LONDON: British bank HBOS Plc. has set plans to wipe out its pension fund deficit of 1.8 billion pounds. It says it will make a substantial fund infusion this year and a series of minor infusions in subsequent years. The bank's chief executive James Crosby said the bank will provide for 1 billion pounds at the end of this year.
The bank has closed membership in the fund for new staff for at least three years. As per actuarial calculations, the fund has a shortfall of 800 million pounds, but in terms of international accounting rules, it is around 1.8 billion pounds.
Crosby likened the deficit to any other debt and for a "financially strong business like the bank's, accelerating the elimination is simply doing the prudent thing". He said he believed the deficit as a proportion of the bank's market value is low compared with most of the FTSE 100 index companies. The provision will also reduce the volatility in HBOS's pension deficit.
The bank, the country's biggest mortgage lender also said paying back the deficit made sense because it removed the risk that higher interest rates and inflation could push up its pension liabilities.
The move covers 36,000 employees in final salary pension schemes covering Halifax, Bank of Scotland, Birmingham Midshires and Clerical Medical. It will not require any extra contributions from the pension fund members.
Both the unions of the bank, Accord and Amicus, welcomed the move.
HBOS said its 1 billion-pound share buyback programme has been largely completed with the bank having brought back shares worth 910 million pounds so far this year. It is also planning to buy back shares worth 750 million pounds next year.
Posted
on : Wed, 07 Dec 2005 10:25 GMT | Pensions News
By : Salim Patel
|
