HSBC’s looming pensions crisis: will the bank win the battle but lose the war?
A business of any reasonable size should have members of its team scanning the horizon for potential problems, like Frederick Fleet in the crow’s nest of RMS Titanic.
The most dangerous crises, though, are those which fall on a company from an apparently cloudless sky: those which hit unprepared, and leave a business scrabbling for grip.
This is the problem which HSBC faces. In essence, the bank reduces staff pensions for Midland Bank final salary pension fund members once they become eligible for the state pension — which, under the provisions of the Pensions Act 2011, will become 66 for men and women this October.
With the reputation of banks still at a very low ebb after the 2008 financial crisis, this is not an issue which will be welcomed by HSBC’s comms team and its relatively new chief comms officer Steve John.
The move is not entirely unexpected. HSBC has pointed out that it was discussed at the most recent AGM, and the mechanism itself — clawback, more formally and euphemistically known as “pension integration” — was introduced in the 1940s to allow employees to reduce their pension contributions. Against the backdrop of an ageing population, rethinking pension schemes makes sound financial sense from the bank’s perspective.
For former employees, however, it’s a different story. The amount which retired HSBC workers will lose varies, but for some it could be as much as £2,500 a year — not an insubstantial amount for those who have planned carefully for their retirement.
HSBC is not the only company to avail itself of this mechanism, but a quick look at other businesses shows which way the wind is blowing. Barclays capped their deductions at less than £1,000 some 20 years ago, while BP stopped clawing back any money at all a year later. The Post Office and even the corporate world’s Great Satan Nestlé have reduced or abolished their use of the deductions.
The fact remains that HSBC is, prima facie, in the right — or at least entitled to pursue this course of action. But as ever, it’s not that simple. MPs have formed an all-party parliamentary group on pension clawback, chaired by veteran Sheffield MP and committee maven Clive Betts, which explicitly identifies HSBC as a target. There is a Midland Clawback Campaign of 10,000 members, which raised the issue at the last AGM in April, and the Equality and Human Rights Commission has been involved, though it acknowledged that HSBC had not broken the law.
Regardless of the rules, the reputational problem remains. Pensions are a highly emotive subject, and the inevitable “compare and contrast” with executive remuneration will generate further bad publicity for HSBC. Expect headlines about “snouts in the trough” and “fat cats” sticking their hands into the pockets of ordinary pensioners.
And there’s a wider issue at stake too. As the economy brushes some of the Covid-19 dust from its coat, conversations are starting about the future shape of business and society. Fairness is the new watchword, along with a newfound acknowledgement of shared responsibility.
There is a palpable urge to change, to create a future which is more equitable, more interconnected, and more humane: in the prime minister’s words, to “build back better”.
Corporate ruthlessness is out of fashion, and HSBC must approach pension clawback with that in mind. Is this a fight the bank wants to have right now, when a messy victory on points is the best that seems possible?
Main image credit: Getty