Tata Steel Pension Cuts Would Hurt Old Workers
The Government has extended its powers to re-index increases to payouts through the reforms on Pensions Act 1995. It can increase payouts from the £15bn Tata Steel pension scheme in exchange for lower levels of inflation. This would reduce about £2.5 billion from its future liabilities.
It can avoid or ultimately reduce the funds needed for a Pension Protection Fund bailout.
However, this type of deal could have those who had been saving from 1997 to get the shortest end of the stick as their uprates would be lowered with the government’s proposal.
The PPF said it would be a better deal to those who started saving from the year 2000 and further because it would reduce the 10 per cent cuts to all deferred pensions under the PPF.
Specifically, Tata has admitted that some members, who were transferred into the current fund in 1990 from a previous scheme, raised concerns at the time that the new contract put any future benefits at risk of being cut if they became “unaffordable”.
The paper says the “matter was apparently settled in 1995, but it is not clear how”.
“The trustee is now investigating the terms on which that dispute was settled,” a spokesperson for Tata said, “[and] will be taking further legal advice on this question when the outcome of the government’s consultation is known.”