HSBC warns removing ‘clawback’ feature on pension scheme would cost £450m

HSBC warned that it could cost the bank £450 million if it removes a feature on a pension scheme that reduces the benefits received by some pensioners.

The banking giant is in the midst of a dispute with campaigners over a ‘clawback’ feature for former Midland Bank employees, which it took over in the 1990s.

‘Clawback’ is the practice of reducing the company pension scheme for an employee when they reach the state pension age.

The scheme has 52,000 members and UK employees who joined the bank between December 31, 1974 and July 1, 1996 would have been eligible to join.

HSBC has called on shareholders to reject the resolution tabled by campaigners at the bank’s annual shareholder meeting to be held on April 12 in Birmingham, deeming it “not in the best interests of the company and its shareholders”.

The resolution calls on HSBC to “abolish, or effectively remedy, the unfair discriminatory practice of taking ‘state deduction’ from the pensions paid to members of the post-1974 Midland Bank defined benefit pension scheme”.

The Midland Clawback Campaign Shareholder Group that tabled the resolution said that the ‘clawback’ favours the highest paid employees while penalising the lowest paid as “calculations are linked to years served, not salary”.

However, HSBC said application of the state deduction to all members of the scheme is “not unfair, disproportionate or discriminatory”.

It estimates that removing the state deduction feature for future pension payments would cost HSBC £450 million and if the state deduction was removed on a retrospective basis the cost could be “considerably more”.