The £14.9bn (€17.3bn) British Steel Pension Fund could close to future accruals as its sponsor seeks an exit from the UK market, according to media reports.

The Financial Times has cited sources claiming Tata Steel wants to shut the fund fully, with a formal consultation said to be pencilled in for the end of this month.

A Reuters report cites a union source as saying Tata is looking to close the defined benefit scheme to future accruals and move members to a defined contribution scheme.

The British Steel fund had an estimated funding shortfall of £1.5bn, according to a government consultation launched in May. However, IPE understands this has been almost completely eroded by investment gains over the summer to just £50m on a technical provisions basis as of mid-October.

A spokesperson for Tata Steel said the company “continues to be in active dialogue and engagement with all relevant stakeholders to develop options to support a sustainable future for the business and find a solution to address the costs, risks and volatilities of the British Steel Pension Scheme and the risks this brings to the future of the Tata Steel UK business”.

The spokesperson added: “These discussions are currently ongoing with stakeholders, as it is important to continue to explore viable alternatives for the scheme.”

The Trustee of the British Steel Pension Scheme (BSPS) said it “is aware that Tata Steel UK intends to consult with its employees on proposals for future pension provision”. 

“Timing of the consultation is a matter for TSUK and its trade unions,” it said. “Under the terms of the current recovery plan, the next payment of £60 million is due on or by 31 March 2017. This payment is not affected by the company’s consultation and would remain due. The same applies to the final recovery plan payment of £65m due on or by 31 March 2018.”  

It noted that the current recovery plan was agreed as part of the actuarial valuation as at 31 March 2014 and that the next actuarial valuation of the scheme is as at 31 March 2017.

Alex Flynn, head of media at Unite, the UK’s biggest workers union, urged Tata Steel not to be hasty with a decision on the pension’s future.

“What we’ve said to the company consistently is we cannot make an informed decision – and they should not make a formal decision – until the fund’s valuation next year so we can assess what that deficit is,” he said.

“The company needs to be very clear with the unions, the workforce and pensioners, as we will be seeking detail on this.

“Tata should stand by its promises and shouldn’t pull the rug from under the people who have paid into their pensions every year.”

Referring to reports that Tata is looking to close the scheme before making the £60m payment, Labour MP Stephen Kinnock said it would be “an absolute disgrace” if it were to do so.

Closing the scheme would help to limit future increases in liabilities.

In its 2016 annual report and accounts, the British Steel fund said it was “likely that it will not be possible to find a new employer wishing to take on the scheme in its current form, and that the scheme would be required to go into the PPF”.

However, until a bankruptcy event occurs, the fund cannot enter the lifeboat fund’s assessment period.

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