If steel giant Tata fails to find a buyer for its UK business it could mean the British Steel Pension Scheme (BSPS) is placed into the Pension Protection Fund (PPF).
A warning over the future of the fund has come from the Trustee Board of the BSPS in response to the Department for Work and Pensions consultation in May.
The Trustee Board found that if the BSPS were forced to be incorporated into the PPF, 58,000 members below age 65, would have their benefits reduced by at least 10 per cent and all members would see reductions in future pension increases.
The trustees have issued proposals involve modified future pension increases and mean no benefit reductions for any members. The board has written to its 130,000 members explaining the proposals.
In recent weeks Tata's sale of its UK assets has been cast into doubt.
Tata is currently reviewing bids from up to seven firms for the business, which it announced it wanted to sell in March.
“There seems to be genuine division within Tata over whether to sell or retain the business,” a source close to the sales process told City A.M., adding, “There is a growing amount of frustration among bidders.”
Earlier today, a leading industry body has warned that a Brexit would exacerbate the crisis engulfing British steel, in a stark warning issued ahead of next week's referendum.
Gareth Stace, director of Steel UK, said Britain is better able to prevent Chinese steel dumping which is contributing to low prices if it remains part of the EU.