The injection comes just weeks after rival HBOS pledged that it would eliminate its pension scheme decicit within a decade, making an initial contribution of £800 million.

The action by HSBC will put pressure on other companies to put in place plans to reduce or eradicate their funds’ deficits. Companies with large deficits include GlaxoSmithKline, BP and Lloyds TSB.

HSBC Holdings — the overall parent company — is to subscribe for an additional £700 million of share capital in HSBC Bank, its UK subsidiary, to support the capital injection.

HSBC’s UK pension scheme, which was closed to new members in July 1996, has more than 100,000 members. Many remain employees at the company. Last year, HSBC made a £600 million payment to its pension scheme in an effort to reduce the deficit.

HSBC’s pension fund has become one of the key negotiating points between the bank’s UK management and its employees. Mike Geoghegan, the combative chief executive of the UK business, has pointed out the benefits of the pension fund to employees in the UK.

Bank staff went on strike earlier this year in protest over the size of their pay increases. Meanwhile Mr Geoghegan and senior executives at the bank have long complained about employment costs in the UK compared with other countries.

A spokesman for HSBC said yesterday: “We have often said that providing adequate retirement benefits is one of our aims when dealing with staff.”

Despite the size of the cash injection by HSBC, it is only a small part of the bank’s annual profits. HSBC made record earnings of $19 billion for 2004 and is on target for profits of more than $20 billion (£11.5 billion) this year.

Pension fund deficits are expected to become an increasingly thorny issue for companies next year. A recent report from Morgan Stanley, the US investment bank, claimed that new accounting rules would hide the deficits, making companies seem more profitable than they really were.

The report said: “We estimate that the forecast net income for the FTSE 100 is overstated by 4 per cent. New accounting rules purge almost all traces of pension deficits from the profit and loss account.”

According to Morgan Stanley’s analysis the total pension fund deficit among Britain’s biggest 100 companies is in the region of £56 billion. The deficits remain large even though shares have staged a strong recovery this year — the FTSE 100 is set to be 15 per cent up for 2005.

This month Rentokil Initial said that it would close its final-salary scheme to save money, putting it on a collision course with employees. Trade unions have vowed to fight plans by employers to close their final-salary pension schemes.

PLUGGING THE GAP

How companies have dealt with their deficits this year

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