A radical new plan has emerged to save the British Steel Pension Scheme (BSPS), as Tata and unions officials work to remove obstacles to a potential sale of UK steelworks including Port Talbot.
India's Tata has been locked in talks with Germany's Thyssenkrupp over a potential joint venture since July, but UK sites including the Port Talbot steelworks are currently excluded from any deal until a resolution is found over the £15bn pension scheme.
Under the new plan, a “mirror scheme” will be created, with pensioners then given the choice over whether to opt in or transfer into the Pension Protection Fund (PPF). A small number of savers such as those who have entered early retirement would gain more from the PPF option.
The Department for Work and Pensions closed a consultation on four potential resolutions for the pensions of the steelworkers almost exactly three months ago.
Earlier this month, it emerged the government was distancing itself from the unions' preferred option of repealing parts of the 1995 Pensions Act. This would have allowed the BSPS to be linked to the Consumer Price Index, rather than the faster rising Retail Price Index, and was also strongly favoured by former business secretary Sajid Javid.
However, sources close to the talks are optimistic that momentum is building behind the new plan, which weds together two of the previous options.
While the government has previously mooted the "mirror scheme" option, the latest version of the plan would see benefits to be linked to the CPI from the outset, negating the need for new legislation and bringing it closer to the plan backed by both Javid and the unions.
One source close to the talks told City A.M. that options include the scheme being solely backed by Tata, run independently as a "zombie" scheme.
Most controversially, a final option would see the pensions jointly underwritten by the government and the Indian steel giant jointly backed by the government and Tata.
However, former pensions minister Steve Webb, now head of policy at Royal London questioned why the government would choose to lend support to the steelworkers' scheme in particular.
“This is what the PPF is there for so why the government should single out a single group of workers like that?
“If you're going to extend this kind of support for British Steelworkers there's going to be a long queue,” Webb added.
A DWP spokesperson said: “We consulted on a number of proposals for the future of British Steel Pension Scheme. We are still considering the responses and will respond in due course.”