Lloyds and HBOS pension fears

Final-salary pensions could be axed as part of a review of staff benefits. Unions fear it could hit low-paid staff.

The scheme has already been closed to those who joined the bank after 2002 but there are now proposals to examine existing staff benefits.

Lloyds boss Eric Daniels and other board members have already given up their final-salary schemes but had said there were no plans to axe them for other staff.

But union sources told The Scotsman they fear the scheme for low-paid staff will be scrapped after similar cuts were imposed on Barclays and Royal Bank of Scotland employees.

Ged Nichols, general-secretary of Accord, said: "Most bank workers are not fat cats. They never took excessive risks, were never paid enormous bonuses and are not responsible for the actions of their employers."

He said the average salary of front-line bank staff was around 16,000 per year.

"They have lost their savings because of the collapse in bank share prices and now they are facing the prospect of losing their occupational pensions."

HBOS staff could be first in line for the cuts as the rules protecting their pensions are weaker than those covering original Lloyds staff. The group was formed after Lloyds took over HBOS.

Mr Nichols called for action to protect pensions. The bank could water down the benefits by turning the final-salary pensions into defined-contribution schemes, where staff and employers pay in a percentage to be invested in the stock market.

Unlike final-salary schemes, there is no guarantee of the size of the pot at retirement.

Mr Nichols urged the bank: "If there were to be any changes in the future, we would hope and expect that the bank would take a long-term view.

It should not discriminate against any group of employees based upon who they were employed by prior to the creation of the Lloyds Banking Group."

Lloyds took over HBOS earlier this year but soon after had to be propped up by taxpayers because of the parlous state of HBOS's finances.

The group is under pressure to start cutting costs and has signed an agreement to scale back the bonuses of top bankers.

But with Barclays announcing in June it would scrap its scheme because of a 2.2 billion shortfall, there are fears that the burden will now be felt more keenly at Lloyds. The Royal Bank of Scotland is also radically reducing its pension awards for staff, although it has not announced it is closing its scheme altogether.

Closure of the Lloyds final-salary scheme would cost staff in excess of 9 billion across the group with the average worker set to lose nearly 133,000.

In a newsletter sent to union members, Mark Brown, general-secretary of Lloyds Trade Union, warned: "We will not stand by and see members futures' being sacrificed simply to save money now by jumping on the most dubious of bandwagons when, according to its own predictions, the bank will be massively more profitable in future."

An internal memo circulated by management sought to reassure staff that no decision had yet been taken. It acknowledged there was "speculation" from unions but added: "We have been very open about our intention to review our 'Total Reward' package across the group, which naturally includes pensions. We said in March this would be a long and complex process.

"Work is still at a relatively early stage and we have not yet started discussions with unions about specific proposals.

"Once we have finalised the review, and discussions with unions, we will communicate in detail with colleagues.

"We understand this is an important issue. We would like to thank you all for your patience as we work through the detail."

A spokesman for Lloyds Banking Group confirmed a review was under way across the group but added: "Everything to do with remuneration is being included in a review, not just final-salary pensions."