Positive news for South Wales yesterday as 4000 staff at Tata’s Port Talbot steel works had their jobs guaranteed for five years. The announcement came as Tata pledged to invest £1bn in its UK business and also covers Tata’s other UK steel plants (1).
The investment plan represents a major reversal for Tata who had gone to considerable lengths to try and sell its British operations since announcing £1m a day losses in March.
The agreement although good news for the workers and local area; could come at a major cost for the steelworkers. As part of the agreement the unions have agreed to consultation with Tata on changes to the £15bn pension scheme (2). The British Steel Pension Scheme has around 130,000 members and has proved a major problem for Tata.
The initial proposals including closing it to future accruals, replacing it with a defined contribution scheme capped at 10% from the company and 6% from employees. (3) Although these changes would make the scheme far less attractive the union are still claiming it as positive news.
The new proposal certainly represents a significant improvement on Tata’s initial offer which was to close the old scheme and replace it with a new scheme offering maximum contributions of 3% from employer and employee. (2)
The pension fund has been a major issue for Tata seen they first tried to sell the business in March. The huge pension liability was a major hurdle to selling the business and led Tata to pause the whole sales process (1).
Mr Jha from Tata said during the process “Among those challenges, there is the need to develop a more sustainable business in the UK as well as a self-sustaining future for the BSPS” (3).
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.