RBS 2011 Annual Report Download - page 336

334 RBS Group 2011
4 Pensions continued
The Main scheme’s holdings of derivative instruments are summarised in the table below:
2011 2010 2009
Fair value Fair value Fair value
Notional
amounts Assets Liabilities
Notional
amounts Assets Liabilities
Notional
amounts Assets Liabilities
£m £m £m £m £m £m £m £m £m
Inflation rate swaps 2,585 67 178 2,132 69 8 1,171 75 3
Interest rate swaps 15,149 2,232 1,864 10,727 270 110 4,893 46 114
Total return swaps 2,085 169 — 466 16 — — — —
Currency swaps 2,861 116 117 (973) — 1 — — —
Credit default swaps 238 6 — — — — ———
Equity and bond futures 3,745 80 10 4,851 49 14 1,730 37 —
Currency forwards 2,078 8 — 4,883 35 91 2,908 58 70
Equity and bond call options 814 67 4 — — — ———
Equity and bond put options 665 11 — — — — ———
The investment strategy of other schemes is similar to that of the Main
scheme, adjusted to take account of the nature of liabilities, risk appetite
of the trustees, size of the scheme and any local regulatory constraints.
The use of derivative instruments outside of the Main scheme is not
material.
Swaps are part of the management of the inflation and interest rate
sensitivity of the Main scheme liabilities. They have been executed at
prevailing market rates and within standard market bid/offer spreads.
Substantially all swaps are with The Royal Bank of Scotland plc and
National Westminster Bank Plc (the “banks”). At 31 December 2011,
the gross notional value of the swaps was £22,918 million (2010 -
£12,352 million; 2009 - £6,064 million) and had a positive fair value of
£431 million (2010 - £236 million positive; 2009 - £4 million negative) to
the scheme.
Collateral is required on all swap transactions with those between the
banks and the Main scheme on terms that do not allow the banks to re-
hypothecate. The banks had delivered £375 million of collateral at 31
December 2011 (2010 - delivered £210 million; 2009 - held £6 million).
Ordinary shares of the company with a fair value of £3 million (2010 - £9
million; 2009 - £4 million) are held by the Group's Main scheme which
also holds other financial instruments issued by the Group with a value of
£424 million (2010 - £264 million; 2009 - £192 million).
The expected return on plan assets at 31 December is based upon the weighted average of the following assumed returns on the major classes of plan
assets, allowing for the net impact of derivatives on the risk and return profile:
Main scheme All schemes
2011
%
2010
%
2009
%
2011
%
2010
%
2009
%
Quoted equities 7.7 7.7 8.0 7.7 7.5 7.8
Private equity 7.7 7.7 8.0 7.7 7.7 8.0
Index-linked bonds 3.1 4.2 4.5 3.1 4.0 4.5
Government fixed interest bonds 3.1 — — 2.8 2.9 4.0
Corporate and other bonds 4.7 5.5 5.9 4.7 5.2 5.8
Hedge funds 6.0 6.0 6.2 6.0 5.3 4.3
Property 6.7 6.7 6.2 6.5 6.4 6.0
Cash and other assets 2.6 4.0 4.2 2.9 3.7 3.8
Equity exposure of equity futures 7.7 7.7 8.0 7.7 7.7 8.0
Cash exposure of equity futures 2.6 4.0 4.2 2.6 4.0 4.2
Total fund 5.7 6.7 6.8 5.6 6.3 6.1
Notes on the consolidated accounts continued