The High Court has approved an application by the trustees of the HSBC pension scheme to clarify the scheme’s rules on surplus use, despite defined benefit members asking for uplifts. 

The court gave the green light for the trustees’ application to change the scheme rules, allowing them to use defined benefit surplus for making contributions to the money purchase section as requested by HSBC – about £152m a year based on 2024. The rules already allowed using surplus for DC contributions but had to be updated as the wording made reference to active members. 

A HSBC UK spokesperson said: “We are committed to ensuring that members receive the benefits they have been promised in retirement. Members will see no changes to their benefits following these amendments.”   

 

That the trustees of the £19bn scheme sought court approval for the change is perhaps unsurprising given not just the size of the scheme but also the longstanding tensions between many DB pensioners and HSBC, even though the court application appeared to be an “open and shut” case, as senior partner at Arc Pensions Law Anna Rogers told mallowstreet in February.   

Pensioners in the former Midland Bank scheme have been trying to get HSBC to stop applying a ‘state pension integration’ or ‘clawback’ to their pensions, arguing that this was unfair because it is based solely on length of service. This means lower earning long-term staff – mostly women – are worst affected. The bank disputes that the policy is discriminatory. 

 
DB members also fear that the bank’s real interest lies in exploring where any surplus will go on winding the scheme up. The trustees have said that there are “no current plans” for a buyout. 

During the recent legal exercise, members were invited to share their views. Some of the 50,000 DB members affected by the clawback wanted part of the scheme’s multi-billion pound surplus to be used to end the policy, which would cost about £450m. 

However, “those communications did not change the Court’s assessment of the legal position on the proposed change”, according to the trustees. That decision needs the agreement of HSBC, which has so far refused to give it.  

At a hearing on 18 March, the court explained its reasons for the decision taken. According to the scheme, the court found that the trustee’s decision to clarify the scheme’s rules was legally appropriate and that the trustee had followed the correct process. It was a decision which a trustee in its position “could reasonably take”. They had taken legal and actuarial advice and been through detailed consideration and “lengthy negotiations” with the bank. They had also given notice to the members and were not obliged to hold a consultation.  

The scheme members had a representative in court, who had tested the trustee’s application fully, according to the scheme, and been advised by his lawyers not to oppose it. 

The court also noted that the change to the scheme rules is time-limited and “includes meaningful protections to safeguard members’ accrued benefits”, the trustees said.

The HSBC pension fund evolved largely from the Midland Bank scheme and was non-contributory until 2009.