RBS moves to shore up pension scheme with £3.5bn injection

Royal Bank of Scotland has revealed that it is to make a further contribution of £3.5 billion to its main pension scheme, in a move seen as an important milestone in its quest to resume dividend payments to investors.

The decision is also in line with planned changes to the fund’s structure required by new retail banking ringfencing legislation.

RBS, which is still 72 per cent state-owned, issued a statement yesterday explaining that the bank and the pension fund’s trustees had agreed the Edinburgh-based group would make a pre-tax payment of just more than £2 billion in the second half of this year, with a further £1.5 billion of payments to follow from 2020.

The initial payment will be recognised in the bank’s second quarter figures, but is expected to have no significant impact on the profit and loss account.

Ewen Stevenson, RBS chief financial officer, said: “With these proposed payments … we will have substantially addressed the historical funding weaknesses that existed in the fund and brought clarity to future funding arrangements.”

Mr Stevenson acknowledged that the agreement also represented an important milestone in the resumption of capital distributions to RBS shareholders who have seen dividends frozen for the past decade as per EU conditions relating to the bank’s £45 billion taxpayer bailout at the height of 2008’s financial crisis.

He added: “For our shareholders, this MOU represents a further important milestone towards the resumption of capital distributions.”

The latest payments are on top of a £4.2 billion contribution to the pension fund RBS made under chief executive Ross McEwan in 2016.

The bank said that both the lender and the trustee do not expect further deficit contributions to the main scheme to be needed in light of the new payments, subject to normal market conditions.

As of end-2017, there were 17,700 active members in the main pension fund, 119,600 ex-employees not yet able to access their benefits, and 70,800 pensioners (or dependants) in receipt of a pension.