Before we answer the severance question, let’s talk about TSB’s day of reckoning. On the 27th, TSB and Sabadell will publish their Q2 2018 results. Notwithstanding the spin from Barcelona and Gresham Street, they are going to be a disaster. The question is how much of a disaster. UBS, an investment bank, said in a recent analysts report [Spanish Banks: Unanswered questions into Q2] that: “When combined, we come up with a £230m pre-tax impact on 2018 earnings, of which we recur c£60m into 2019 onwards. We note this estimate does not include any potential FCA fine and/or additional legal costs”. The UBS analysis does not factor in the damage to TSB’s franchise both in terms of customer outflows and, more importantly, customer inflows. And that’s the key statistic – not the number of customers that have left, because we know customers are more likely to get divorced than change their bank accounts, but the number of new TSB customers in Q2. Anything less than 6% is a disaster for TSB and Sabadell.
The issue of whether the Bank’s severance terms are contractual or non-contractual has come up in a number of legal cases BTU has been involved in over the years. The Bank’s Job Security Policy, which transferred to TSB under the TUPE Regulations, makes it clear that the enhanced redundancy terms for HBOS staff employed before 1st January 2012 “are non-contractual”. In respect of heritage Lloyds TSB staff, the Bank’s Job Security Policy is silent on whether the severance terms are contractual and nor does it set out a date for the expiration of the terms. Whether the terms are contractual or non-contractual is very important in the current climate. If there is ambiguity TSB can simply say in any legal dispute that the terms are non-contractual and the member of staff is not entitled to the enhanced severance terms. But if the heritage Lloyds TSB terms are contractual and there is no end date, then members of staff are entitled to those terms whether they are made redundant next year or the year after that. And let’s not forget, one of the consequences of the Bank’s IT meltdown inevitably going to result in more job losses and more branch closures. That’s why the issue is important. Equally, we are aware of mutterings that TSB is planning to do away with the enhanced severance terms for heritage Lloyds TSB and HBOS staff. We are also aware that the Bank is approaching members of staff to leave on compromise agreements, which are invariably significantly less than what members would be entitled to under the redundancy terms.
In a recent case at the Employment Tribunal a senior representative of the Bank confirmed that the Job Security Policy, including severance terms, was contractual for heritage Lloyds TSB staff. Lloyds Banking Group has confirmed that the same Job Security Policy and redundancy terms are contractual for heritage Lloyds TSB staff.
If the heritage Lloyds TSB severance terms are contractual, and we believe they are they are, then do they expire at the end of 2018? The policy setting out how the enhanced severance terms are calculated for heritage Lloyds TSB staff makes no reference to an end date unlike the HBOS terms. In light of what the Bank has said in a tribunal case, it’s important that staff are reassured that their severance terms are contractual and can’t simply be changed by TSB whenever it wants.
We will be writing to members shortly enclosing a letter for them to send to the Rachel Lock, HR Director, asking her to confirm the legal position on this important issue. In the meantime, members with any questions can contact the Union’s Bedford Office on 01234 716029 or email us at email@example.com.
LBG Pension Liabilities shrink by £2.4bn
Mercer, the professional services group, has calculated that about £50bn has been paid to 210,000 members of company-backed defined-benefit pension schemes since April 2015. The record transfer value offers being offered by pensions scheme to those members willing to give up their future pensions and the 2015 “pension freedoms”, which gave over 55s flexibility to spend their defined contribution pension funds as they wish, with no requirement to buy an annuity, is resulting in large numbers of members asking for transfer valuation quotes.
It’s difficult to calculate how much money is being transferred out of the LBG pension schemes but based on the number of members contacting the Union since the beginning of the year, and the average value of the transfer value quotes we have seen, we estimate that £100 million is being transferred out of the LBG Pension Schemes every month. If that continues at the same rate, we estimate some £2.4bn will have been transferred out of the Lloyds Bank Pension Schemes over the last two years. And transfer activity could increase given that the Financial Conduct Authority (FCA) is proposing to drop its guidance that advisers “should start from the assumption” that transferring money out of DB pension will always be “unsuitable”.
Another issue we have to contend with is the fact that the new administrators of the Bank’s pension schemes, Willis Towers Watson, just can’t cope with the volume of work. Quotes are still taking too long to produce and members and their advisers are having wait to 3 or 4 weeks and in some cases months for responses to their questions. That’s not sustainable. We appreciate that the volume of correspondence from members is unprecedented but Willis Towers Watson should have factored that in when taking over the business. The Trustee, who is ultimately responsible for the administration of the Scheme, needs to get a grip of this issue and sort it out immediately. If the administrative chaos continues then we will refer the issue to the Pensions Regulator for them to sort out.