British Steel pension trustees take on Tata over rescue deal

A new front in the pension battleground has opened up as trustees of the £15 billion British Steel retirement scheme heralded a high-stakes clash with backer Tata to try to halt cuts to pensioner benefits.

British Steel trustees, led by chairman Allan Johnston, are set to push the Indian group to ensure a new sponsor is in place to underwrite the scheme when the UK assets are sold to ensure its 130,000 pensioners are protected.

Bidders for Tata’s UK unit have indicated they will refuse to buy the group if the scheme remains attached to the company, setting up a flashpoint.

Seven bidders have emerged — Liberty House, Excalibur, JSW Steel, Greybull Capital, Hebei Iron, Nucor and Endless — but the pension scheme is seen as a major stumbling block hampering a sale.

Business secretary Sajid Javid will fly to Mumbai at the end of this month to seek a peace deal with Tata’s Indian board over the scheme.

He has proposed changing the law to allow British Steel to pay a lower rate of pensions in future to stop the scheme, which is £485 million in deficit, sliding into the Pension Protection Fund, the UK lifeboat fund.

However, at least one expert, former Boots pension boss John Ralfe, warned the move could cut benefits in over 6000 corporate schemes. “It would drive a coach and horses through the fundamental principle that pension benefits once earned, cannot then be reduced,” he said. “Changing the law in this way would represent a damaging dismantling of defined-benefit pension scheme regulation in the UK.”

The clash is the latest drama to engulf the pensions industry, after the 20,000-strong BHS pension plan faced relegation to the PPF after its parent company filed for administration. The failure of the scheme has triggered a further headache for British Steel with ministers desperate to keep it from the same fate as BHS over fears two large schemes would overwhelm the PPF. It emerged last week that Sir Philip Green, who sold the store chain for £1 to controversial bankrupt Dominic Chappell, had offered £80 million towards the scheme’s £570 million deficit but was turned down by the pensions regulator. It is thought the watchdog is seeking at least £300 million.

TPR head Lesley Titcomb was called “not much of a regulator” by MPs probing the collapse of the group although focus has grown on former boss Bill Galvin, who headed TPR when BHS’s recovery plan was agreed in 2012.