Pension vote could delay HBOS merger

The Lloyds TSB-HBOS merger faces fresh opposition after trustees of the HBOS pension fund today voted to ask in court for the deal to be delayed until better protection is offered for the scheme.

Guardians of the 80,000-member final salary scheme will make a submission requesting that the deal is not approved unless they are given greater security over payments.

The trustees voted for the move at a meeting today, when they also decided to press ahead with plans for an up-to-date valuation of the scheme, as at December 31, 2008

They believe the recent financial crisis has vastly widened the £95m (€99m) deficit calculated on December 31, 2006, to an estimated £3bn to £5 bn (€3.12bn to €5.21bn) shortfall.

The trustees said in a letter to members of the HBOS pension fund: “Your trustees have decided to take this step reluctantly.

“We understand the commercial basis underpinning the acquisition and do not oppose it as such; however, we also believe that it is fundamental that appropriate arrangements are made to protect the accrued benefits of final salary pension scheme members.”

They added: “Since the acquisition was announced, your trustees have repeatedly sought engagement with Lloyds TSB. We signed confidentiality undertakings in a form which was acceptable to Lloyds TSB. However no details of what steps Lloyds TSB are planning have been shared.”

The trustees will make the legal submission at a High Court hearing in Edinburgh on January 12, when the takeover – which is being structured by way of a Scheme of Arrangement – must be legally ratified in order to proceed.

They are hoping to secure a legal commitment from Lloyds that the newly-merged group – part-owned by the British government after a state-backed cash injection – will guarantee payments.

It is thought that current commitments to the scheme are instead being offered through subsidiary companies of the enlarged group.

The legal move by the trustees will be the first of its kind and watched closely in the corporate world as an important test case.