Lloyds Trade Union (LTU)

October 05, 2011 07:29 ET

Lloyds Banking Group Pension Schemes Saddled With 'Toxic' Assets?

LONDON, UNITED KINGDOM--(Marketwire - Oct. 5, 2011) - The largest trade union in the Lloyds Banking Group and thousands of pension scheme members are demanding that the Trustees of the Lloyds TSB No 1 Pension Scheme and Lloyds TSB No 2 Pension Schemes, which have assets of some £14.9 billion, answer detailed questions about whether the two schemes have been saddled with so called 'toxic' assets by the Bank. Those assets could now be worth a lot less than the value placed on them at the time of the last actuarial valuation.

No Response From Bank

Whilst the Bank and the Trustees have every right legally to remain silent on the issues, members of the Lloyds TSB No 1 and No 2 Pension Schemes want to know whether their pension funds have been saddled with these so called "toxic" assets.

At the last actuarial valuation, which was carried out in 2009, the shortfall between assets and liabilities, what we would call the pension deficit, for the Lloyds TSB No 2 Pension Scheme had increased to just over £2 billion up from over £1 billion in 2008.

The Lloyds TSB No 1 Pension Scheme, which is largely made up of Lloyds Bank heritage staff, saw its pension scheme deficit increase from £2.6 billion to £4.5 billion. Together the two schemes had a total pension deficit of some £6.5 billion in 2009.

At the time of the valuation the Trustees of both Schemes agreed that assets of approximately £1 billion including, additional Bank contributions, should be injected into the Schemes.

£4b Involved

In addition to that: "Further assets with an initial value of approximately £4 billion have been put into a partnership structure set up by the Bank, in which the Trustee Directors have an interest".

The Bank in its annual report to members states "if the Bank were unable to pay the agreed deficit contributions to the schemes during the recovery period, the Trustees could use the assets in the partnership to meet those contributions".

Questions That Need Answering

The questions the Bank and the Pension Scheme Trustees need to address immediately are:

  • What kind of assets, "toxic" or otherwise, have been put into this partnership structure? The Bank should explain to members exactly what type of assets they partly own. HSBC made a £1.76 billion exceptional payment into its pension scheme last year and that comprised assets ranging from subordinated debt to asset-backed securities.
  • How much are those assets worth now and how much do they have to fall before the Bank is required to put in further assets? Who values those assets?
  • When push comes to shove who actually owns and controls those assets? The Bank or the Pension Schemes? If the Bank for whatever reason was unable to meet its obligations to the Pension Schemes, would the Trustees or someone else have first call on those assets?

Union Comments

Mark Brown, General Secretary of LTU said:

"Silence on these important issues is not an option. The Bank and the Trustees need to confirm the details of the so called partnership agreement and how it is structured immediately. They also need to answer LTU's questions on the assets owned by the partnership and whether these include any so called 'toxic' assets such as mortgage backed securities."

About Lloyds Trade Union (LTU)

Lloyds Trade Union (LTU) is the largest independent trade union representing staff working in the Lloyds Banking Group, with over 40,000 members. In large parts of the Bank, LTU represents over 80% of all managers and staff.

Mark Brown

General Secretary

Lloyds Trade Union

Contact Information