RBS To Pour Billions Into Yawning Pension Gap
Royal Bank of Scotland (RBS) is to pour billions of pounds extra into its pension scheme during the next decade to fill a ballooning deficit exacerbated by years of low interest rates.
Sky News can reveal that the state-backed lender is to plough almost £1bn into the scheme annually for the next three years as it seeks to eliminate a deficit valued in May at £5.6bn.
The gap, which refers to the value of the scheme's liabilities minus the value of its assets, was disclosed in the small print of RBS's detailed half-year results statement, published on Friday morning.
RBS said: "In May 2014, the triennial funding valuation of The Royal Bank of Scotland Group Pension Fund was agreed which showed that the value of the liabilities exceeded the value of assets by £5.6bn at 31 March 2013, a ratio of 82%.
"To eliminate this deficit, RBS will pay annual contributions of £650m from 2014 to 2016 and £450m (indexed in line with inflation) from 2017 to 2023.
"These contributions are in addition to regular annual contributions of approximately £270m in respect of the ongoing accrual of benefits as well as contributions to meet the expenses of running the scheme."
The additional contributions agreed with RBS's pension trustees will mean the bank paying in £920m a year until 2016, falling to £720m annually between 2017 and 2023.
An analyst said the extra funding reflected the impact of quantitative easing and low interest rates, which were themselves precipitated by the recession that was triggered by the 2008 banking crisis.
In its 213-page results announcement, RBS reiterated warnings made earlier this year about the possible impact of a Yes vote in next month's Scottish independence referendum on its credit rating and on its broader business and financial position.
It also said formally for the first time that its failure to persuade its Government shareholder to support the payment of higher bonuses posed a risk.
The bank said: "The Group's changing strategy has led to the departure of many talented staff.
"Following the implementation of CRD IV and the Government's views on variable compensation, there is now a restriction on the Group's ability to pay individual bonuses greater than salary, which may put the Group at a competitive disadvantage.
"An inability to attract and retain qualified personnel could have an adverse impact on the implementation of the Group's strategy and regulatory commitments."