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Halifax caught in pension row

Halifax Building Society faces a mass withdrawal of millions of pounds of deposits by pension schemes because it refuses to let their members benefit from the free shares bonanza when it floats on the stock market next year.

The Society has been told by the J Sainsbury pension scheme, which looks after the supermarket giant's contributions, that it will pull out about pounds 5m invested in Halifax's additional voluntary contributions deposit account. A further pounds 1m of annual payments made by the pension scheme on behalf of the store's 2,000 AVC contributors is also set to be diverted elsewhere.

The row looks likely to lead to mass withdrawals from Halifax's AVC deposit account, which currently holds about pounds 123m of savers funds on behalf of about 400 pension schemes.

A Halifax spokeswoman said yesterday: "We cannot discuss this specific case because we regard it as confidential between ourselves and our clients. Our board made the decision not to give free shares to depositors. This includes contributors to the AVC scheme, which is a deposit account."

Other pension trustees, including representatives of a pounds 4bn scheme who declined to be named, are also thought to be close to withdrawing their money.

Anger at Halifax's stance is being fuelled by the fact that it currently pays just 5.4 per cent of annual interest on its deposit account to AVC savers. By contrast, Abbey National's equivalent account pays 5.94 per cent at present.