Lloyds share price: Bank to save £1 billion by freezing pensions
iNVEZZ.com, Wednesday, March 12: (LON:LLOY) is to reap a £1 billion one-time gain by freezing the pensionable pay for a third of its employees.
The British lender said in a statement yesterday that it will leave the amount it uses to calculate final-salary pensions for the 35,000 members of its defined-benefit plans unchanged from April 2. Lloyds said that it had decided to remove the two percent permitted increase after reviewing its pension arrangements as part of a wider review of the pay, benefits and rewards it offers to staff.
The cuts are the third radical move by the 33 percent taxpayer-owned bank to reduce the burden of its generous non-contributory defined-benefit pension scheme. It closed the scheme to new entrants ten years ago and watered down benefits in 2011.
“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,” Lloyds said, adding that it will continue to provide a “competitive and sustainable pension.”
The £1 billion gain from the pension cap will be recognised in the second-quarter and will bolster the lender’s capital ratios, Lloyds revealed.
***Decision prompts accusations of double standards***
Lloyds’ move to freeze the pensionable pay of its employees has sparked criticism from labour unions and an accusation of double standards, after the UK lender increased the pension pot of its chief executive last year.
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CEO Antonio Horta-Osorio was handed a £568,000 pension contribution last year and a pay package worth up to £7.8 million for 2014.
“This is a disgraceful display of double standards. The taxpayer-supported bank has doubled its profits, but it is attacking thousands of ordinary workers’ pensions while splashing out on huge bonuses for its senior bankers. Somehow the money runs out when it comes to the pensions of staff earning just £15,000 per year.” said Unite union’s national officer, Rob MacGregor.
Lloyds’ share price — up over 60 percent on a year ago – has been trading lower so far today. As of 08:54 UTC, the stock had eased 0.81 percent to 80.46p.
According to AnalystRatingsNetwork data, five research analysts have a ‘sell’ rating on Lloyds, nine have it as a ‘hold’ and 20 rate it as a ‘buy’.
**As of 08:55 UTC, buy Lloyds shares at 80.41p.**
**As of 08:55 UTC, sell Lloyds shares at 80.40p.**