Prestige Wealth Solutions - Tata Steel Agree In Principle to Settlement for UK Pensions Saga in 2017
Tata Steel has recently in principle agreed to the pensions saga that they have been facing at their UK business. This decision could be the last thing needed to complete the merger of the company's european steel making operating with their rival ThyssenKrupp, a German company.
Tata Steel have been feeling the financial burden that has been put on them by the £15 billion British Steel Pension Scheme as one of the largest steel makers in the country. The deal, which is now only in principle, could result in the company handing over thirty three percent of the UK subsidiary towards the retirement fund, that is equivalent to £550 million as a result.
The agreement is still in negotiations between the UK regulators, trustees of BSPS and Tata Steel in the UK. In the event that the negotiations go ahead successfully, it could result in the end of the crisis being faced by the steel industry, when Tata decided to remove themselves from Britain after serious financial losses over the past few years. This decision could be the final thing holding the company back from a merger with ThyssenKrupp, along with Port Talbor in South Wales.
The scheme is to be sponsored financially by Tata Steel UK, but it will lower the annual increases when it comes to any future payouts for pensions. This poses a lesser risk for the company. The BSPS members who choose not to move to the new scheme would find themselves in a Pension Protection Fund, which benefits have been cut by around ten percent.
More than five thousand eight hundred companies are facing deficits of £530 billion for defined benefit schemes. The modified scheme is expected to be a better outcome that the Pension Protection Fund for most of the members. Workers at Tata steelworks voted this year to accept the BSPS closure for future contributions, which was offered as a rescue package by the company. The pension provision caused a net loss of £145 million in the first three months of this year.