NAB to revamp UK pension scheme

The changes may lead to a one-time cash injection into the out-of-money defined benefit fund which covers about 5600 staff.

The move comes on the heels of a credit ratings downgrade for Britain's Clydesdale Bank, triggered by continuing speculation of a possible sale of the business.

NAB is said to be holding informal talks with two buyout funds in London to sell either all or part of Clydesdale Bank under a long-term plan to exit the tough British market.

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

He said NAB continued to target organic growth in that market.

However, as part of the changes to the pension scheme, NAB has asked its staff to make more contributions to the defined benefit fund if they wish to retain the same payout level 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 British staff.

Latest accounts show NAB's pension plan had an operating deficit of #117 million ($186 million), although this was down sharply from a deficit of #360 million a year earlier.

NAB consolidated its three British pension schemes during the middle of the last decade and made a #100 million injection. The move was aimed at reining in a deficit that at the time had topped $1 billion.

NAB also changed 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 staff bear the market risk.

NAB will discuss the proposed changes with its British staff over the next two months. Like most other banks, it remains concerned about funding for future liabilities, particularly under stricter accounting rules that bring pension liabilities directly onto the bank's balance sheet.

Meanwhile, the chief financial officer of NAB, Mark Joiner, this week held a series of meetings with fund managers, where he reiterated his position that NAB was not a forced seller of the British assets. However, analysts say the bank should consider selling the $4 billion-plus business if the right opportunity comes along.

NAB's shares finished 45? lower yesterday at $22.50.