearly feel that they are being railroaded into a choice between this outcome and an even worse deal in the PPF, which provides no increases at all in respect of pre-1997 accrued benefits.”
In the meantime, the regulator has replied to Mr Field saying that “is important to note that the new BSPS is not a foregone conclusion”.
Mr Zaitschenko said that members have started receiving letters from the trustees to choose one of the schemes.
The deadline for this decision is December, he added.
BSPS members also want to make other pensioners aware of similar problems that they might face in the future, as DB schemes have been facing severe deficits, he said.
BHS is the prime example where 19,000 members’ defined pensions were at risk.
Sir Philip Green, the former owner of the BHS group, ended up paying £363m to ensure their security, although at a cost as BHS members’ benefits have been reduced.
maria.espadinha@ft.com