Barclays could save more than £200 million per year by stopping contributions to its employee pension scheme.

Barclays announced £7 billion in profits for 2022 last month, but its “contribution holiday” means the cost of payments it would normally make towards former employees’ retirement benefits, will now be met by the pension scheme, infuriating some ex-employees.

One retired scheme member, who did not want to be identified, said the bank could afford to take a payment holiday because it was making “huge savings” by limiting annual pension increases for its 72,000 pensioners and dependants to a maximum of five percent.

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They said this was despite inflation currently running at more than 10 percent and the bank could choose to pay more.

They 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 are increased each year in line with retail price index inflation, this is capped at five percent, according to a document obtained by the Guardian, though Barclays has the discretion to award higher increases.

It is understood that the bank is reviewing the arrangement.

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According to the scheme member, “the investment banker bonuses continue to be paid” despite the bank’s apparent unwillingness to do so during the cost-of-living crisis.

The bank announced last month bonus payments to employees would total £1.2 billion this year.

Employer pension contribution holidays are legal, but they have long been a source of contention, especially 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 September 30, last year, its assets were valued at £27.2 billion, down £10 billion from the previous year’s figure of £37.2 billion.

The newsletter mentioned the “difficult environment” in 2022. On September 23, Kwasi Kwarteng’s mini-budget shook financial markets, sending government bonds plummeting and forcing some pension funds to close.

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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.”

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In 2021, Barclays’ total employer contributions to the scheme were £999 million, with £273 million described as “normal” contributions to members’ pensions.

The figures for 2022 were £590 million and £256 million.

The payment holiday is understood to apply to these standard 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 £4billion 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.”

SourceThe Guardian

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