RBS 2013 Annual Report Download - page 400
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Notes on the consolidated accounts
398
4 Pensions
The Group sponsors a number of pension schemes in the UK and
overseas whose assets are independent of the Group’s finances.
The Royal Bank of Scotland Group Pension Fund (the “Main scheme”)
operates under UK trust law and is managed and administered on behalf
of its members in accordance with the terms of the trust deed, the
scheme rules and UK legislation (principally the Pension Schemes Act
1993, the Pensions Act 1995 and the Pensions Act 2004). Under UK
legislation a defined benefit pension scheme is required to meet the
statutory funding objective of having sufficient and appropriate assets to
cover its liabilities. Pension fund trustees are required to: prepare a
statement of funding principles; obtain regular actuarial valuations and
reports; put in place a recovery plan addressing any funding shortfall; and
send regular summary funding statements to members of the scheme.
The Main scheme corporate trustee is RBS Pension Trustee Limited
(RBSPT), a wholly owned subsidiary of National Westminster Bank Plc.
RBSPT is the legal owner of the Main scheme assets which are held
separately from the assets of the Group. The Board of RBSPT comprises
four trustee directors nominated by members selected from eligible active
staff and pensioner members who apply and six appointed by the Group.
The Board is responsible for operating the scheme in line with its formal
rules and pensions law. It has a duty to act in the best interests of all
scheme members, including pensioners and those who are no longer
employed by the Group, but who still have benefits in the scheme.
Similar governance principles apply to the Group’s other pension
schemes, although different legislative frameworks apply to the Group’s
overseas schemes.
The Main scheme, accounting for 86% (2012 and 2011 - 85%) of the
Group’s retirement benefit obligations, was closed to new entrants in
2006. Since 2009, pensionable salary increases in the Main scheme and
certain other UK and Irish schemes have been limited to 2% per annum
or CPI inflation if lower. Also, with effect from 1 October 2012, the normal
pension age for future benefits was increased to 65 unless members
elected to make a contribution to maintain a normal pension age of 60.
The Group’s defined benefit schemes generally provide a pension of one-
sixtieth of final pensionable salary for each year of service prior to
retirement up to a maximum of 40 years. Employees making additional
contributions can secure additional benefits.
Since October 2006, new UK entrants may join The Royal Bank of
Scotland Retirement Savings Plan, a defined contribution pension
scheme.
The Group also provides post-retirement benefits other than pensions,
principally through subscriptions to private healthcare schemes in the UK
and the US and unfunded post-retirement benefit plans. Provision for the
costs of these benefits is charged to the income statement over the
average remaining future service lives of eligible employees. The
amounts are not material.
Interim valuations of the Group’s schemes under IAS 19 ‘Employee Benefits’ were prepared at 31 December with the support of independent actuaries,
using the following assumptions:
Main scheme All schemes
2013 2012* 2011* 2013 2012* 2011*
Principal actuarial assumptions
(weighted average) %% %% % %
Discount rate (1) 4.7 4.5 5.0 4.5 4.4 5.2
Expected return on plan assets (1) 4.7 4.5 5.0 4.5 4.4 5.2
Rate of increase in salaries 1.8 1.8 1.8 1.8 1.7 2.0
Rate of increase in pensions in payment 3.1 2.8 3.0 2.9 2.6 2.9
Inflation assumption 3.3 2.9 3.0 3.2 2.8 3.0
*Restated
Note:
(1) The discount rate and the expected return on plan assets for the Main scheme as at 31 December 2013 is 4.65%.