(Adds details on nature of deal, background)
LONDON May 16 Tata Steel has agreed
the key commercial terms of a deal to cut benefits and improve
the funding position of its British pension scheme, the Indian
company said on Tuesday.
The pension scheme was a major stumbling block in talks to
merge Tata Steel's British and European steel assets with those
of Thyssenkrupp, because the German company was
opposed to taking on Tata's 15 billion pounds in UK pension
The deal, agreed with the scheme's trustees, will see Tata
plough 550 million pounds into the final salary British Steel
Pension Scheme (BSPS). It is subject to formal approval by The
Pensions Regulator, but Tata said it expected to get approval
Tata has also agreed, as part of the deal, to sponsor a new
pension scheme, which will have lower benefits than those of the
original scheme, and to give the BSPS a 33 percent equity stake
in its UK business.
With benefit cuts in place, the new scheme will pose less of
a risk to the company, Tata said.
The British Steel Pension Scheme is one of Britain's largest
final salary schemes with 130,000 members.
The pension scheme's members who do not agree to move to the
new scheme will automatically transfer to the Pension Protection
Fund (PPF), which said all the scheme's members, including those
in the new scheme, are guaranteed PPF compensation levels.
The PPF is a lifeboat for pension schemes in Britain that
run into trouble.
(Reporting by Maytaal Angel and Carolyn Cohn. Editing by Jane