HBOS HAS more than halved its final salary pension deficit after contributing £1.15 billion to the pot during the past two years.

The bank said that its pension deficit, accordingtotheIAS19accounting standard, now stands at £900 million before tax.

The reduction has come from an extra payment of £800m, on top of the company'sregularcontributionsof £350m. Employees have not made any extra payments.

The bank said that positive stock market movements in recent years had also helped to reduce the deficit, which is equivalent to 2.2% of its £40 billion market capitalisation.

HBOS has about 80,000 members in its final salary pension schemes, 92% of which are in the former Halifax and Bank of Scotland schemes.

David Fisher, HBOS director for HR, said that the bank was well on track to meet its goal of eliminating the deficit altogether by 2015.

It plans to eliminate its actuarial deficit, which is calculated by another measurement, by 2010.

HBOS and the pension fund trustees are close to completing their review of the actuarial deficit. It is expected that it will be reduced to around £200m.

Representatives from HBOS unions Accord and Amicus said: "We welcome the positive steps that HBOS has taken to eliminate the deficits in the final salary schemes. This will be a great comfort to members. HBOS has taken a lead that we believe other decent employers should follow."

This was the second piece of good news for HBOS staff last week.

The UK's fifth-largest bank posted full-year profits of £5.71bn and announced a £550m shares and bonus windfall for more than 65,000 staff. Employees will receive a £270m annual cash bonus - up from £222m last year - to be paid with their March salary.

In addition, each member of HBOS staff will be awarded free shares in the summer worth between £500 and £3000 - totalling £70m. Staff will also benefit from two staff share schemes worth £210m. The payout follows a 56.5% jump in HBOS shares over the past three years.

Other British employees, however, did not fare so well on the pensions front last week.

The pension deficits of Britain's top 200 company schemes has grown by £16bn, according to new figures last week.

Actuaries Aon Consulting said the fall in stock markets around the world had cut pension fund asset values, reversing a trend over the last year that had seen deficits fall dramatically.

Thevolatilityofthemarkets will generate further concerns that more companies will close their occupational schemes to new entrants.

At one point the deficits of FTSE 100 firms topped £140bn. But by the end of last year that figure had declined to £40bn.