Tata Steel UK has reached the long-awaited agreement over its £15bn pension scheme.

The company signed the documentation for a Regulated Apportionment Arrangement (RAA) with the Trustee of the British Steel Pension Scheme on 11 August.

Tata said the agreement offers more "sustainable outcomes for pensioners, employers, and the business."

When the RAA takes effect, the British Steel Pension Scheme will be separated from Tata Steel UK and several affiliated companies.

From the day the document was signed, there is a 28-day period for any affected parties to refer the decision to tribunal - the Pension Protection Fund has already issued confirmation of non-objection to the RAA.

In the absence of any referrals by the end of that period, it is expected that The Pensions Regulator (TPR) will confirm its approval of the RAA, which would take effect after Tata Steel UK makes a payment of £550 million to the British Steel Pension Scheme.

Tata Steel UK has also reached an agreement for the sponsorship of a proposed new pension scheme, which is conditional on certain qualifying conditions being met.

All members of the British Steel Pension Scheme would be invited to transfer to the new scheme after the completion of the RAA and, if the qualifying conditions are met, members who choose to, will transfer to the new scheme.

Tata said: "The new scheme would have lower future annual increases for pensioners and deferred members than the British Steel Pension Scheme, giving it an improved funding position, which would pose significantly less risk for Tata Steel UK.

"There remains no certainty with regards to the eventual existence, size or form of the new scheme and the funding position and membership of any new scheme is still dependent on the results of the proposed voluntary membership transfer exercise."

Koushik Chatterjee, Tata Steel group executive director, said: "Considering the continued challenges in the global steel industry, as well as the uncertain global politico-economic environment, the RAA presents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business."

First published 21.08.2017

Lindsay.sharman@wilmingtonplc.com