Ministers To Unveil Tata Steel Pension Revamp

Ministers will this week unveil proposals that would slash billions of pounds from the liabilities of the British Steel pension scheme as they seek to smooth a path for a buyer of Tata Steel's UK operations.

Sky News has learnt that the Government is expected to launch a consultation later that would, if implemented, require a change in pensions law in order to radically restructure the £15bn fund.

The proposals include altering the annual uplift in pensions provided to scheme members from the RPI inflation index to the CPI index, which would save an estimated £2.5bn and allow the scheme to be hived off into a separate entity.

However, they are likely to stoke controversy because if they were introduced, they would effectively trigger a reduction in the benefits that will be paid out in future to thousands of steelworkers.

Sources said the plans were likely to be outlined in a written statement from a minister from the Department for Work and Pensions sometime today, although they cautioned that they were still being finalised on Wednesday evening and remained subject to change.

The urgency of the timetable to secure the future of Tata Steel's UK operations, which directly employ more than 11,000 people, means that the consultation period is expected to last only a few weeks.

Reports suggest that Sajid Javid, the Business Secretary, is behind the plan to restructure the steelworkers' pension scheme, reflecting his determination to find a buyer for Tata Steel's 11 British plants.

However, the DWP and Treasury are said to be concerned that such a move could set a dangerous precedent for the pension schemes of other troubled companies.

The Indian-owned Tata Steel announced a sharp rise in fourth-quarter losses on Wednesday, and said the process of finding a buyer for its UK operations was continuing.

Bidders include the management of the vast Port Talbot steelworks through a vehicle called Excalbur, and the American billionaire Wilbur Ross, whose interest was revealed last month by Sky News.

A Government spokesperson said: "We absolutely recognise pensions are a challenge. We are exploring all options and engaging with Tata and other interested parties to see what support Government can provide."