HSBC revealed yesterday that its has injected £1bn into its British pension funds, becoming the second major bank this month to tackle its yawning deficit. The top-up - some £700m from the parent company, with £300m siphoned from British operations - almost halves its £2.1bn shortfall.
Earlier this month HBOS, the country's biggest mortgage lender, set aside a similar amount and pledged to plug a £1.8bn pension shortfall within a decade.
Banks, like many other major British companies, saw their pension funds dwindle as stock markets fell between 2000 and 2003. At the same time, life expectancy is rising.
A study by Lord Turner of Ecchinswell, commissioned by the Government, recommended that the retirement age be lifted from 65 to 69 to meet a £57bn shortfall.
HSBC's payment eased a deficit in the retirement funds largely inherited from Midland Bank, which it scooped for £3.9bn in July 1992. The final-salary scheme, which was closed to new entrants in 1996, has about 106,000 members. Later this month, the trustees of the scheme will discuss what to do with the remainder of the deficit.
Aspokesman for HSBC said: "We are committed to ensuring that our pension funds are properly supported and have taken this action to demonstrate this commitment."
HSBC's British bank employs 55,000 workers and is expected to contribute pre-tax profits of about £3.2bn this year. Overall, HSBC - the world's second-biggest bank after Citigroup - is slated to notch up pre-tax profits of almost £12bn in 2005.
The retirement plans of workers at many of Britain's top companies have been thrown into doubt.
Directors of the rat-catcher Rentokil Initial were dubbed "vermin" this week after unveiling plans to scrap its final-salary pension scheme for existing employees. The attack, made by Derek Simpson, the general secretary of the union Amicus, came as experts warned that Rentokil was likely to be the first of many companies to renege on pension commitments.
HSBC said yesterday that it had no plans to follow Rentokil's lead, but the National Association of Pension Funds said it was aware of several other large companies that were considering a similar move.
British Airways, which has one of the biggest pension deficits compared with its market value, is consulting employees over how to address its black hole.
The FTSE 100 companies are estimated to have a collective deficit of about £40bn. Lloyds TSB, Royal Bank of Scotland, BT, BAE Systems and Unilever all have pension-fund black holes deeper than £2.8bn.
The retirement income of Britain's 2 million private-sector workers who have a final-salary pension scheme is under threat.Reuse content