Tata Steel has reportedly offered a funding package of £520m (€620m) to the British Steel Pension Scheme (BSPS) in an effort to end its obligations as sponsor.

The company, which runs steel plants in England and Wales, wants to secure a regulated apportionment agreement (RAA) to allow BSPS to operate without a sponsor. Without this, the company claims the ongoing costs of the scheme would make the UK business unviable.

The trustees of BSPS have also supported the idea of an RAA, arguing that a restructuring of member benefits would allow the £15bn scheme to remain sustainable without the need to enter into the Pension Protection Fund (PPF), the UK’s lifeboat fund for defined benefit pensions. However, the two parties need the agreement of the Pensions Regulator (TPR) before the RAA can be established.

Indian newspaper Economic Times and the Financial Times in the UK have both reported the £520m offer, although Tata Steel has not commented.

The trustees indicated that an agreement was still some way off.

In a statement, the BSPS trustee board said: “The trustees note the recent media coverage regarding the future of the British Steel Pension Scheme. The trustees, Tata Steel, and the various regulatory bodies are continuing to hold constructive discussions and it is too early to speculate on how these might conclude.

“The trustees remain committed to securing the best possible outcome for members and believe this would be achieved by allowing members to choose between staying in the BSPS (and so getting PPF compensation) and transferring to a new scheme that would provide modified benefits.

“For the vast majority of members and pensioners, the modified benefits provided by the new scheme would be better than PPF compensation. BSPS assets transferred to the new scheme would be used to provide the modified benefits with a high level of security and the possibility of progressive reinstatement of pension increases as and when circumstances allow.”

The Pensions Regulator said in a statement: “We continue to have discussions with the employer and the trustee about the future of the British Steel Pension Scheme. There are still significant issues to be resolved and we will consider all proposals carefully in light of their impact upon the 130,000 pension scheme members and PPF levy payers.”

A spokesperson for the PPF said: “Discussions between all relevant parties on the future of the British Steel Pension Scheme are continuing.  The PPF is committed to working with all parties to find a solution that is in the best interest of our levy payers and the 11m people who are protected by us, including the members of the British Steel scheme. Members of the scheme can be reassured that we are there to protect them if required.”

In order to agree a deal with Tata Steel, the BSPS trustees would have to be satisfied that any cash settlement compensated for the removal of a guarantee held by the pension fund over Dutch assets.

Martin Hunter, principal at Punter Southall, said the guarantee would provide a “substantial boost” to the scheme if its sponsor were to file for bankruptcy.

“As precise details of the Dutch assets which are part of the guarantee are not in the public domain, it is not possible to accurately quantify the extent to which the British Steel Pension Scheme would expect its recovery to be improved through the guarantee,” Hunter said. “However, we would expect that the trustees will only be willing to give up this guarantee if the £520m being offered exceeds the recovery they would expect to be able to obtain from these assets through an insolvency process.”