HBOS could be “hollowed out” by its takeover partner Lloyds TSB, leaving the 79,000 people in the HBOS pension fund at risk of not having their pensions paid in full, the scheme’s leading independent trustee warned yesterday.

Roger Boyes, who is spearheading a campaign to challenge the £33 billion deal in court next week, told The Times that he and his fellow trustees had no option but to try to block the deal.

Without a guarantee from Lloyds, there was a danger that HBOS assets that indirectly underpin the scheme could be removed and placed in other parts of the Lloyds group or sold.

“Right now we’re in the dark, we’re being denied information and that leaves the trustees with nowhere else to go,” said Mr Boyes, who was finance director of Halifax plc until 2001 when it merged with Bank of Scotland to form HBOS.

The HBOS scheme is one of the biggest final-salary schemes in the country, paying out pensions to 15,000 people and with outstanding promises to another 64,000 past and present HBOS staff. The trustees estimate that the shortfall in the fund could be as much as £3 billion to £5 billion.

In such cases the covenant, or financial strength, of the sponsoring company is crucial. Lloyds has declined to issue a group-wide guarantee for the HBOS scheme, planning to leave what remains of HBOS after the merger as the sponsor and guarantor of the scheme within the enlarged group.

In an open letter last Friday the trustees complained that after the deal, HBOS could be configured in a way that reduces its cashflows or distributable reserves – and therefore its ability to fill the deficit.

However, Lloyds argues that it treats four of its own six pension schemes in a similar way, with the Cheltenham & Gloucester and Scottish Widows schemes solely reliant on the covenant of the respective subsidiaries within Lloyds.

Stuart Stephen, head of pensions within Lloyds, said: “Finding a long-term solution for the benefit of the group and all its pension schemes is preferable to a short-term solution that may not turn out to be to everyone’s advantage.”

Lloyds has argued that the HBOS trustees will have plenty of opportunity to express their concerns after a deal is done – if necessary by calling on the Pensions Regulator or by calling for a fresh valuation.

Both sides say that they are eager to meet the other, but there has not been a senior level meeting since December 1. “All Tim Tookey [finance director-elect of the combined bank] needs to do is pick up the phone,” Mr Boyes said.

Shareholders of both banks have approved the takeover and the banks are in the final stages of capital-raisings, which are conditional on the deal going through.

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