Tata Steel pensions proposals “drive a cart and horses through pensions protection” says former minister
Efforts to reduce Tata Steel's pensions deficit by scaling back members' rights represent a dangerous precedent according to the former pensions minister.
British Steel Pensions Scheme Trustee chairman Allan Johnston suggested last week that business secretary Sajid Javid was exploring options outside of the Pensions Protection Fund in a bid to tackle the firm's £485m deficit.
One option will see savers given a choice between entering the PPF, which limits inflation protects to years worked after 1997 with increases linked to the CPI and capped at 2.5%, or joining an alternative scheme, backed by the government.
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This would see the British Steel Pensions Scheme spun off as a “zombie” organisation, according to former pensions minister Steve Webb, now director of policy at Royal London.
“The government might put some money behind it, so perhaps it would perform better, but that's not really known. And would you have the the right to swap if it's not going well? This raises all kinds of questions.
"And not least that if steel is a special case deserving of this treatment, then why not airlines or whatever else you might think is important? It will be very hard to say now when the next one comes along," Webb told City PM
"You can protect those steel workers and pensioners, but if you drive a cart and horses through the existing pension protection regime while you're at it then that's a big price to pay."
Final bids for the struggling UK arm of the steel business had to be submitted by noon on Monday, while Javid is expected to travel to India later this week to meet with Tata Steel ahead of a board meeting in Mumbai.
A spokesman for the department for Business Innovation and Skills declined to comment.