The trustees of the HBOS pension scheme have called off their legal challenge to the impending takeover by Lloyds TSB in the Court of Session next Monday.
The trustees of the HBOS pension scheme have called off their legal challenge to the impending takeover by Lloyds TSB in the Court of Session next Monday.
But they still have no guarantees over the future funding of the scheme, and intend to pursue a revaluation that could throw up a deficit of up to £5bn for Lloyds TSB to account.
They said yesterday: "Having carefully considered the representations made by Lloyds TSB about the potential repercussions of any delay, particularly on the planned capital raising exercise which is due to commence on 15 January, and in view of helpful statements made by Lloyds TSB to the trustees in the course of the discussions, the trustees have decided that it would be in the best interests of all concerned not to proceed with legal action."
The threat was made in an open letter at the end of last week, in which the trustees complained they were "deeply concerned that they have not received any substantive proposals" from Lloyds TSB for supporting the final salary pension scheme (FSPS) in the enlarged group.
The trustees believe there is a danger that HBOS assets that indirectly underpin the scheme could be removed and placed in other parts of the Lloyds TSB group or sold, undermining the pension rights of the scheme's 79,000 members.
They cited in the letter "the substantial weakening of the HBOS covenant, as evidenced by the dramatic fall in its market capitalisation and the uncertainty as to the future of HBOS within the enlarged group".
Earlier this week one of the trustees Roger Boyes, the former finance director of Halifax prior to its merger with Bank of Scotland in 2001, told a newspaper that no meetings had taken place since last month, the trustees were being "denied information" and that "all Tim Tookey (finance director elect of the merger bank) needs to do is pick up the phone".
A meeting with Lloyds TSB and its advisers took place this week. But the trustees stressed that they "thus far have not received satisfactory proposals of support for the FSPS from the parent company of the enlarged group".
They therefore remained committed to pursuing an actuarial valuation as at December 31, which could show a £3bn to £5bn deficit, and continuing with a review of investment strategy. They said: "The trustees are confident that the commit- ment by all parties to maintaining a constructive dialogue will enable progress to be made."
