Tata Steel today announced that it has concluded a new agreement under which its UK business stands separated from the 15-billion pound British Steel Pension Scheme (BSPS).
"Tata Steel UK has received confirmation from the pensions regulator that it has approved a regulated apportionment arrangement (RAA) in respect of BSPS," Tata Steel said in a statement here.
As part of the arrangement, a payment of 550 million pound has been made to BSPS by Tata Steel UK and shares in Tata Steel UK, equivalent to 33 per cent stake, have been issued to the BSPS trustee, the steel giant said.
The BSPS has now been separated from Tata Steel UK and a number of affiliated companies, it added.
Last month, Tats Steel had announced clinching of the deal facilitating detachment of the BSPS from its UK business.
The company, in the statement, said its UK business has agreed to sponsor a proposed new pension scheme subject to meeting of certain qualifying conditions.
"All the members of the BSPS will now be invited to transfer to the new scheme which would have lower future annual increases for pensioners...," it said.
The pact, signed by Tata Steel with the trustee of the BSPS, will pave the way for the Indian steel major's potential merger with German giant ThyssenKrupp.
"The BSPS Trustee will, in due course, communicate with all scheme members about the separation and the proposed new scheme," it said.
Koushaik Chatterjee, Tata Steel's Group Executive Director, said: "The completion of RAA follows many months of hard work to provide the most sustainable outcome for pensioners, current employees and the business."
The next step involves necessary formalities to set up the new scheme with lower risk profile following necessary member consent process led by the trustee, he said.
"This will take some time to implement, given the wide membership base. The net financial impact of RAA including the payment of the agreed 550 million pound will be reflected in Q2 FY18 financials for the company," he added.
The BSPS had been the major hurdle to future plans for Tata Steel in the UK and the latest move had been welcomed by workers' unions who had voted in favour of a deal earlier this year.
The company on May 16 had announced that the key commercial terms of an RAA had been agreed in-principle between the company and the pension scheme trustee.
Trade unions Community, Unite and GMB in a joint statement had welcomed the RAA announcement, which included a commitment that Tata will stand behind a new scheme with reduced annual increases.
RAA is a mechanism that allows a financially troubled employer in the UK to detach itself from defined benefit scheme liabilities. Tata Steel maintained that the agreement offered "more sustainable outcomes for pensioners, employees and the business".
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