Bank under pressure to focus on Asia and cut costs by its largest shareholder .HSBC has abandoned plans to capture a slice of the UK’s £62bn annual workplace pension market after the banking giant failed to convince employers to sign up to a new scheme it spent four years developing.
The London-based bank had plans to expand beyond its UK banking core services, and launch its own pension scheme that would have managed retirement pots for other companies and staff.
The “master trusts”, or multi-employer pension schemes, are operated by master trusts that make money on the investment and administration fees derived from employee contributions.
In 2019, HSBC was the first lender in the world to receive regulatory approval for launching a master trust. Since then, it has hired a number senior employees and begun promoting the master trust to employers.
In its 2021 annual account, which was filed in March of last year, HSBC stated that it intended for the scheme’s operation to begin “in the coming year”. Even as recently as September, HSBC was still actively recruiting for its business.
HSBC quietly cancelled the plans in response to a lack of interest. Two professionals in the industry said that the fees were high and companies were concerned about a bank becoming involved with pensions.
Broadstone’s employee benefit consultants, Broadstone, said that HSBC was too late to enter the market as the consolidation had already taken place.
“Unfortunately, the banks in particular have a bad rep for dabbling with pensions. HSBC may be a household name, but I believe that the consulting industry, which drives a large part of the master trust business, would have preferred a name with a good reputation in the pensions sector.
In a press release, HSBC confirmed that “the diswinding of the HSBC Master Trust in the UK and its subsidiaries is subject to the applicable legal and regulatory requirements”.
The bank said that “this strategic direction was taken following an extensive review to reallocate the resources towards other priority areas.”
The retreat of HSBC is a sign of the pressure exerted on the bank by its largest shareholder Ping An. has campaigned for the division of the bank into east and west lines, while criticising its high cost base.
Executives have responded by doubling down on investments in Asia, and selling or closing non-strategic business, like its retail operations in France, and Canada.
HSBC refused to reveal how much money it spent on developing its pension mastertrust, which required approval from the Pensions Regulator, as well as professional services such as legal and auditing advice and the appointment trustees for the scheme’s governance.
According to company accounts filed atCompanies House, the scheme received a capital injection of £1.7mn from the bank. The bank has also covered its operational costs.
HSBC aimed to grab a piece of the booming workplace retirement market. This sector was raking in about £62bn each year thanks to a government initiative that automatically enrolls employees into a company’s pension.
Since 2012, the automatic enrollment policy has brought more than 10 million savers into workplace pensions. Many of them are now in mega funds or master trusts.
HSBC attempted to enter a market that has traditionally been dominated by pension saving companies and insurers. HSBC was the only bank to receive authorization for a master trust.