- The Observer, Sunday 12 April 2009
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Pension deficits at Royal Bank of Scotland and Lloyds Banking Group have soared to more than £18bn in recent months, according to a report by Hymans Robertson, the retirement consultants.
The enormous deficits in the part-nationalised banks are another huge headache for the Treasury, which is keen to minimise its exposure to potential liabilities - and to taxpayers, who will ultimately foot the bill.
RBS has seen its pension deficit jump from £8bn to £12.3bn in the past three months, while Lloyds registered a £6.2bn shortfall in funding for its occupational final salary scheme, according to the report. The news follows controversy over the £16m pension pot awarded to RBS's former chief executive Sir Fred Goodwin.
The banks now face a situation that is only likely to get worse as the recession, low interest rates and fears of an inflationary spiral add to pension costs. Investors are concerned at rising levels of pension commitments at financial services companies and groups such as British Airways and BT, which have wrestled with ballooning shortfalls for several years.
Several companies have cut the cost of their schemes or demanded that staff match company contributions. Aviva, the owner of Norwich Union, and Aon, the insurance broker, said last week they would be asking staff to make larger contributions.
The report said finance companies were supporting growing deficits as their earnings declined sharply, and it would take much longer than previously thought to fill the funding gap.
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