Tata Steel UK has confirmed that it will close its defined benefit (DB) pension scheme to future accrual.
The organisation will close the British Steel pension scheme (BSPS) to future accrual from 31 March 2017. From 1 April 2017, the DB scheme will be replaced with a defined contribution (DC) pension scheme.
The closure follows a consultation process, which collected feedback from over 4,000 employees during more than 90 face-to-face briefings across the UK, in addition to feedback from trade union representatives.
In February 2017, employees who are members of trade unions GMB, Unite and Community voted to accept a pension proposal that includes the closure of the DB scheme to future accrual and the establishment of a new DC scheme with a maximum employer contribution of 10% and employee contributions of 6%.
The proposed DC pension scheme will also provide employees with death-in-service benefits at four times qualifying earnings; income protection of 50% of qualifying earnings for up to two years; and a one-off payment of up to £10,000 could be made to compensate members of the DB pension scheme over the age of 50 that want to retire from the age of 60.
The accepted proposal followed the rejection of a previous proposal put forward by Tata Steel UK, where the DC pension scheme would have employer and employee contributions of 3%.
A Tate Steel UK spokesperson said: “Tate Steel UK continues to be deeply engaged with the pension scheme trustee, the trade unions and relevant regulatory and government bodies to identify the best prospects for the future sustainability of its UK operations, and a fair and practical outcome for the members of the British Steel Pension Scheme.
“The [organisation] believes that finding a structural solution to address the risks from the pension scheme to the viability of the business is a crucial part of its ongoing UK transformation plan.”
Allan Johnston, chairman of the trustee board of the British Steel pension scheme, added: “The trustee of the British Steel pension scheme welcomes the conclusion of the consultation between Tata Steel and its employees over future pension provision. The closure of the scheme is an important step in securing its future outside of the Pension Protection Fund (PPF) and making available the choice of better pension benefits for the vast majority of members than would be available to them following freefall entry into the PPF.
“We continue to have constructive discussions with Tata Steel, HM Government, the Pensions Regulator, the Pension Protection Fund and other stakeholders about how to secure a better outcome for the BSPS membership. These discussions are ongoing and the membership will be kept informed of developments.”