HSBC and Santander’s UK pension schemes are both set to be sponsored by their retail, ring-fenced divisions, it has been confirmed.

Following Barclays’ recent announcement regarding the ring-fencing of its Barclays Bank UK Retirement Fund, spokespeople for HSBC and Santander have confirmed that their defined benefit pension schemes will be placed in and sponsored by their retail businesses.

Legislation passed after the financial crisis specified that the largest UK banks are required to divide, (ring fence) their core retail banking services from their investment banking arms. The deadline for this is the beginning of January 2019.

Nonetheless, it has been confirmed that while banks have to abide by the ring fencing requirements by the beginning of next year, they have until 2026 to place their pension schemes into their investment or retail divisions.

In order to comply with banking legislation, Barclays Bank, the sponsor of the fund, will be divided into two entities: Barclays Bank PLC comprising of the investment bank and international banking division, and Barclays Bank UK PLC, a new entity covering the ring-fenced UK banking operation, including the UK retail bank.

In the agreement, trustees have agreed that the responsibility for sponsoring the UKRF will remain with Barclays Bank PLC until it is split into two entities. Once the restructuring has taken place, the responsibility for supporting the scheme and its deficit will be assigned to the “riskier, non-ring -fenced investment arm”, despite scheme members having been employed in Barclays’ core UK banking business.

Commenting on its plans, a spokesperson for HSBC said: “HSBC has been in discussions with the trustee of the HSBC Bank (UK) Pension Scheme and an in principle agreement has been reached on the treatment of the scheme. The defined benefit section of the HSBC Bank UK pension scheme will move to be supported by HSBC UK, with additional support provided by the HSBC Group. The scheme is well funded and the most recent valuation had a surplus on a funding basis.”

The ring-fencing of the banks are to await regulatory and legal approval prior to confirming when their pension schemes will be moved.

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