HSBC pensioners are planning to protest at Friday’s annual general meeting of the banking giant over what they term a pensions ‘clawback’. The campaigners have filed a shareholder resolution asking for a 5% cap on the reduction. HSBC’s board has recommended unanimously to reject the proposal. 

 

HSBC’s AGM in Birmingham is set to see protesting pensioners, who are again calling on the bank to do something about the ‘clawback’ or ‘state deduction’ applied to their pensions - a reduction of the company pension based on the fact that they are in receipt of state pension. Roughly 50,000 pensioners of the former Midland Bank, bought by HSBC in 1992, are affected, and several thousand of them have campaigned for years, while the bank has not moved from its position. 

 

    

“Thousands of retired former Midland Bank workers are having their retirement ruined by the bank’s clawback policy,” said Nancy Ball, a spokesperson for the campaigners, the Midland Clawback Campaign. 

  

She added: “HSBC is an incredibly wealthy, and resolving this injustice will be, for them, the equivalent of finding some loose change down the back of the sofa, but for those on the lowest of incomes the impact is devastating, plunging many into financial distress.” 

 

The campaign group is no longer asking for the deduction, which is applied to members of the post 1974 section of the Midland Bank Pension Scheme, to be dropped entirely but to be capped at 5%. The group says the clawback “is hugely disproportionate and significantly impacts the lowest paid, mainly women, as it is entirely driven by length of service, rather than the amount of pension being paid”. 

 

The group previously said that although legal, the practice of reducing pensions of long-serving employees was discriminatory as it penalises lower-paid former employees at the bank such as cashiers, who were predominantly women. The bank in 2020 denied that the practice discriminates against women, while admitting that “it might seem to impact lower earning employees, many of whom are female”. 

 

A letter sent to one scheme member shows she had her annual company pension of £3,681 reduced by more than a quarter, after almost 30 years of service. Impacted pensioners typically lose between 15% and 20% of their company pension when they reach state pension age, but some see it drop by as much as 30% or more, according to the campaigners. One news outlet reported that a 65-year-old HSBC scheme member is working for Tesco’s to make ends meet because of the clawback. 

 

HSBC, which made a profit of $16.7bn after tax last year and runs a surplus in its defined benefit pension scheme, argues that capping these deductions “is not in the best interests of the company and its shareholders as a whole”. It says that the change would be retrospective and “unfair to other scheme members”, who it says might raise grievances. 

 

The bank commissioned a market review of the state deduction across 140 schemes in 2020, which concluded that almost two-thirds have “some form of state pension integration”. It is not clear whether ‘state pension integration’ includes only similar deductions to the one contested or other features. 

 

One scheme member had challenged the clawback, but in 2020 the Pensions Ombudsman agreed with the trustees that Mrs R, previously receiving a monthly pension of £339.99, should repay £4,403 to the scheme as the administrator had forgotten to reduce her company pension between 2010 and 2018. 

 

    

A key issue appears to be how the deductionras communicated when people joined the former Midland Bank. The affected scheme members agree it was never properly explained to them throughout their working lives, according to the campaigners. 

 

“The majority never knew that their occupational pension would be reduced on reaching state pension age and that details appertaining to clawback were hidden in complex paperwork. The bank chose to refer to clawback with the wholly inappropriate term of ‘state deduction’. Suffice to say there is no deduction by the state,” the group said.  

 

In its 2020 decision, the ombudsman ruled that the ‘state deduction’ had been explained in scheme booklets. TPO did not question the use of the term or how it might be understood by members; campaigners say the term was coined by Midland Bank itself and interpreted by some pensioners as a reference to contracting out of the state second pension. 
  

The campaigners involved the Equality and Human Rights Commission in the past. HSBC said the EHRC made informal contact in late 2018, on the back of which HSBC gave its reasons for operating the pension deduction, which included advice from leading counsel.  

 

“Following a review of the information provided, the EHRC has now confirmed that the use of the state deduction is lawful,” its public documents read. EHRC has told mallowstreet it cannot find any evidence of contact with either HSBC or the campaigners. 

 

Benefit reductions or failures to provide inflation increases for pre-1997 benefits have repeatedly caused anger and consternation among pensioners.  

 

Last year, some Sotheby’s pensioners were considering taking their cases to the ombudsman as the auction house stopped paying inflation increases on pre-97 pensions that pensioners say were communicated to them as effectively guaranteed. In 2017, a Westminster debate took place after former employees of Hewlett Packard and 3M protested about the lack of inflation adjustment of their pre-97 pensions, leading former pensions minister Richard Harrington to write to the chief executives of the respective companies. 

 

Should companies with well funded schemes continue to operate clawbacks during a cost of living crisis?