HSBC has abandoned its plans to enter the UK’s £62bn annual workplace pension market. The bank had created a pension scheme that offered core banking services, which would have managed retirement benefits for other companies and their employees. The plan was developed over four years and was expected to operate this year. HSBC became the first financier to receive regulatory approval in 2019 to launch such a scheme. Despite having hired many senior employees and promoting the plan to employers, the bank struggled to attract enough deals, leading to the abandonment of the project.
Two industry experts told the Financial Times that companies were put off by the fees and the idea of banks getting involved in pensions. HSBC confirmed that it had abandoned its plans, but declined to say how much it had spent on the scheme’s development. The exit from the market is believed to have come about as a result of increasing pressure from Ping An, HSBC’s biggest shareholder, to split the bank into an east-west route and criticism of the bank’s persistently high cost base.
HSBC’s decision to withdraw from the market is a concern for the bank, as the workplace pension market has become a significant one. Since the introduction of the auto-enrollment policy in 2012, over 10 million savers have enrolled in workplace pensions, many of whom are enrolled in mega-funds. Companies that offer these multiemployer pension schemes, known as “master trusts,” derive their income from the investment and management fees generated by the master trusts. More than 30 companies have master trust licenses to operate, with HSBC listed as the only bank on the list.