COMPANIES across the country could be forced to stump up for the potential rescue of both the Tata-sponsored £ 14billion British Steel Pension Scheme and its £ 435million BHS counterpart.
Government sources fear that the Pension Protection Fund (PPF), which was created to safeguard the retirement savings of members of company-sponsored defined benefit (DB) schemes, will end up having to bailout both funds.
The PPF is financed by a levy on all private sector employers that have a DB pension fund and even though it has reserves of & pound; 3.6billion, it is understood that its board of directors will look at increasing the levy if it has to take on the pensions of British Steel and BHS workers.
Together, they represent the sternest test the PPF has faced since it was established in 2004.
However, the Government is confident that it will pass with flying colours.
One source said: "The PPF was designed to take on big schemes and its astonishing that it has not done so yet, but it is inevitable. Every now and then a big scheme will fail. There is no reason to doubt the PPF. "
A PPF spokesman said it is monitoring the situation at Tata Steel UK and is also holding talks with BHS about how much financial support it is prepared to provide to their pension schemes.
Last week Tata put its UK steel operations up for sale, which have been haemorrhaging money for years and are suffering under an onslaught by cut-price Chinese suppliers. Its Port Talbot site alone is losing & pound; 1million a day.
The Indian conglomerate is understood to hold little to no hope of finding a buyer for the business, having spent the past 18 months trying to sell it.
Tata will reportedly move to close down its British steel division unless a white knight appears before its next board meeting at the end of the month.
The firm has written down the value of Tata Steel UK, which employs more than 15000 to almost zero.
The closure of the business would not just threaten the prospects of its employees, but also its supply chain.
According to the manufacturing lobby group the EEF, there are 25000 people directly employed by the steel industry and a similar number by suppliers to the industry.
As part of its response to the Tata crisis, today the Government will say that all public infrastructure projects should consider using British produced steel.
BHS, which has not made a profit for seven years, avoided collapsing into administration last month after its landlords agreed to huge rent cuts.
The crisis resulted in the PPF becoming the retailer's biggest creditor after taking on its two schemes, which have a combined & pound; 571million deficit on a secure buyout basis.
The PPF has given BHS six months to work out a new funding plan or face the threat of administration again.
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