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NAB reforms UK pensions

NATIONAL Australia Bank's British business continues to come under focus as it overhauls its pension scheme for the second time in five years.

NATIONAL Australia Bank's British business continues to come under focus as it overhauls its pension scheme for the second time in five years.

The changes may lead to a one-time cash injection into the out-of-money defined-benefits fund that covers about 5600 staff. The move comes on the heels of a credit rating downgrade for British-based Clydesdale Bank, triggered by continuing speculation of a possible sale of the business.

NAB is said to be holding informal talks with two separate London-based buyout funds to sell all or part of Clydesdale as part of a longer-term plan to leave the tough British market.

But NAB chief executive Cameron Clyne this week said the commitment to the bank's British business "had not changed".

But as part of the changes to the pension scheme, NAB has asked staff to make more contributions if they want to retain the same level of payouts on retirement.

"The reforms aim to reduce complexity and make the scheme more sustainable by reducing the volatility, cost and risks associated with it," NAB said in a note to its staff in Britain.

Latest accounts show NAB's pension plan had an operating deficit of #117 million ($A186 million), although this was down sharply from a deficit of #360 million a year earlier.

Mid-last decade NAB consolidated its three British pension schemes and made a #100 million injection. The move was aimed at reining in a deficit that at the time had topped $A1 billion.

NAB also shifted the way defined payments were calculated to prevent further blowouts in the scheme. Australian companies largely closed their defined-benefit pension plans during the 1990s, shifting to contribution plans where the employee takes the market risk. NAB will consult with its staff in Britain over the next two months on the changes.

NAB, like most other banks, remains concerned about funding for future liabilities, particularly under stricter accounting rules that bring pension liabilities directly on to the bank's balance sheet.

Meanwhile, NAB's chief financial officer, Mark Joiner, this week held a series of meetings with fund managers, reiterating his position that NAB was not a forced seller of the British assets. But analysts argue NAB should consider selling the $4 billion-plus business if the right opportunity came along.

"NAB's existing UK banking business is not creating shareholder value and this situation is unlikely to change in the forseeable future," said BBY analyst Brett Le Mesurier.

NAB shares finished 45? lower at $22.50.


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