MPs are pressing the owners of Tata steel for assurances 130,000 British Steel workers will not lose retirement benefits after it has emerged the pension regulator will not craft rules to safeguard them.
Labour MP Frank Field said yesterday (15 October) that "it is now all too clear that the livelihoods of 130,000 British Steel pensioners lie in the hands of the new owners - a pan-European super-giant – and not The Pensions Regulator”.
The Work and Pensions committee chair will be writing to Thyssenkrupp and Tata in a bid to find answers on how they will deal with the steel workers' pensions.
In August, Tata Steel UK (TSUK) got the go-ahead to offload the British Steel Pension Scheme (BSPS) and create a new defined benefit (DB) fund, after the regulator gave its formal approval to a regulated apportionment arrangement (RAA).
Designed for multi-employer schemes, under an RAA the participating employer in a DB 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 received £550m from the parent Tata Steel Group, significantly more than it would receive in insolvency, and a 33 per cent equity stake in TSUK.
But following completion of the RAA, the scheme is now offering its 130,000 members a choice; transfer to an as yet unannounced new scheme, available only to those who meet certain as yet unknown qualifying conditions, which will be sponsored by TSUK, or remain in the existing scheme which will transfer to the Pension Protection Fund (PPF).
In a letter to Mr Field, Leslie Titcomb, chief executive of TPR, said that the new BSPS proposal, including the qualifying criteria that need to be met in order for it to be established, “was the product of negotiation and agreement between the BSPS trustee (on behalf of the members), TSUK and the wider Tata Steel group”.
This means the regulator is not responsible for setting up these criteria, which will be designed to safeguard members’ benefits, as the TPR said previously.
Mr Field said: “Even if the vast majority of scheme members opt for the new scheme, the owners could still pull the plug and send them into the PPF.
“In the event the new scheme does go ahead, the new owners will decide whether to start paying cost-of-living increases for pensions accrued before 1997, the oldest members.”
According to estimates, the switch from [retail price index] RPI-indexation in the old BSPS to the statutory minimums offered by the new scheme could result in a 60-year-old scheme member with all their service pre-1997 losing around 40 per cent of their pension, Mr Field said previously.
Since the announcement of the agreement, Tata and Thyssenkrupp have initiated merger talks.
Mr Field will write to the two companies to understand what the “mysterious qualifying criteria” will be.
He will also be asking what commitments will the companies make to ensure the new scheme starts and stays in a healthy state, and how will the interests of pensioners will be represented and protected.
Member of the BSPS have also asked for the intervention of billionaire founder Ratan Tata, since they estimate that pensioners are going to lose 20 per cent of their pension in real terms in 10 years.
maria.espadinha@ft.com
