While Tata Steel's decision to invest £1bn ($1.26bn) in its UK business could save the Port Talbot plant from closing down, it still faces some major hurdles, The Pensions Regulator (TPR) has warned. The UK non-departmental public body said these hurdles were related to Tata Steel's UK pension scheme.
The regulator explained that the Indian steel giant had to first secure the future of its pension scheme, which had liabilities to the tune of £15bn and 130,000 members. It said this was in turn crucial for saving the Port Talbot plant.
The warning comes just days after steel unions reached an agreement with Tata Steel that assured the future at Port Talbot and other steelworks across the UK. Apart from the £1bn investment, the proposal included points relating to production, jobs and pension.
Referencing the pension scheme, the proposal read: "Tata Steel will begin a consultation on the closure of the British Steel Pension Scheme (BSPS) to future accrual, replacing it with a defined contribution scheme with maximum contributions of 10% from the company and 6% from employees."
Tata Steel UK employees are yet to agree on these changes, which will be put to vote in early 2017. Port Talbot's future is said to now depend on its employees agreeing to these changes.
Further, TPR also warned that there was a lot of work to be done to resolve these pension related issues. It explained that it had to either approve the entry of this pension scheme into the Pension Protection Fund (PPF), which would result in a 10% cut to members' benefits or approve any major changes to pension benefits and Tata Steel's commitment to the scheme.
"We note the announcement from Tata Steel and look forward to seeing more detail from them regarding any proposal for the British Steel pension scheme. There are still significant issues to be resolved and we will consider any proposals carefully in light of their impact upon the 130,000 pension scheme members and PPF levy payers," a TPR spokesperson was quoted as saying by the Guardian.
Meanwhile, Tata Steel said it was working on the pension related issue. "[We are] working separately on a necessary structural solution," the company said.