The pensions of more than 130,000 members of retirement funds underwritten by Tata Steel UK are in the balance, as the deadline for rescue bids for the business looms.
Seven prospective buyers, which employ around 12,000 people at sites across the UK, are expected to put forward an offer by the end of the day. The BBCeven reports that two of them, Liberty House and a management buyout consortium going under the name Excalibur, will state they are prepared to "work in partnership on a takeover".
It is not known how this would affect their respective turnaround plans. Liberty plans a radical conversion of the Port Talbot blast furnace into an electric plant processing scrap steel, while Excalibur has pledged to retain primary steelmaking.
Business Secretary Sajid Javid is flying to Mumbai this week to discuss the offers with the Tata board, says the Daily Telegraph. Beyond the specifics of the rescue plans in each offer, attention is likely to be focused on finding a solution to the near-£500m pension scheme deficit that has the potential to scupper a sale.
Buyers are unwilling to take on the huge £15bn British Steel pension funds, which the Daily Mail has estimated will require additional annual funding of £60m from next year - on top of the existing £485m shortfall and losses of £1m a day running the business.
Javid is thought to be backing a rescue plan that would see the funds hived off into a separate company, underwritten by the government and boosted by a one-off payment from Tata. Future pensions would be re-indexed to a lower inflation measure to "build a 'war chest' of £1.5bn to £2bn… to execute a buyout of the scheme" at some point.
However, this would involve a change to the law, which experts and the Department for Works and Pensions worry will set a dangerous precedent.
Their alternative solution is to place the funds into the industry rescue scheme, the Payment Protection Fund. This would also see future payments cut to the lower inflation measure only without the need for new legislation. It would also mean payments for a number of members who took early retirement being cut by up to ten per cent.
In a joint statement, the Department for Business, Innovation & Skills and the Department for Work and Pensions said: "We are working very closely together to achieve the best result for Tata workers and a future for British steel."
A spokesman for Tata said the company was "in talks with the government and pension scheme trustees to find a solution for the scheme".
Source: The week