The historic British Steel Pension Scheme (BSPS) is to be closed in a move that could affect about 16,000 workers.

India-based Tata Steel said it would begin a 60-day consultation about the closure and about proposals to shift staff to a defined contribution scheme.

Tata Steel is the latest company to axe its defined benefit pension scheme – in January, Tesco announced a consultation on plans to close its scheme, which is one the largest in the private sector with 350,000 members.

The scheme was valued at GBP 13.6bn in November 2014 and the fund has about 140,000 members, with 16,000 workers contributing.

The pension deficit is thought to be around GBP 2bn as of March 31 2014, compared with a deficit of GBP 1.2bn in 2013.

Savings of around GBP 1bn are estimated to be created by the closure.

Tata Steel took the first step towards closing the scheme two years ago when it announced that from April 2014 new starters would be enrolled in a less generous defined contribution scheme.

The company said: "We have been unable to come to an agreement that would have enabled defined benefit provision to continue and will be consulting employees on a proposal to close the defined benefit scheme to future accrual."

Union GMB called the plans to close the fund "unnecessary and profoundly disappointing" and said it was preparing a strike ballot.

David Hulse, GMB national officer, said the union did not expect to find itself discussing closure to new accrual, following months of negotiations that got underway in November.

"Throughout a long process, we have acted in good faith and negotiated constructively in trying to reach an agreement that addresses what we acknowledge to be a significant deficit in the scheme," Hulse said.

A spokesman for Tata said the company put forward changes to the defined benefits (DB) fund that would have balanced any changes across the entire workforce.

"We believe the trade unions' proposals to change member benefits would have unfairly disadvantaged younger scheme members, who would have had to bear most of the impact of the changes.

"We have been unable to come to an agreement that would have enabled defined benefit provision to continue and we will be consulting employees on a proposal to close the defined benefit scheme to future accrual," he said.

First published 19.03.2015

Lindsay.sharman@wilmingtonplc.com