Trustees of Corus’s pension scheme have held talks with Tata Steel about measures it will take to secure retirement benefits for the 167,000 members.

Under the Pensions Act of 2004, a change of control of a scheme sponsor is a notifiable event which must be reported to the UK’s Pensions Regulator. Trustees are required to take steps to ensure pension promises can and will be fully paid. This often means such moves as the injection of cash or the provision of other collateral.

Although Corus showed a surplus at June 30 under IAS19 accounting rules, pensions experts noted the funding was likely to fall well short of the sum needed to secure all promised benefits with an insurance company. Moreover, it is uncertain whether pension trustees or the UK Pensions Regulator could compel Tata to make contributions to the scheme in the event of a future shortfall.

In a note for RBC Capital Markets, pensions adviser John Ralfe wrote: “It is not clear if the Regulator’s powers apply outside the EU, the domicile of Tata Steel and other likely bidders.”

The scheme has UK liabilities of £9bn ($17bn).

“Despite its current surplus, [the scheme] is running a major asset and liability mismatch by holding 46 per cent of assets in equities. These are worth roughly £4.1bn – by coincidence the value of the Tata Steel offer,” Mr Ralfe wrote. Corus showed a total accounting deficit of £308m in its pension scheme as of December 31 2005.

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