By Maytaal Angel
LONDON Tata Steel's British workers voted on Wednesday to accept pension benefit cuts in return for safeguards on jobs and investment, although the Indian company's plan to spin off its entire UK pension scheme still faces regulatory hurdles.Wednesday's vote allows Britain's largest steelmaker to close its 15 billion pound ($19 billion) British Steel Pension Scheme (BSPS) to future accrual and replace the final salary scheme with a less generous defined contribution scheme."Steelworkers have made great sacrifices ... Those sacrifices must be repaid by Tata Steel honouring its commitments on investment and job security. Nothing less would be a betrayal and add to the deep mistrust that steelworkers now have for the company," said Tony Brady, national officer of the Unite trade union. In return for pension changes, Tata Steel has pledged to guarantee production and jobs at Britain's largest steelworks in Port Talbot, Wales, for five years and to invest 1 billion pounds in its UK business over the next decade.The company's new defined contribution scheme will cover its existing 11,000 UK employees. The firm is, however, seeking rare regulatory approval to cut benefits for all 130,000 BSPS members and to spin off the scheme into a standalone entity.Tata says its UK unit, which is set this year to post its first profit in five years, will fail if it has to keep ploughing funds into a scheme with 13 times more pensioners than paying employees.
The company is also seeking to spin off the pension scheme because Germany's Thyssenkrupp, with which it is in merger talks, is not prepared to take on any UK pension liabilities in the event of a tie-up."Steelworkers have taken a tough decision. It is vital that we now work together to protect the benefits already accrued and prevent the BSPS from free-falling into the pension protection fund (PPF)," said Roy Rickhuss, general secretary of the union Community.The PPF is a lifeboat for failing UK pension schemes. Tata Steel's UK workers were under pressure to back a deal that secured jobs and investment because if the company fails, they will face deeper benefit cuts under PPF payout terms.
Stephen Kinnock, member of parliament for Aberavon, Wales, said: "What we have seen today is that the workforce will strain every sinew to save our industry. If fulfilled, the package voted on today should secure the future for Port Talbot." Some industry watchers, however, remain to be convinced that the 4,000 or so jobs at Port Talbot are secure for more than five years.Thyssenkrupp has said its main goal in merging with Tata's European operations is to combat overcapacity in the steel sector, and many expect this makes jobs at Port Talbot, a vital regional employer, vulnerable in the long term.
Some pension experts also say Tata faced a battle to spin off the UK pension scheme because it would have to convince the regulator that the UK unit might otherwise go insolvent - something that looks less likely now it is heading for a profit. Martin Hunter, principal at pension consultants Punter Southall, said Tata faced a "substantial hurdle" winning regulatory clearance."Even if the Pensions Regulator can be convinced that insolvency is inevitable... the cash sum needing to be offered to achieve a separation could be substantial, perhaps even in excess of 1 billion pounds."($1 = 0.8025 pounds) (Reporting by Maytaal Angel; Editing by Keith Weir and Mark Potter)
This story has not been edited by Firstpost staff and is generated by auto-feed.
Firstpost is now on WhatsApp. For the latest analysis, commentary and news updates, sign up for our WhatsApp services. Just go to Firstpost.com/Whatsapp and hit the Subscribe button.
Updated Date: Feb 15, 2017 23:15:06 IST