Steel crisis: Tata pensioners 'could lose average of 25%'
Trustees of the Tata Steel pension scheme are writing to members urging them to take part in the UK government's consultation on changing the benefits they will receive.
They say the majority of people will be better off under those proposals.
The alternative is compensation from the Pension Protection Fund (PPF).
However, analysis by pension experts for BBC Wales has found current pensioners will lose an average of 25% whichever option they take.
It also found members who are working and paying into the scheme will lose an average of 40% of their benefits under the UK Government's proposals and 45% in the PPF.
Cardiff-based pensions experts Quantum Advisory said these were broad estimates and would vary member by member.
There are 130,000 members in the current scheme.
Pensions have been a sticking point in the sales process for Tata, with potential buyers unwilling to take over the liabilities of the pension fund.
There is a deficit of £485m although in the worst case scenario it could reach £4.9bn.
The scheme's annual increase could be changed to use the Consumer Prices Index (CPI) inflation measure, which is usually below the Retail Prices Index (RPI) measure currently used.
"I have written to scheme members setting out why the trustee believes it is better and fairer to use the scheme's assets to provide modified benefits under the scheme than to hand the assets over to the PPF," said Allan Johnston, chairman of the board of trustees of the British Steel Pension Scheme (BSPS).
"The modified benefits would be more generous for the vast majority of members than PPF compensation.
"Not everyone responding to the public consultation will necessarily do so with the best interests of the scheme membership in mind. It is vitally important that scheme members have their voices heard."
Stuart Price, partner at Quantum Advisory, said: "Under either scenario, scheme members who are below the scheme's normal pension age will be hit the hardest financially.
"However, they are the ones who would benefit if the proposed changes were implemented compared to the scheme going into the PPF.
"For the 70,000 or so scheme members who are above the normal pension age, the proposed changes broadly results in the same benefits they would get if the scheme went into the PPF so they would be no better or no worse off."
Ministers have said the new proposals would only be for the Tata pension scheme and would not apply to any others.
Iestyn Morris, a pension lawyer with Capital Law in Cardiff, said: "The DWP has said in its consultation document that any changes to the law will only apply to 'BSPS as a specific scheme'. In other words, the changes will not provide other defined benefit schemes with a legal entitlement to follow suit.
"The government has also made it clear that it will only change the law if it results in the majority of scheme members being better off than they would be under the PPF."
However, some pension experts are concerned the changes would set a dangerous precedent.
The UK government's consultation runs until the end of the month.