British Steel pensioners: Don't make us '˜collateral damage' in Tata rescue deal

MPs urged to intervene over British Steel pensions

As young men joining their local steelworks, they were made a simple promise – start paying into a pension scheme that was “as good as it could possibly be” and it would look after them and their loved ones in old age. But decades later, they are finding that promise may no longer hold.

For many in Yorkshire, being a British Steel employee represented not just a job for life, it was a way of life. Sons, fathers and grandfathers all often worked at the same plant and, at its height in the 1960s and 1970s, British Steel employed more than 260,000 people; largely clustered in five main areas – South Yorkshire, Teesside, Scunthorpe, South Wales and Scotland.

British Steel was privatised in 1988 and in 1999 a merger resulted in it becoming Corus. Eight years later, Indian conglomerate Tata Steel bought Corus. But Tata’s hopes of making a success of the business did not come to fruition – and the firm pointed the finger of blame at the £15bn pension scheme for its financial woes; warning the entire business faced collapse, taking thousands of jobs with it. As a result, unions thrashed out a compromise last year to allow Tata to ditch the pension scheme in exchange for keeping the giant Port Talbot facility in South Wales in operation for the next ten years. 

It now means 125,000 members of the company’s pension scheme are facing major changes to their payouts, with those whose service occurred either largely or entirely before 1997 being worst-affected as annual inflation-linked rises for all years of service before then are essentially removed.

The result, warn representatives of a 4,000-strong Facebook group called ‘British Steel Pensions Members’, will be many ex-employees losing out on thousands of pounds they had been budgeting for. Stefan Zaitschenko, from the group, says pensioners are “collateral damage” in the deal and fears many of those due to be affected by the changes from next March do not fully understand what is on the cards. 

Under the terms of the agreement, approved this week by The Pensions Regulator, individuals’ pensions will be transferred into a ‘lifeboat’ scheme called the Pension Protection Fund (PPF), where there will be a 10 per cent reduction to their values. But they can alternatively opt to transfer to a revised scheme sponsored by Tata known as British Steel Pension Scheme 2, which will pay less money than currently but generally provides more than the PPF arrangement.

Zaitschenko, from Guisborough in North Yorkshire, worked for British Steel for 37 years and retired five years ago. The former project manager says those affected will lose out whatever happens. “People are between a rock and a hard place. Since the scheme began in 1969 to 1997, all those people only worked for one company – British Steel. Ten years after that, a big company came in and took over and ten years later that company is going away, leaving them with a big hole in their pensions.”

While an element of pensions accrued between 1988 and 1997 will still qualify for inflation-linked rises under the revised scheme, an example given on the British Steel Pensions website shows this portion represents a tiny proportion of the overall pot. Zaitschenko says complexities such as this make it harder for members of the scheme to understand the simple consequences of the planned changes; they are about to lose out on a considerable amount of money.

“I bump into people from work and say ‘Do you know?’ and they haven’t got a clue. I feel guilty because you have spoilt their day and probably the rest of their life when you explain. There are only 4,000 people in the group at the minute but there are tens of thousands of pensioners out there who are blissfully unaware of what is about to happen.”

Zaitschenko says members generally accept that revisions are needed but suggests that a middle ground could be found in which rises running below the current rate of inflation are applied. Another area of major concern to campaigners is the impact on widows of former workers who are now receiving pension payouts they rely on. The campaign has been writing to MPs in the hope of applying political pressure so changes are made.

Andy Mains, from North Yorkshire, retired last year at 55 having previously been a team leader in Teesside. His late father also worked for British Steel, meaning his 83-year-old mother’s widow’s pension will also be hit.

Mains says: “For me, it is unfair. You have got people who didn’t ever work for Tata. Now their futures are being determined by a company that they have never worked for. We could lose 20 to 30 per cent of the value of our pensions as inflation goes up. My mother got the letter a couple of weeks back. She said ‘What is this? I haven’t got a clue what it means’. I spent a couple of hours with her explaining.”

Shaun Campbell, a 56-year-old from Rotherham who started at British Steel in 1977, says his mother-in-law is also receiving a widow’s pension and his father also receives a steelworks pension which he fears will eventually become “worthless”. Campbell, who retired last year along with his wife, says what they had budgeted is now in question. “How bad it is going to be, nobody knows.”

Mick Hawker, aged 62 and from Sheffield, started work for British Steel in 1971 and finished in 1991, going on to work for the NHS. “If inflation is two to three per cent every year I’m still living, then I could lose 50 to 60 per cent. Like everybody else, I think it is a disgrace. They are looking after the profits of a huge multi-national company with money around the world and trying to ditch their pension responsibilities in this country.

“My mother is 92. She is getting my father’s pension and because she lives in Ireland, she has already taken a big hit because of Brexit in terms of the exchange rate. I spoke to her last week and gently explained what is happening. I’m sure there are a lot of people in that situation. I can remember being encouraged to join the scheme as a young man, being told it was as good as it could possibly get. That was the promise the Government made to us.”

Paul Needham, also from Sheffield, says he had been ringing round former colleagues to see if they understood what was coming. “Out of the 20 I have rung, only one was aware of the pre-1997 change and that was because his wife was a financial adviser. I am worried that the bulk of people affected by it aren’t aware of it. For me, that is the main issue.  Political fights are sort of secondary to me but informed decisions need to be made by people who are quite vulnerable.”

Richard Green from Teesside was made redundant in 2010 having worked for British Steel for 34 years.

“I’m coming up to 59 now and should I live until I’m 80, it is a long time to go without an inflationary rise. It will put people under a great deal of stress and anxiety. When you go for a job at my age, nobody wants to know. We are not just a commodity to be bargained with on the stock exchange, this is human life. All we are appealing for is fairness.”

Tata says changes are vital

Tata says changes to the pension scheme are necessary to ensure it remains “sustainable”.

The company says further information will be provided to affected members in the coming months ahead of decisions on transfers being made in December.

Koushik Chatterjee, Tata Steel’s group executive director, said the approval of The Pensions Regulator for the changes “follows many months of hard work to provide the most sustainable outcome for pensioners, current employees and the business”.

He said the new scheme will have a “lower risk profile” but work to set it up will take some time, in part because of the large number of people who are members of the scheme. 

Members will receive personal information and illustrations by October to assist them in making their choice between schemes.

The BSPS Trustee Chairman, Mr Allan Johnston said: “Members of the BSPS now have an important decision to make regarding their pensions and we are undertaking a series of communications to ensure that they have all the information they need to make the right choice for them.

“For most members, the choice will be straightforward.  For some members, however, the best choice will depend on their personal circumstances and preferences.  It is very important that members make an informed decision after receiving full information about all their options and taking appropriate advice.

“The Trustee expects that the transfer to the new scheme will be completed by March 2018 and that the original BSPS will go into a PPF assessment period by the end of that month.”