Robert Maxwell: Misuse of pension funds led to tighter rules

The main steelworkers union said millions of pounds was being taken from a fund surplus to pay for a merger with Hoogovens to form Europe's largest steel producer.

The Iron and Steel Trades Confederation said it was taking urgent legal advice over what it called this "travesty" before deciding whether to complain to the Pensions Ombudsman.

But the claims have brought a firm rebuttal from British Steel - now known along with Hoogovens as the Corus Group - who denied that the company was using pension fund money to finance the merger or give money to shareholders.

A senior director of the company, John Bowden, said the allegation was "quite preposterous" and a major misinterpretation of the pension fund surplus.

More than £600 million of the surplus was required to maintain the fund in terms of contributions by the company, he said.

"The company is not giving pension fund money to shareholders and the suggestion that British Steel is dabbling with pension fund money is quite wrong."

'Unilateral action'

The Iron and Steel Trades Confederation said it had made a number of suggestions as to how a £1 billion surplus should be used, but these had been thrown out by the company, which was now acting "unilaterally."

General Secretary Michael Leahy said these proposals had included a £500 payment to 55,000 pensioners and a cut in the retirement age for steel workers from 65 to 60.

"They are taking £863 million of the surplus for themselves. That cash can be used to fund the merger with Hoogovens, or cover the £700 million British Steel is giving its shareholders as part of the merger deal.

"Shareholders will be receiving their money very soon. We hope they realise where it's coming from," said Mr Leahy.

While the company was proposing some minor improvements to the pension scheme costing £146 million the union described their approach as utterly unfair.

"There is a huge surplus in a fund to which employees, and until 1988 taxpayers contributed, and British Steel now intends to take the lion's share for itself," he said.

Tighter regulation

British Steel would have to follow the rules set out in the 1995 Pensions Act before it was allowed to use the surplus to help pay for its merger, according to Opra, the occupational pension fund regulator.

The act was created following publisher Robert Maxwell's raid on the Mirror Group pension fund and companies are now required to get permission from their fund trustees to spend any surplus.

David Cresswell, Opra's communications manager, said the trustees were obliged to inform pension fund members and Opra of the scheme, if they agreed it should proceed.

Opra would then check to see whether it met the necessary legal requirements.

Earlier this month British Steel announced a major shake-up of its corporate image, changing its name to The Corus Group.

The makeover follows the merger between British Steel Plc - which has 12,000 employees at plants in Wales - and Hoogovens NV.