Tata Steel U.K. will embark on a period of consultation with employees on a proposal to freeze the £13.3 billion ($16.6 billion) British Steel Pension Scheme, London, following an agreement with trade unions.
Participants will be offered “a competitive” defined contribution plan, a Tata Steel news release said. Further details could not be learned by press time.
The move is part of plans by parent firm Tata Steel Ltd., which launched a process to sell the U.K. business in April.
“Tata Steel U.K. has developed a long-term investment plan to make the business more competitive in the future,” said Koushik Chatterjee, group executive director, Tata Steel, and executive director for the European business, in the news release. “The delivery of the transformation plan in the next couple of years, combined with a structural solution for the British Steel Pension Scheme fund, is essential to provide the affordability and financial self-sufficiency for future investments and also service its financial obligation to its stakeholders.”
The announcement was welcomed by the pension fund’s board of trustees. In a separate statement, the trustees said the consultation on freezing the pension fund is a necessary step in securing the best outcome for participants.
The statement added that the trustees believe entry into the Pension Protection Fund, London — the lifeboat for the defined benefit funds of insolvent U.K. companies — remains the most likely outcome for BSPS, unless benefits are modified so the pension fund is no longer in deficit and there are adequate reserves to cover residual risks. Freezing the pension fund “is an important step in preparing the scheme for the future and securing a better outcome for members than entry into the PPF can offer,” the statement said.
The deficit was about £50 millioncqd as of Oct. 17, down from a £300 million deficit as of March 31.