Barclays could save itself more than £200m a year after deciding to take a break from paying into its staff pension scheme, despite the fund’s assets plummeting by £10bn in 12 months.
Barclays last month declared profits of £7bn for 2022, but its “contribution holiday” means the cost of the payments it would normally make towards former employees’ retirement benefits will now have to be met by the pension scheme – prompting anger among some ex-staff.
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One retired scheme member, who asked not to be named, claimed that the bank was able to afford to take a payment holiday because it was enjoying “huge savings” as a result of restricting annual pension increases for its 72,000 pensioners and dependants to a maximum of 5%, even though inflation was currently running at more than 10%, and it could opt to pay more.
The scheme member said: “Despite its assets reducing in value from £37.2bn in 2021 to just £27.2bn in 2022 after Liz Truss caused the fund’s value to bomb, Barclays is claiming it has a £2bn surplus and the pension fund can afford the pension contribution holiday that the bank is taking in 2023.”
He said the scheme’s pensioners “are primarily staff who worked in the branch network and at Barclaycard rather than the investment bankers of today. They retired on modest pensions that are being eroded by inflation … Barclays should play fair with these former staff.”
While scheme payouts increase each year in line with retail prices index inflation, this is capped at 5%, though a document seen by the Guardian states that Barclays has the discretion to award higher increases. It is understood that the bank is keeping arrangement this under review.
The scheme member said that while it appeared the bank was not prepared to do this during the cost of living crisis, “the investment banker bonuses carry on being paid”. Last month the bank said bonus payouts to staff would total £1.2bn this year.
Employer pension contribution holidays are legal, but have long been controversial, particularly when the companies taking them announce multibillion-pound profits and generous dividend payouts to shareholders.
The Barclays Bank UK Retirement Fund (UKRF) has about 213,000 members, and a newsletter sent to them revealed that on 30 September last year, its assets were valued at £27.2bn – down £10bn on the £37.2bn figure a year earlier.
The newsletter referenced the “challenging environment” in 2022. On 23 September, Kwasi Kwarteng’s mini-budget caused turmoil in the financial markets, sending government bonds plunging and leading to the near-collapse of some pension funds.
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However, the document said that while a fall in asset values “might seem concerning”, the value of its liabilities – the pension payments it makes to former employees – had “reduced by more”. As a result, the scheme’s funding position had improved and there was now a £2bn surplus.
The document said the trustees had agreed a pause on Barclays’ pension payments. As a result, “no contributions are due in 2023. This means the contributions the bank would normally make towards members’ benefits will be met out of the UKRF.”
The trustees said that before agreeing to this, they “thoroughly investigated” the scheme’s financial position, reviewed the rules and took advice, adding: “We have also agreed that this pause on contributions will be tested every 12 months and will only remain in place if the UKRF’s funding surplus is enough to ensure it retains an enhanced low dependency on Barclays.”
Barclays’ total employer contributions to the scheme were £999m in 2021, of which £273m were described as “normal” contributions towards members’ pensions. The figures for 2022 were £590m and £256m. It is understood the payment holiday relates to these normal contributions.
In a statement, a Barclays spokesperson said: “The UKRF is managed by an independent board of trustees that is responsible for ensuring an appropriate funding position to meet the contractual obligations of the scheme. As noted in its newsletter to members, at 30 September 2022, the funding surplus, which is the difference in value between assets and accrued pension promises, was £2bn. This surplus … acts as a buffer to provide protection 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 valued stakeholders and … we continue to listen to their feedback.”
