Lloyds TSB said yesterday that it was set to net a £125m bonus as a result of the Government's laws against age discrimination.
The bank said the laws meant it would no longer be able to top up the pensions of people taking early retirement. Previously, had a worker retired at, for example, 55, the bank would usually treat them as if they had retired at 60 for the purposes of their pension.
However, the head of communications, Mary Walsh, said: "Under anti-age discrimination laws, this would be positively discriminating in their favour, and that would be unlawful. We were therefore compelled to make the change."
The move will have the effect of cutting the scheme's liabilities by £125m.
Lloyds TSB closed its final-salary pension scheme to new entrants in the mid-1990s. It currently has a £1.9bn funding shortfall before the boost is taken into account.
The bank revealed the one-off bonus in its pre-close trading update, when it said profits would be on track to meet analysts' expectations of a 7 per cent rise.
The group finance director, Helen Weir, also said the company's overall bad debt charge was likely to fall as a percentage of average lending for the full year compared to the first half. The charge for consumer bad debt in the second half will be "no higher" than in the first half, despite the rapid rise of personal insolvencies. Mrs Weir said the bank was "seeing light at the end of the tunnel" on the issue of consumer debt.
Last week Royal Bank of Scotland said the same, but Barclays and HSBC both reported no end in sight to the rising tide of bad consumer loans.
Mrs Weir said Lloyds TSB had benefited from introducing tougher credit controls at an earlier point to other banks.
The bank's lending is also more concentrated on people who already have current accounts with Lloyds TSB, so it is better able to assess their ability to repay.
However, Mrs Weir added her voice to those sounding alarm at the rise in individual voluntary arrangements, or IVAs, an easier form of bankruptcy that can leave consumers debt-free in five years if banks agree to write off some of their loans. She said of companies that aggressively market IVAs: "We have some concern over standards."Reuse content