Defined Benefit  

Barclays pension members take bank to court

Barclays pension members take bank to court

Several members of the Barclays defined benefit (DB) pension fund have presented objections in court to changes that that will see the scheme become part of the split-off investment banking business.

John Ralfe, an independent pension consultant, told FTAdviser that he has been in contact with some of these members, and that the court “should look very carefully at how to properly protect” these individuals.

He said: “There are various ways this can be done, but they all require Barclays to write a cheque."

According to new regulations brought in to strengthen the financial system following the financial crisis, banks will need to ring-fence their retail business, separating it from riskier activities, such as investment banking.

Barclays will satisfy this requirement by setting up a new ring-fenced bank, subject to approval, in April 2018.

However, Barclays Bank UK Retirement Fund (UKRF), the banking giant's final salary scheme, will be moved to the investment bank after 2025.

Mr Ralfe said: “The pension scheme members are worse off because of ring fencing - they will be supported by the investment bank, which could go bust, not the retail bank, which cannot, and where the vast majority worked.”

Due to concerns about the future of pension fund members pensions, Frank Field, chairman of the Work and Pensions select committee, will be writing to The Pensions Regulator (TPR) and the scheme trustees.

He said: “The whole point of splitting banks in two is to protect the safe retail bank that can’t be allowed to fail from the casino bank that can go bust come the next crash.

"I am struggling to fathom how being shackled to the expendable half provides long term reassurance to the pension scheme members.”

With liabilities of £42.5bn and assets of £34.6bn, the scheme has a deficit of £7.9bn, according to its triennial actuarial valuation conducted in September 2016.

A spokesperson at the bank said: “Barclays’ primary objective in its ring-fencing plans has been to safe-guard the interests of our pensioners.

"We believe that we have achieved this through the agreement reached with the trustee and their advisers, which involve both of Barclays’ operating companies being liable for the pension fund until December 2025, and up to £9bn of assets being committed to fully secure its obligations.

"We have discussed our plans with the PRA, the Pensions Regulator and the independent expert reporting to the Court (Grant Thornton).

"The plans will be subject to further scrutiny by the court as an additional protection for pensioners from 26th February as required under the ring-fencing legislation.” 

As part of the ring-fence scheme approval process, individuals that consider that they may be adversely affected by the new ring-fencing scheme have the right to object, and have this objection heard by the court.

According to information at Barclays website, these objections need to be filed with the Business and Property Courts of England and Wales, with a copy sent to the Prudential Regulatory Authority (PRA), by 26 of January.