Lloyds Banking Group, Edinburgh, will effectively eliminate increases in pensionable pay of about 30,000 participants in the U.K. by revising the rate on increases in pensionable pay to zero from 2%, effective April 2.
The change will give the bank a one-time benefit of £1 billion ($1.7 billion), confirmed a spokesman for the company.
Its six defined benefit funds remain open to future accruals.
Members affected by the changes will receive a one-time 3% lump-sum payment, according to a news release from the bank. The spokesman said this 3% can be a cash payment or can be used as a contribution to the pension fund.
The change, which followed a review of the Lloyds' pension arrangements done as part of a wider review of pay, benefits and reward to employees, “represents the right balance between providing fairer pension benefits to all colleagues and managing the group's capital and risk position,” according to the news release.
Lloyds' six pension funds have total assets of £32.6 billion and carry a £787 million combined deficit, according to the spokesman.
“In line with many other U.K. companies, Lloyds Banking Group has been reviewing its pension arrangements in order to ensure that it continues to offer a competitive and sustainable pension to all its employees,” according to an e-mailed statement from the bank. “The group believes that the defined benefit schemes remain an important part of the employees' benefit package but wants to ensure that its pension benefits are more balanced across the group, particularly as two-thirds of the group's employees are not members of the defined benefit schemes.”
The six funds are Lloyds Bank Pension Scheme No. 1, Lloyds Bank Pension Scheme No. 2, HBOS Final Salary Pension Scheme, Scottish Widows Retirement Benefits Scheme, The Equitable Pension Fund and Life Assurance Scheme, and Lloyds Bank Offshore Pension Scheme, according to the spokesman. Breakouts on the assets of each pension fund were not available.
