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Tata Steel and the impact on older workers

by on June 8, 2016

Debate about the consequences of the Tata Steelworks rescue scheme rumbles on. This article on The Week website highlights the likely impact of the current proposal on older workers. Specifically, it is said that the pension cuts would hit older workers hardest as it would completely freeze payouts on any pensions accrued before 1997. 

The scheme’s trustees believe the current proposal would avoid the need for a Pension Protection Fund bailout. The necessary reforms to the pensions legislation would allow the government to “re-index” increases to payouts from the British Steel pension scheme to a lower level of inflation. This would have the effect of reducing future liabilities by £2.5bn. 

This plan to reduce the index-linking benefits of the scheme is however now being recognised as more radical than had been appreciated. Pension experts say that it would leave some older pension savers facing a severe cut to their benefits. One example, given here in The Times, would entail a 60-year-old member of the scheme (whose contributions dated back to before a change in the law in 1997) losing 40% of the value of the pension.

Notwithstanding this, it’s being argued that this might be the best deal overall. A good example of how corporate rescue packages might differentially affect workers of different ages. There are hints that this particular plan might be the subject of a legal challenge.

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