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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 lender had ambitions to branch out from its core UK banking services and offer its own-branded pension scheme, which would have managed the retirement pots of other companies and their staff.
Operators of these multiemployer pension plans, known as “master trusts” make money from the investment and management fees generated from employee contributions.
In 2019, HSBC became the first lender to obtain regulatory approval to launch a master trust. Since then it has made a number of senior hires and started promoting the scheme to employers.
In the master trust’s 2021 annual accounts, filed in March last year, HSBC said it planned for the scheme to be operational in the “coming year”. As recently as September, the bank was still recruiting for the business.
But HSBC has since quietly dropped the plans after failing to drum up enough business. Two industry professionals told the Financial Times that companies had been concerned about the level of fees and the idea of a bank getting involved in pensions.
“HSBC were too late getting to the market, as it was already consolidating,” said Damon Hopkins, head of defined contribution workplace savings, at Broadstone, the employee benefit consultants.
“Unfortunately the banks, in particular, have a bad reputation for dabbling in pensions. While HSBC is a big name, I think that the consulting world, who drive a lot of where the business goes in master trusts, might have preferred a well established name in the pensions market.”
HSBC confirmed “the unwinding of the HSBC Master Trust and its entities in the UK, subject to applicable legal and regulatory requirements” in a statement to the FT.
“Following an extensive review, this strategic direction has been taken to reallocate resources towards other priorities,” the bank added.
While only a tiny business in terms of its vast global balance sheet, the retreat is indicative of the pressure being exerted by HSBC’s largest shareholder Ping An, which has been campaigning to split the bank along east-west lines and criticised its persistently high-cost base.
In response, executives have been doubling-down on investment in Asia and closing or selling non-strategic businesses, such as its retail operations in France and Canada.
HSBC declined to say how much it had spent developing its pension master trust, which had required authorisation from the Pensions Regulator as well as the hiring of professional services, such as auditing and legal advice, and the appointment of trustees for the scheme’s governance.
The scheme received a £1.7mn capital injection from the bank, which has also borne its operational costs, according to accounts filed with Companies House.
HSBC had been aiming to take a slice of the booming workplace pension market, which was chalking up about £62bn in contributions each year, thanks to a government policy that sees workers automatically enrolled into a company pension.
Since the automatic enrolment policy was introduced in 2012, more than 10mn savers have been brought into workplace pensions, many now in mega funds, also known as master trusts.
HSBC was attempting to break into a sector that is traditionally dominated by insurers and pension savings companies. More than 30 companies have received authorisation to run a master trust and HSBC is the only bank on the list.
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