The Trustee and the Bank have worked together to agree a change to the Scheme’s rules, following a request by the Bank.
This change will make the existing rules clearer on how and when the Scheme’s current assets can be used by the Bank to fund its contributions into members’ Defined Contribution (DC) pots. As part of the process to complete the rule change, the Trustee will be making an application to Court.
This change will not affect your benefits or the amounts which will be paid into your DC pot in the future. You don’t need to do anything.
We explain more about the rule change below. There are also contact details at the end of this document if you have any questions.
What is happening?
The Scheme’s rules were first written when Scheme members were building up Defined Benefit (DB) pensions. This stopped in 2015, with all active members now building up DC pension pots instead. At the time, many of the Scheme’s rules were updated to reflect this change.
The Scheme’s rules allow the Bank’s DC contributions to be met from Scheme assets. This can only be done if certain tests are met – linked to the Scheme having more assets than are expected to be needed to pay all DB benefits (this is called a funding surplus). The Bank has not previously used this rule but would now like to do so. The Trustee has identified a need to clarify this rule before it can be used by the Bank.
The Trustee and the Bank have agreed changes to make it clear how and when the rule will work.
To make sure that we get the change right, the Trustee and the Bank have also agreed to go to Court to confirm that the change can be made. The Bank will not start to use Scheme surplus to meet its DC contributions before the Court confirms this. This is a normal approach to take in these circumstances.
Is there anything else to know?
The main aim of the Trustee and the Bank is to make sure that your Scheme benefits are secure. The Trustee does not believe that the rule change will impact the security of members’ benefits. The Bank’s DC contributions could only be paid from Scheme assets if the Trustee, working with its advisers, is confident that the Scheme is well funded.
The Trustee and the Bank monitor the Scheme’s funding surplus regularly. The Trustee expects that this surplus will keep growing even if the Bank’s DC contributions are paid from Scheme assets.
The Trustee and the Bank will also be discussing the principles as to how any funding surplus would be used if, in the future, they secure all members’ DB benefits with an insurance provider. There are no current plans to do this. However, as the rule changes are about using Scheme assets, the Trustee thinks it is important to at least consider this point alongside the rule changes. If, after four years, the Bank and Trustee haven’t reached agreement on this, the Bank’s DC contributions to the Scheme would no longer be met from the Scheme’s assets. The Trustee and Bank can, however, agree to extend this period.
The Court application
The Trustee and the Bank will be asking the Court to confirm that the change to the rules can properly be made. In doing so, the Court will consider the interests of Scheme members.
Members will be represented in the Court process by a single representative member (the “Representative”). This is common practice because it is not practical to join all members as parties to the Court application. The Representative will speak for all those who share the same interest in the outcome of the case. Stephen Burnell, a DB pensioner member of the Scheme, has kindly agreed to be the Representative. He has not had any involvement in this work to date and is independent. He will have independent legal advice from specialist solicitors and barristers whose costs are paid by the Scheme. His legal team is Gowling WLG (UK) LLP and Fenner Moeran KC.
Where can I find out more information?
We have included some FAQs about the rule change and the Court application on our futurefocus page. Please scroll down this page and you will find the FAQs under the section ‘Further Actions’.
Going forward, any further information will be added to this page on futurefocus. We expect the Court hearing to take place in early 2026 and we will publish the details of the hearing and subsequently its outcome on futurefocus when they are available.
Further actions
You don’t need to do anything. If you would like more information you can read the FAQs on futurefocus. If you have any other questions or comments, you can contact HSBCPensions@eversheds-sutherland.com. Any relevant comments or information that you provide will be passed to the Representative’s legal team.