by Barclays could save more than £200m a year if it decides to stop paying contributions to its occupational pension scheme, even though the fund’s assets have fallen by £10bn in 12 months.
Barclays last month declared profits of £7bn for 2022, but its ‘contributory holiday’ means the cost of payments it would normally make to a former employee’s pension benefits will have to be covered by the pension scheme – sparking anger among some former employees employees.
One retired member of the scheme, who asked not to be identified, claimed the bank was able to afford payment holidays because it had “enormous savings” as a result of capping annual pension increases for its 72,000 retirees and dependents to a maximum of 5%, even though inflation was now over 10%, and he could have opted for a higher payment.
A scheme member said: “Despite assets falling from £37.2bn in 2021 to just £27.2bn in 2022 after Liz Truss caused a bombing of the fund’s value, Barclays says it has a £2bn surplus and the pension fund can afford the retirement leave that the bank takes in 2023.”
He said the program’s retirees “are primarily employees of the branch network and Barclaycard, not today’s investment bankers. They have gone into meager pensions which are being eroded by inflation… Barclays should play fair with former employees.”
Although payouts from the scheme increase each year in line with retail price index inflation, this is capped at 5%, although a document seen by the Guardian states that Barclays is free to grant higher increases. It is understood that the bank is conducting review arrangements.
A program member said that while the bank appeared unprepared during the cost-of-living crisis, “investment bankers’ bonuses are still being paid.” Last month, the bank said employee bonuses would total £1.2bn this year.
Employers’ retirement leave is legal but has long been controversial, especially when companies taking it announce multi-billion dollar profits and generous dividend payments to shareholders.
Britain’s Barclays Bank UK (UKRF) pension fund has around 213,000 members and a newsletter sent to them revealed that on 30 September last year its assets were valued at £27.2bn – £10bn less than £37.2bn a year ago before.
The bulletin mentioned a “challenging environment” in 2022. On September 23, Kwasi Kwarteng’s mini-budget caused turmoil in financial markets, causing government bond prices to plummet and leading to the near collapse of some pension funds.
after the promotion of the newsletter
However, the document said that while the decline in asset values ”may appear alarming”, the value of its liabilities – the pension payments it pays to former employees – “has decreased by more”. As a result, the financial situation of the scheme has improved and there is now a surplus of £2 billion.
The document said the trustees had agreed to stop payments to Barclays pensions. As a result, “no contributions are due in 2023. This means that the contributions that the bank would normally pay for membership benefits will be covered by UKRF.
The trustees said before agreeing to it, they “thoroughly reviewed” the scheme’s financial situation, reviewed the rules and sought advice, adding: “We have also agreed that this break in contributions will be tested every 12 months and will only stay in place if excess funds UKRF enough to ensure that the increased dependence on Barclays is kept low.”
Barclays’ total employer contributions to the scheme were £999m in 2021, of which £273m was described as “normal” members’ pension contributions. Figures for 2022 were £590m and £256m. Payment holidays are understood to apply to these normal contributions.
In a statement, a Barclays spokesperson said: “The UKRF is governed by an independent board of trustees which is responsible for ensuring that it is financially sound to meet the program’s contractual obligations. As noted in the Members’ Bulletin, as at 30 September 2022, overfunding, which is the difference in value between assets and acquired pension promises, was £2 billion. This excess…acts as a buffer to protect against adverse events such as market volatility.”
They added: “Barclays has paid around £4bn in deficit contributions since 2016 which has contributed to the surplus. Our former colleagues are valuable stakeholders and… we continue to listen to their views.”
