Pension trustees of HBOS yesterday formally launched an attack on the terms of the £33 billion all-share takeover by Lloyds TSB.

They agreed to ask an Edinburgh court, which needs to sanction the arrangement, not to approve the deal until Lloyds TSB gives cast-iron guarantees on the future of the HBOS final salary pension scheme. The court is to meet on January 12 to discuss the takeover, due to be completed a week later.

In a letter to members of the scheme last night, the trustees criticised Lloyds for not offering sufficient guarantees. They said: “We understand the commercial basis underpinning the acquisition and do not oppose it as such; however, we also believe that it is fundamental that appropriate arrangements are made to protect the accrued benefits of members.”

The fund has a deficit of up to £5 billion, a huge increase from only £95 million two years ago, according to trustees. The scheme has 79,000 members, 28,000 of whom are HBOS employees anxious about their futures as Lloyds prepares to cut thousands of jobs.

The trustees said that they had “repeatedly sought engagement with Lloyds” over their concerns. “No details of what steps Lloyds TSB are planning have been shared and the limited discussions that have been held have demonstrated no willingness on the part of Lloyds TSB to discuss what they would or might be willing to do to underpin the HBOS covenant as reconfiguration proceeds,” they added.

The Lloyds deal has also met opposition from prominent Scottish businessmen worried about losing HBOS's Scottish base and about job losses. The merger, brokered by the Government in September after worries about the survival of HBOS, the UK's biggest mortgage lender, received shareholder approval in December.

The new enterprise, Lloyds Banking Group, will be funded by rights issues of £11.5 billion by HBOS, and £5.5 billion by Lloyds TSB, backed by public money. The Government is expected to own about 43.5 per cent of the group, which will have 3,000 branches and a total staff of 143,000.

The HBOS pension scheme's trustees said that they were worried that it would suffer if HBOS's cashflow reserves were reduced. They have also decided to commission an actuarial valuation, a year earlier than expected. This could lead to Lloyds/HBOS having to make a hefty contribution towards the deficits.

A spokesman for HBOS said: “We are very much of the view that our deal with Lloyds TSB is the best form of protection for our employees. Following the deal, the HBOS pension scheme will be backed by an even bigger and stronger group. We believe this provides significant reassurance for all HBOS colleagues.”

HBOS shares fell more than 90 per cent last year. Their price dipped again this week over the pension concerns.

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