Lloyds' £1bn profit from pension cuts: Anger as alert issued on boardroom pay

Profits at Lloyds Banking Group will be boosted by at least £1 billion this year because of a planned cut to the value of staff pensions.

The bank, 41 per cent-owned by the taxpayer, said in December it was capping the rate at which staff built up their pensions.

The move took effect this month and will cap pensionable salary rises for about 60,000 staff at just two per cent or the rate of inflation, whichever is lower.

Pension change: The move will cap pensionable salary rises for about 60,000 staff at just two per cent or the rate of inflation, whichever is lower

Although it does not limit pay rises, it does restrict the amount of any salary rise that can be counted towards a company pension. That, say analysts, will boost Lloyds' bottom line by £1 billion or more this year.

The bank may refer to the oneoff gain in its interim management statement this week, although no figures will be included in the announcement.

The boost from the pension pruning should make it almost certain that the bank will return to profit this year and is likely to fuel hopes that the Government may sell its stake in the near future.

Analysts believe that for a selloff to be successful, politicians will have to wait at least until 2011. Unions have already expressed fury at the pension move. While future staff pensions have been trimmed to improve Lloyds' financial fortunes, the bank's directors have seen their earnings rise.

Lloyds is facing investors unease over recent bonuses and last week leading shareholder group the Association of British Insurers issued an alert on the group's boardroom pay.

The remuneration committee at Lloyds recommended millions of pounds in bonuses to directors.

Though chief executive Eric Daniels has waived his £2 million bonus, four other board members, including retail director Helen Weir and finance director Tim Tookey, were paid bonuses worth a total of more than £4 million.

Lloyds made a loss before tax of more than £6.3 billion. The bank said: 'The remuneration committee has sought to strike a balance between the fact that the group is loss-making and the need to motivate executives to run the business to maximise returns for shareholders, including the taxpayer.'

Barclays has also come under attack for its pay levels from corporate governance activist PIRC, which advises a number of local authorities' public sector pension schemes. It urged investors to vote against Barclays' pay report at this week's annual meeting, describing rewards as 'potentially excessive'.

Goldman shareholders sue Blankfein

Shareholders in besieged investment bank Goldman Sachs are suing chief executive Lloyd Blankfein over an alleged subprime mortgage fraud that threatens to overwhelm the once untouchable Wall Street titan.

Two investors, Morton Speigel and Robert Rosinek, filed complaints in the New York State Supreme Court late last week, claiming Blankfein had failed in his duty to investors.

Goldman has been fighting a rearguard action against fraud charges brought by America's Securities and Exchange Commission and a barrage of other allegations over its conduct.

A number of its directors, including Blankfein and the alleged fraudster Fabrice Tourre, will appear on Tuesday before a Senate committee. The hearing is likely to centre on the fraud claim levelled by the SEC.

Goldman has denied the SEC's claim that it helped the hedge fund, Paulson & Co, to gamble on the collapse in the US sub-prime mortgage market while tricking other clients into bearing $1 billion (£650 million) of losses.

Sources said it hoped to negotiate a financial settlement with the authorities. But Goldman would have to ensure the settlement made clear it was not admitting culpability. It is not expected to file its defence until after this week's hearings.

Meanwhile this weekend, Goldman denied allegations that it had used its position as an adviser to Lloyds Banking Group to increase the value of bonds it held in the bailed-out bank.