Tata Steel UK is to consult on the closure of the British Steel pension scheme (BSPS) to future accrual.
The new DC pension scheme would have a maximum employer contribution of 10% and employee contributions of 6%.
The new proposal differs from a previous proposal put forward by Tata Steel UK, where the DC pension arrangement would have employer and employee contributions of 3%.
The new pension proposal forms part of a wider proposal on employment terms, including a £1 billion investment plan to support the steelworks at Port Talbot, as well as commitments to continue blast furnace steel making until 2021, and to seek to avoid any compulsory redundancies for five years.
The proposal follows negotiations with trade unions Community, GMB and Unite.
Union representatives will ballot their members on the proposal in the new year.
Koushik Chatterjee, group executive director at Tata Steel and executive director at Tata Steel Europe, said: “The delivery of Tata Steel UK’s transformation plan and generation of free cash flows will be the key enabler for the future sustainability of the business and we are very encouraged by the early signs of the delivery of the plan. There is much more work to be done to make Tata Steel UK more financially sustainable, but I am confident that all stakeholders will do all they can to try to ensure that the company will be able to achieve its plan in the coming months and years. The proposed changes to future pension provision and other employment terms are necessary to de-risk the [organisation] and help achieve long-term sustainability. We are also working separately on a necessary structural solution for the British Steel pension scheme fund.”
Allan Johnston, chairman of the trustee board of the British Steel pension scheme, said: “Options for separating BSPS from Tata Steel were outlined in the government’s consultation document in May. All of these options required closure of the BSPS to future accrual. The trustee is in constructive discussions with Tata Steel, HM government and the Pensions Regulator about the options in the consultation.
“Although the trustee was not involved in the negotiations between [Tata Steel UK] and the trade unions about closure of the BSPS, [the] announcement is an important step towards achieving the best possible outcome for the scheme and its members. The trustee remains confident that the assets it holds are more than enough to pay the proposed modified benefits, which would be a better outcome than [Pension Protection Fund] compensation for the vast majority of members.”
Dave Hulse, national officer at GMB, added: “This agreement would mean the blast furnaces at Port Talbot keep making steel and that steelworks across the UK get the investment they need to compete in the future. We’ve fought hard to save jobs and today’s agreement is a credit to our members.”
Roy Rickhuss, general secretary at Community, said: “This is not the end of the process and it will be for all our members to now vote on this proposal. We will continue to work closely with Tata and all levels of government as we seek to build a sustainable future for Britain’s steel industry.”
Tony Brady, national officer at Unite, added: “[This] news is a step in the right direction for our industry but there is still a lot more that government can and must do. The commitments made today by our reps must now be followed by a commitment from the government that they will hold Tata to their word and ensure jobs are protected.”