United Kingdom pensions regulator clears Tata Steel proposal

Tata Steel

When the RAA takes effect as planned, it would separate the British Steel Pension Scheme from Tata Steel UK and the pension scheme's other participating employers (certain subsidiaries of Tata Steel UK).

Tata Steel UK has finally signed the regulated appropriation arrangement for the pension scheme.

The deal makes the 130,000 members of the scheme automatically eligible to join the Pension Protection Fund (PPF), an industry-funded lifeboat for ailing schemes, which offers lower guaranteed benefits than the existing terms.

It follows an announcement on May 16 that the key commercial terms of an RAA had been agreed in principle between the company and pension scheme Trustee. It was noted at that time that the RAA remained subject to the agreement of detailed documentation with the pension scheme Trustee, as well as formal approval by the UK Pensions Regulator and non-objection from the UK Pension Protection Fund. After the accord was signed, the pension regulator issued a clearance statement that marks the commencement of a 28-day period during which parties directly affected by the RAA may refer the decision to approve it before the Upper Tribunal of the United Kingdom court system.

Tata Steel today announced clinching of a new agreement that will detach the 15-billion-pound British Steel Pension Scheme (BSPS) from its United Kingdom business. It would effectively mean that Tata Steel would no longer have any responsibility for the pension scheme.

Slaughters advised Tata Steel on the restructuring with a team led by pensions and employment partners Charles Cameron and Phil Linnard, head of the firm's financing practice Andrew McClean, M&A partner Padraig Cronin and head of restructuring and insolvency Ian Johnson.

Tata Steel UK said they had also reached an agreement for the sponsorship of a proposed new pension scheme.

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Tata Steel's pension liabilities have been a sore point that slowed merger talks with German Thyssenkrupp, putting approximately 8,000 British jobs at risk within the steel industry.

Tata Steel Group Executive Director Koushik Chatterjee said the deal was an "important milestone in Tata Steel U.K.'s journey towards a sustainable and enduring future, with pension obligations whose risk profile would be consistent with the underlying business".

"What this delivers is a more realistic promise to scheme members, without the destruction of value that comes with the current PPF route".

Unions welcomed the RAA and TSUK's commitment to the new scheme, which put an end to the uncertainty their members had faced for over a year.

"We'd encourage members to consider the details and their position carefully and decide whether the new scheme or the PPF is the better option for them", a PPF spokesman said.

"We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, ".

In a statement, the pension trustees said: "The New BSPS will pay the same benefits as the old BSPS except that future increases will be smaller".

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