London: Tens of thousands of steelworkers in the UK could have their pensions slashed by up to 20 per cent under plans by Tata to wash its hands of the 15 billion pounds British Steel retirement scheme, media reported on Sunday.
According to a report in the Sunday Times, the Indian conglomerate is understood to be in negotiations with the government and the Pensions Regulator over putting the scheme, which has about 130,000 active and retired members, into the Pension Protection Fund (PPF), which would mean workers suffer cuts to their retirement savings of as much as 20 per cent.
Last week Tata said UK's largest steelworks, at Port Talbot in South Wales, was no longer viable and put its entire British steel operation up for sale, leaving 15,000 jobs hanging in the balance.
Sources close to the company said it does not plan to continue supporting the pension fund once it has quit UK steel, according to the report.
"There is no possibility whatsoever [it will retain the pension scheme]," said one source. "Legally it can do it."
The scheme is one of Britain's biggest a throwback to when the industry employed hundreds of thousands of workers.
It has a deficit of 485 million pounds, but with assets of almost 14 billion pounds, it is in fairly healthy shape.
Amid the pension talks, Sanjeev Gupta, the Indian origin steel tycoon, has made an alternative proposal to replace Port Talbot's blast furnaces with more efficient electric arc furnaces.
The plan from his company Liberty House, which recently bought assets from Tata and the failed Caparo Industries, is seen as a longshot that would require vast government support.
Tata bought the Anglo-Dutch steelmaker Corus in 2007 in an ill-fated 6.7 billion pounds deal.
It believes it has a strong case for disposing of the pension scheme after propping up the loss-making British operations for years.
It has pumped in 1.5 billion pounds and written down the value to zero. It is working with PwC on the pension plan.
While Tata could put its British arm into administration to shed the liabilities, it is unwilling to do so because of the huge risk to its reputation.
Instead, it is likely to offload the scheme through a compromise deal with the Pensions Regulator.
That would entail it pumping in hundreds of millions of pounds to partly plug the scheme's estimated 2bn pounds buyout deficit ? the cost of transferring it to an insurer.
The Community union, which represents steelworkers, said: "Our members would be extremely concerned for their pensions. Tata needs to be a responsible seller of its business and honour its moral and social duties... That includes its obligations to the thousands of members of the pension scheme."
The PPF generally pays full pensions to those who have retired but reduces payouts by 10 per cent for those who retired early or are still in work of which there are more than 40,000 in the steel scheme.