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Is TSB the John Lewis of financial services?

TSB bank began trading last week. Photo: PA

TSB is in the departure lounge, waiting to decouple from Lloyds by listing on the stock market.

We’ll get the price and the prospectus soon but in the meantime the bank has unveiled a new way of rewarding its staff that takes its inspiration from – wait for it – the John Lewis Partnership.

Well, TSB did promise us something different.

When the bank finally floats its 8,600 staff will be given £100 of shares and will become “TSB partners”.

This is interesting: it gives employees something for nothing and skin in the game - malthough not very much.

We don’t yet know how TSB has been valued but if we use the reported book value of £1.5bn as an imperfect guide then it would leave staff with a holding of less than 1%.

By comparison, postal workers were given 10% of Royal Mail and John Lewis staff own 100% of John Lewis.

General view of a branch of John Lewis Credit: PA

Every year TSB partners will also eligible for a John Lewis style bonus, paid as a flat percentage basic salary from top to bottom across the bank.

This move strikes all the right notes in terms of fairness but the bonus isn’t guaranteed and is capped at 15% of salary.

TSB presents this as linking pay properly with performance.

Fair enough ,but it rather misses the point that the size of rewards at bank branch level has never been the issue.

For the record, the John Lewis bonus is uncapped and has been paid, whatever the weather and without controversy, every year since 1953.

TSB chief executive Paul Pester. Credit: PA

The TSB chief executive is getting a pay rise. Paul Pester will earn a basic salary of £700,000 a year, up from £600,000.

That’s less than Charlie Mayfield, chairman of the John Lewis Partnership, who earns £920,000, but then John Lewis doesn't operate a separate executive bonus scheme.

TSB, like every other plc, does and if Paul Pester hits all his targets he will qualify for a total package of £1.68 million.

Even with his maximum bonus Paul Pester will not be able to earn more than 65 times the pay of average frontline TSB employee.

The same principle is enshrined at John Lewis, only the cap is set at 75 times earnings.

At some other banks the ratio is over 100. The union that represents TSB staff has applauded politely; the High Pay Centre has christened the policy “ethical”.

Of course, what I have just done is compare a retailer with a bank. But by holding up John Lewis as its muse it’s a comparison TSB is inviting us to make.

It occurs to me that for anyone working in the banking sector this reform will probably feel pretty radical but then banks have always rewarded their staff differently to companies in other sectors of the economy.

I rather suspect that of the shop floor of John Lewis they are wondering what the fuss is about.