09 January 2009
The HBOS Pension Scheme trustees have abandoned their plans for
a legal challenge to the bank's acquisition by Lloyds TSB, after
management persuaded them they could be imperilling the group's
In a statement, the trustees said they had decided not to
proceed with a challenge to the Scheme of Arrangement under which
the acquisition is to take place, having been persuaded that doing
so would threaten the bank's planned capital raising exercise.
The scheme trustees are still pressing ahead with preparations
for a new scheme valuation which could yet put them at loggerheads
with Lloyds over annual contributions of cash into the scheme
because a new valuation could show a larger scheme deficit.
The trustees say the HBOS scheme has a deficit of £3bn to
£5bn and wants its debt guaranteed by the new, combined
parent company as a way of delivering additional security to
members. So far Lloyds has refused, saying that it does not even
offer that level of assurance to its own pension scheme.However,
trustees for the existing Lloyds schemes are understood to have
been pressing for greater security as well, including an agreement
from the parent company that it will stand behind any debts.
Lloyds is said to have told trustees that it will review their
status after the HBOS acquisition is complete.