HBOS trustees seek to delay Lloyds deal
UK - The trustees of the HBOS Final Salary Pension Scheme (FSPS) have prepared a report to present in court in a bid to delay the merger between Lloyds TSB and HBOS over concerns the deal will weaken the employer covenant to the defined benefit scheme.
In an open letter to scheme members the trustees revealed Lloyds TSB had failed "to make substantive proposals to put the FSPS on a secure footing following the deterioration in quality of the support provided by HBOS itself".
Although the trustees acknowledged the commercial reasons behind the deal, and so "do not oppose it as such", it warned that appropriate arrangements needed to be put in place to protect the accrued benefits in the scheme, which reported a £725m (€789.7m) deficit in June 2008 up from £347m in 2007. .
At a specially convened trustee meeting last week, they decided to commission an actuarial valuation as of 31 December 2008, a year earlier than scheduled, to determine the current level funding ahead of the expected change in the strength of the employer covenant provided by HBOS.
In addition, the trustees confirmed they had decided to ask the Court of Session in Edinburgh - which has to approve the 'scheme of arrangement' set out for the merger before the deal can be completed - to delay approving the deal until 'appropriate arrangements are made to ensure the security of the FSPS".
Ahead of the court hearing, scheduled for 12 January 2009, the trustees of the scheme confirmed that members of the board had met with an official of the court to prepare a report to air the scheme's concerns, which include:
Following the meeting trustees said it had taken the decision to petition the court "reluctantly", but added they believed "it is necessary in the current environment for support from Lloyds TSB for the FSPS to be fully clarified and properly documented".
In response to the concerns raised by the trustees, a spokesman for HBOS said: "We are very much of the view that our deal with Lloyds TSB is the best form of protection for our employees. Following the deal, the HBOS pension scheme will be backed by an even bigger and stronger group. We believe this provides significant reassurance for all HBOS colleagues."
However the trustees of the scheme added: "We do not think that the FSPS can or should rely simply on broad statements of intent unsupported by a legally binding commitment."
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