Tata Steel to close UK final salary pension plan

Tata Steel has announced plans to close the historic British Steel final-salary pension scheme, in a move that could affect about 16,000 workers.

India's largest private sector steelmaker by sales was forced to reveal the plans after unions reacted with anger at being told the decision on Friday at the TUC Congress House in London.

Unions representing steelworkers threatened to ballot their members for industrial action. "Tata Steel's decision to close the BSPS is unnecessary and profoundly disappointing," said Roy Rickhuss, general secretary of the Community trade union.

He added: "We have lost all faith in the company and its leadership, which has brought us to the brink of a major national industrial dispute for the first time in over 30 years."

Tata Steel is the latest company to take an axe to its defined benefit pension scheme. In January, UK retail giant Tesco announced a consultation on plans to close its scheme, which is one of the largest in the private sector with 350,000 members.

The India-based steel group said it will begin a 60-day consultation about the closure, and proposals to shift staff to a defined contribution pension scheme, where members bear the investment risk for building their workplace pension savings.

Although the figure is not finalised, the pension deficit is thought to be in the region of £2bn as of March 31 2014. This compares with a deficit of £1.2bn in 2013. The steel group estimates the closure will create savings of about £1bn.

In November 2014, the scheme was valued at about £13.6bn. The British Steel pension fund has about 140,000 members, with just 16,000 workers currently contributing to the fund.

Tata Steel took the first step towards closing the scheme two years ago when it announced that from April 2014 new starters would be enrolled in a less generous defined contribution scheme.

A spokesman for Tata Steel said: "We have been unable to come to an agreement that would have enabled defined benefit provision to continue and will be consulting employees on a proposal to close the defined benefit scheme to future accrual."

The decision to close the scheme comes as Tata is in talks to sell its European long products division, which employs 5,900 people in the UK and another 600 across Europe, to Geneva-based industrial group Klesch.

The sale would include a number of Tata Steel's biggest UK assets, including its Scunthorpe steelmaking plant that employs 4,000 people. The division, which makes steel that is used for building and to make rails for train lines, accounts for about a third of the company's 17,500 UK workforce.

Tata Steel's European division, which was inherited after its $13bn purchase of Anglo-Dutch steelmaker Corus in 2007, has undergone a difficult period after demand for steel plummeted during the economic slowdown. European steel demand fell 40 per cent at the worst point of the downturn and remains about 30 per cent below pre-crisis highs.

Tata Steel has spent the past few years cutting jobs across its UK operations. The number of people it employs in the UK has fallen from 25,000 in 2008 to 17,500 today.

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