UK govt to make statement on steel industry pensions

Business Secretary Sajid Javid is to make a statement to parliament on the steel industry as reports said the government was looking at slashing the liabilities of the old British Steel pension fund, now part of assets that Indian conglomerate Tata is trying to offload.

Javid will make the statement to the House of Commons on Thusday. Tata is considering a number of bids for its UK assets.

One of the main sticking points is the pension fund deficit, estimated to be around £485m. The BBC reported the government was looking at changing the annual measure used to uplift payments to scheme members.

The report said the government was expected to propose basing the scheme's annual increase on the Consumer Prices Index (CPI) inflation measure, which is usually below the current Retail Prices Index (RPI) measure.

The trustees of the British Steel Pension Scheme welcomed the move, saying it was better than the alternative, which would see the scheme fall into the Pension Protection Fund (PPF), the report added.

"Although this [government move] would entail future pension increases being cut back from their current levels, benefits would be more generous than those provided by the PPF for the vast majority of Scheme members," said Allan Johnston, chairman of the British Steel Pension Scheme.

However, former Liberal Democrat pensions minister Steve Webb warned the government was going down “a very dangerous path”.

"Everyone has huge sympathy for steel workers and for efforts to protect jobs, but rushed changes to pension rules risk driving a coach and horses through the pension security of hundreds of thousands of workers well beyond the steel industry," he told BBC radio.

Reports suggestion that the new rules would stipulate that a company could only change its pension liabilities in an emergency. But Webb said the term emergency was "ill-defined" and companies could create them artificially in order to reduce their pension payouts.

"Once there's a loophole that says you can walk away from promises you've made. Other [companies] could walk away," he said, adding that he thought there could also be legal challenges,” he said.