11 August, 2017
It will also hand the scheme a one-third stake in the ongoing United Kingdom operations, which include the giant Port Talbot steelworks in Wales.
The Pensions Regulator (TPR) said its move to give initial approval for the restructuring came after ensuring it met "strict criteria created to stop employers abusing the RAA mechanism" and would "prevent the company becoming insolvent....we do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best outcome for everyone involved in what is a very hard situation,"' said Lesley Titcomb, Chief Executive of TPR.
Koushik Chatterjee, Tata Steel's Group Executive Director, said: "The RAA process has been a long and detailed one, and I would like to thank the Pensions Regulator, Pension Protection Fund, the Trustee of the British Steel Pension Scheme, its members, the unions and employees - indeed, all our stakeholders, including the Governments of the United Kingdom and Wales, for their constructive engagement through the process".
"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.
Tata Steel said more than a year ago that it would seek to merge its European operations with the steel division of Germany's Thyssenkrupp.
The Pensions Regulator has granted "initial approval" for a regulated apportionment agreement (RAA), involving a £550m cash injection and BSPS taking a 33% stake in Tata Steel UK, its sponsoring employer.
Also, shares in Tata Steel UK would be issued to the British Steel Pension Scheme Trustee under the terms of a shareholders' agreement, which would lead to a 33 per cent economic equity stake in Tata Steel UK being held by the trustee, it said.
"The RAA is one important milestone in Tata Steel UK's journey towards a sustainable and enduring future, with pension obligations, whose risk profile would be consistent with the underlying business".
Unions welcomed the RAA and the company's commitment to the new scheme, which put an end to the uncertainty their members had faced for over a year. RAA is a mechanism which allows a financially troubled employer in the United Kingdom to detach itself from defined benefit scheme liabilities.
"If stressed pension funds were allowed to restructure in a more transparent way, a pension fund equivalent of Chapter 11, risk could be better shared between the company, the members and the PPF", Rosenberg said.
Should there be no referrals to the UK court system in the next 28 days, the Pension Regulator is expected to confirm its approval, subject to Tata Steel UK making a £550-million payment to the scheme.
Lesley Titcomb, Chief Executive of the UK's Pensions Regulator, said: "We do not agree to these types of arrangements lightly, but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very hard situation".
In February, the company's British employees voted to accept proposals to close the existing pension scheme to new contributions, in exchange for greater certainty about the future of its 8,500-strong workforce.
BSPS trustees' Chairman Allan Johnston added: "It is the best outcome that could be achieved in the circumstances".