Lloyds made a total of £2.2bn of pension scheme deficit reduction contributions in 2022. Those contributions were made to the group’s three main defined benefit (DB) pension schemes.
Fixed deficit reduction contributions of £800m were paid in full during the first quarter of 2022, while variable contributions of £1.44bn were paid during the year to cover the full amount of agreed contributions relating to 30 per cent of in-year shareholder distributions of £1.04bn, plus an additional £400m paid in December 2022.
The group’s three main DB schemes continue to have an actuarial funding deficit. However, Lloyds are saying that the schemes are in a “significantly stronger financial position than at the end of 2021, when the deficit was around £4bn”.
Lloyds expects to make further deficit reduction contributions of £800m in the first half of 2023, consistent with 2021 and 2022. However, Lloyds is discussing with the Trustee, whether further variable contributions would not be necessary in 2023 and beyond. Lloyds has said that it expected to have substantially agreed the triennial valuation with the Trustee by the end of the third quarter of 2023, along with a revised contribution schedule for any remaining deficit.
The Trustee needs to stand firm – and let’s be honest it’s not got a history of doing that – and not be bullied into allowing Lloyds to reduce its contributions until such time as the deficit is completely gone. Moreover, it should ensure that the Bank’s ‘contribution holiday’ doesn’t result any further black holes in the pension schemes.
Answer The Letters, Charlie!
In one of our previous Newsletters, we said the Trustee of the LBG pension schemes had a duty to act in the best interests of scheme members. Many pensioner members are struggling to cope with the cost of living crisis. The Retail Price Index is 13.5% and the Consumer Price Index is 10.1%. Inflation has fallen by only 1% since its peak in October 2022.
Members sent letters to Harry Baines, Chairman of the Trustee Board, saying that the Trustee should either make a one-off cost of living payment or undertake an individual review awarding one-off increases to those retired members of staff with the smallest pensions. The Trustee has refused to respond to those letters.
Members also wrote to Mr. Charlie Nunn, Group Chief Executive, asking him to intervene but he’s also refusing to engage with retired members of staff. He needs to respond to those letters now.
We will be producing a follow up letter that members can send to Mr. Nunn asking him to respond to their previous letter on this important issue. That letter will be sent in the next few days.
Why The Delay?
Members of the three main pension schemes will have recently been sent their annual pension review letter detailing their pension increases for 2023.
Given that those increases are based on the inflation rate from the previous year, many members are asking why Towers Watson, the scheme administrators, waited until the very last minute to send those letters out? Some members got their letters on 18th April, with the increases effective from 20th April. It created a lot of unnecessary anxiety for retired members of staff, many of whom are feeling the pinch.
There’s absolutely no reason why those letters can’t be sent – whether by email or post – in the middle of March and we’ll be writing to the Trustee saying that needs to happen next year.
Does Anybody At Lloyds Care About Pensioners?
Thirty five years ago, when I came to work for the Union, this question would have been greeted with a mixture of incredulity and derision!
Then, most of the people at the top of Lloyds had joined the bank from school and despite the normal issues in any workplace were trusted by most staff to do the right thing. But over this period we have seen the demise of the 40 year career and the rise of very highly paid, peripatetic senior executives, many of whom move on before their failures catch them up. In the case of Lloyds the share price tells a story of repeated failure to maintain the pre-eminence of a great British brand.
So, does anyone at the top of Lloyds care about pensioners? We are entitled to judge people on their track records and the fact that we had to fight a major court case to put right an obvious unfairness on pensions and the Guaranteed Minimum Pension, that Lloyds could have put right very quickly, suggests not.
But failing to respond to pensioners’ letters and failing to communicate in an age when communication is so easy is, frankly, unforgiveable and sends the clearest possible message about how the Bank intends to conduct itself.