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Independent Report Exposes True Extent Of Pension Deficit
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Date: 29th Jan 2007
A report commissioned by LTU has today blown a massive hole in the Bank’s carefully crafted pension deficit strategy and raises important questions about the Group’s future profitability.
An Executive Summary of the report has been sent to all LTU members and the full- report has been sent to the Trustees and the Bank.
Hymans Robertson, a leading firm of UK Actuaries, has concluded that under the new funding regime the ongoing deficit in the LTSB No 1 Pension Fund could potentially be in excess of £3 billion. That is significantly more than the £1.1 Billion deficit announced to the City. Hymans Robertson has also concluded that the annual contributions needed to eliminate a £3 billion deficit over 10 years could potentially be over £400 million a year. Moreover, the contributions required to fund benefits accruing in future, allowing for future salary growth, could potentially be over 30% of pensionable salaries not 23.2%.
Only last year the Bank announced that it would make annual contributions of £138 million for the next ten years in order to reduce the deficit of £1.1 Billion. It even suggested that it could reduce the deficit in 6 years with additional voluntary contributions. The Bank recently announced that its decision not to augment the pension entitlelement of employees taking early retirement would reduce the Group’s pension liabilities by up to £125 million. Those pension liabilities are much greater than anyone dared to think and rather than reducing its contributions the Bank could have to increase them significantly in future.
The next actuarial valuation under the new funding regime is not set to take place until 2008. LTU has written to the Trustees asking them to bring forward that valuation now and appoint an independent firm of actuaries to carry out that work on behalf of members of the Scheme. A similar valuation should be carried out for the No 2 Fund. Only then will there be a clear picture of the state of the Funds.
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