Written evidence from Midland (HSBC) Clawback Campaign [PPS0002]

 

A campaign to remove the inequality and indirect discrimination of state pension integration, particularly as applied by HSBC UK to the Midland Post 1974 Defined Benefit Scheme                                                

1948 Integrated pensions were implemented by the government in post war Britain alongside the new State Pension and National Insurance Contributions. Designed to alleviate the new NI cost for employers that already provided a work pension. Employers could reduce the work pension paid when State Pension became payable to an individual, by all or some of the State Pension amount. This meant they could pay less into the work pension scheme and that the employee should receive the same after as before.

1975 Midland Bank took this anachronistic pension practice and imposed it on their Defined Benefit Pension Scheme, as a cost saving measure. The scheme members prior to 1975 (who are closer to the creation of this new act) do not suffer a reduction. Midland Bank chose to call the reduction, a State Deduction, instead of using the terms used in the original Act of Integrated Pension, or Bridging Pension, or indeed the term Clawback which has been more commonly used in the media and Parliament. The term State Deduction has caused confusion, with many members believing it related to the scheme opt-out of SERPS (the State Pension top-up scheme now incorporated within the current Full State Pension – the scheme members only receiving the Basic State Pension (if that)). It is easy to see how and when the confusion commenced and continued throughout the scheme member’s careers.  A State Deduction would imply that any reduction is imposed by the government. Ian Stuart CEO, HSBC Bank UK, stated in an email ‘The meaning and the application of State Deduction is fully explained in the information available to the members of the Scheme. Whilst we regret that this term has caused confusion for some of our members, it has been clearly and consistently communicated within the Scheme ‘ The ‘some members’ he refers to will be the ten thousand scheme members and former loyal employees that have joined our campaign and who strongly dispute the claim that clawback, or indeed the full details of the pension scheme, were ever fully explained. For most they were simply told they had a non-contributory 2/3rd final salary scheme, with scheme booklets available from Regional Head Office.

2016 Scheme members, having completed 40 years’ service and opting to retire receive their pension statements. They are then alerted to the fact that there is a reduction in their occupational pension. A campaign to fight for fairness was created to change this.

2017 Town Hall meeting held in London, chaired by Ian Stuart, who declared in his opening speech, ‘That nothing will change’ There are apparently 22 sections to the HSBC UK Staff pension scheme. The bank claim in their response to a shareholder resolution at their 2020 AGM that other sections also suffer a form of clawback but have refused to provide evidence to support this; the Campaign have researched public records and cannot find any other sections that suffer clawback.

Many government and company schemes recognising that Clawback is outdated, have either removed it, or capped the reduction. Public Service Schemes that included a reduction in pensions at State Pension Age, removed this Clawback in 1980. Compare this to HSBC, one of the largest and wealthiest banks in the world, still resolute that Clawback will continue, even when the pension scheme is in surplus funds. This is also an inequality.

All Party Parliamentary Group formed and chaired by Clive Betts MP

2018 Assisted by Clive Betts, a complaint was made to The Equalities and Human Rights Commission. Both Clive and the complainant believed that there was a clear prima facie case for indirect discrimination. An encouraging letter was received from Rebecca Hilsenrath, CEO of The Equalities and Human Rights Commission, advising that they were asking the bank for objective justification with regards to the huge disparity (percentages) of clawback. Approximately 18 months passed whilst a decision was made, finding in the favour of the bank. HSBC advised that they had answered all the commission’s questions in full and had also given the commission the benefit of their legal counsel’s opinion. We have taken legal advice and whilst our counsel acknowledges the injustice, there is apparently nothing in law to support this inequality.

We have successfully raised resolutions at the last two Annual General Meetings and have received support in 2020 receiving 282,143,318 votes from ordinary shareholders and institutional investors.

Unite the Union support our campaign but have declined to fund a legal challenge, on the basis that arguments under present legislation appear to be weak. Our campaigners have paid £30,000 to date to obtain legal advice.

Clawback calculation method used by HSBC

Our occupational pension that we receive is based upon the salary earned and the number of pensionable years completed.  This is fair.

The cost of the pension scheme to the bank is determined by the salary paid to the individual.

Clawback has no link to salary.

On reaching SPA Clawback commences and is calculated thus:

The value of State Pension 52 weeks prior to leaving or retiring. Divide this sum by eighty and then multiply by the number of completed pensionable years. This results in the highest paid losing a small percentage of pension and the lowest paid losing the highest percentage.

For example, a senior manager retiring on a pension of £150,000 a year might suffer a clawback on reaching SPA of £2,500 or just 1.7% whereas a junior clerk with the same job start and end dates might retire on a pension of only £10,000 a year and yet also suffer clawback of £2,500 at SPA but which equates to 25% of their pension.

This means the lowest paid are effectively subsidising the higher paid

Employment practices of the 1970s, 80s and 90s mean that the vast majority of the lowest paid are women.

We have collated our own data base which irrefutably confirms that the Clawback method that HSBC implement indirectly discriminates the lowest paid and who are mainly women. We have proven this without the assistance of the bank.

To date, 547 pensioners, (1.07% of scheme membership) have submitted details. The analysis focused on the percentage of a person’s pension which would be withheld upon them reaching State Pensionable Age and before any cash withdrawals were taken.

Key Facts from the Data Provided

  1. The percentage of pension being clawed back ranged from 2.2% to 32.8%
  2. Of the five pensioners who will lose more than 30% pension, all are women.
  3. For those in the range 20% - 30%, it is ten times more likely to be female than male.
  4. For those in the range 15% - 20%, it is nearly six times more likely to be female than male.
  5. Those losing 3% or less are four times more likely to be male.

 

Number of Pensioners Affected

 

% Pension Clawed Back

Total

Female

Male

%female

30%+

5

5

0

100%

25%-30%

12

11

1

92%

20%-25%

34

31

3

91%

15%-20%

147

125

22

85%

3%-5%

17

8

9

47%

0%-3%

5

1

4

20%

 

Whilst the pension paid conforms to The Equal Pay Act it is outrageous that there appears to be nothing to oppose the blatant inequality of clawback. To allow Clawback to plunge many into poverty has no place in modern times. It is immoral, unjust, outdated and needs to be addressed.

The 1946 Pension Act and 2010 Equality Act permit Clawback and allow for this unfair calculation of the deduction. HSBC hide behind the law and ignore the moral arguments. Therefore, it would seem that some form of change to both pension and equality law is required.

Whilst trying to keep this complex issue brief, there is much more information available that can be provided by the campaign committee.

             

August 2020