£65bn wiped off value of bank pension schemes

Britain’s biggest banks have seen the value of their staff pension plans plunge by more than £65 billion after rising interest rates and the fall-out from last autumn’s mini-Budget decimated assets.

The unprecedented drop – equivalent to more than a third of the funds’ value – highlights how exposed traditional company pension schemes were to so-called liability-driven investment strategies.

LDIs were meant to match a scheme’s liabilities with supposedly ‘safe’ assets such as bonds, or Government IOUs.

However, former Chancellor Kwasi Kwarteng’s disastrous mini-Budget revealed previously hidden leverage in the pensions system. The full extent of these losses is only now emerging.

NatWest, which has the biggest bank pension scheme by assets, saw £20.3 billion – or 35 per cent – wiped off its value.

Halifax and Scottish Widows owner Lloyds Banking Group, which has 345,000 members, lost the same.

The HSBC and Barclays pension funds shrank by more than £10 billion each.

But analysts say the banks have no plans to increase their contributions to make good the shortfall – because the funding position of bank pensions schemes has actually improved.

Rising interest rates mean the present value of schemes’ future liabilities have fallen.

Iain Clacher, professor of pensions and finance at Leeds University Business School, warned: ‘There are now fewer assets from which to pay pensions.’