2015 Pension planLunch & Learn 2 December 2014

What you should remember

- Valuable pension for

valuable employees

- Less pension accrual

- Get in control

Valuable pension for valuable employees

Valuable pension for valuable employees

RBS NL Pension Fund

• Funding ratio 138%

• 122% on market rates

• 1,42% indexation 2013

• Realistic indexation ambition

4

Dutch pension sector

• 107% end of October

• <100% on market rates

• Often no indexation granted

• In 2013 cuts with 68 funds averaging 1.9% and impacting 3.1mln participants

Our valuable plan recognised

IPE Awards Vienna20 November 2014

Nominated “Best Pension Fund of The Netherlands”

Financieel Dagblad 27 November 2014

FD featured an article on RBS NL Pension Fund commenting on its sound policies and continuation of a classic defined benefit scheme

Trouble in paradise

Trouble in paradise?

Pension fundsAllocation of shortfall

•3 children and 2 candies• Funding ratio <100%

• 10 rolling average #children 1,65

• Assumptions on future availability of candy

Dutch GovernmentBudgetary deficits

•Budget deficit•Excess savings/insufficient consumption

Quick fixes pension funds?

Revision of Financial Assessment Framework (FTK)•Aim to secure nominal pensions

• Higher reserves

• Lower indexation probability

•Balance interests of generations

Indexationambition

Nominal guarantee

Quick fixes government

• Reduction of tax facilities for pension accrual• Increase of pensionable age to 67 (month following 67th birthday)

• From 86% average career pay to 75%

• Pensionable salary capped at EUR 100k

• Compensation in disposable income• Jumpstart Dutch economy?

• Net pension arrangement > 100K

What does this mean for you?

What does this mean for you?

Pensionable salaryPensionable salary

2,15

sala

ry

accrual %

Current situation

• Every year you accrue 2,15% pension over your pensionable salary

• In 42 years you accrue ±88% of your career average pay

What does this mean for you?

Pensionable salaryPensionable salary

2,15

Pensionable salaryPensionable salary

sala

ry

sala

ry

accrual %

Current situation New situation

2,15accrual %

What does this mean for you?

Pensionable salaryPensionable salary

Pensionable salaryPensionable salary

€ 100k

2,15

sala

ry

sala

ry

accrual %

Current situation New situation

2,15accrual %

How do we compensate?

Benefits budget neutral

Reduction accrual to 1.875% from 2.15%Reduction accrual to 1.875% from 2.15%

from

un

limite

d t

o m

ax.

€ 1

00.0

00fr

om u

nlim

ited

to

ma

x. €

100

.000

€ 100k

1.875%0.0%

€15.6

€ 2.6 mln

Cost-effective contribution x €1 mln.(% of pension base)

€ 1.9 mln

I

II

III

How do we compensate?

Benefits budget neutral

Compensation for reduction in accrual %

How do we compensate?

Benefits budget neutral

Compensation for reduction in accrual %

• Additional pensionable salary component

Elements pensionable salary

• Base salary

• 13th month

• 4.2 surcharge

• Holiday allowance

• AMT

• Stand-by allowance

• + 1% contribution sponsor to employee benefit budget

Elements pensionable salary

• Base salary

• 13th month

• 4.2 surcharge

• Holiday allowance

• AMT

• Stand-by allowance

• + 1% contribution sponsor to employee benefit budget

How do we compensate?

Benefits budget neutral

Compensation for reduction in accrual %

• Additional pensionable salary component

• Increase in base salary 2,75% increase in base salary

2,75% increase in base salary

How do we compensate?

Benefits budget neutral

Compensation for reduction in accrual %

• Additional pensionable salary component

• Increase in base salary

• Lower offset for state pension (AOW)

AOW offset reduced from EUR 13,449 to EUR 12,642

resulting in higher pension accrual

AOW offset reduced from EUR 13,449 to EUR 12,642

resulting in higher pension accrual

How do we compensate?

Benefits budget neutral

Compensation for reduction in accrual %

• Additional pensionable salary component

• Increase in base salary

For incomes exceeding EUR 100k

•Flat % net pension allowance

•Net pension arrangement

• Old age pension

• Survivor benefits

Net pension arrangement 100K+

• Full time salaries exceeding 100k receive compensation• Flat % compensation over excess (±40% in 2014)

• Paid monthly

• Employer will arrange for 3rd party net pension scheme• Qualifies for pension accrual under Dutch Pension Act

• Non-taxable upon receipt of pension

• Non-taxable in box 3 (wealth tax)

• Individual defined contribution

• Investing in life cycle funds

• Capital serves to purchase an annuity at pensionable age

• Survivor pension covered on basis of opting-out• Old age pension on basis of opting in

Example: EUR 60k

2014 costs 2014 costs

Accrual 1,875% and

1% BB

Accrual 1,875% and

1% BBAOW offset AOW offset

2,75%Salary

increase

2,75%Salary

increase

2015 costs2015 costs

Increase pension-able age

Example: EUR 110k

2014 costs2014 costs

Accrual 1,875% and 1%

BB

Accrual 1,875% and 1%

BBAOW

offset AOW

offset

2,75%Salary

increase

2,75%Salary

increase

2015 costs 2015 costs

Increase pension-able age

Salary capEUR100k

Salary capEUR100k

PensionAllowancePension

Allowance

Balanced outcome

• To the extent possible compensated individually• Lower incomes benefit more from lower AOW offset and accrue only

slightly less in 2015

• Incomes <100k partly compensated by higher accrual in RBS NL Pension fund and partly in salary

• Income >100k receive flat % over income in excess of salary cap (annually adjusted)

Get in control!

Get in control!

• Pension plan with RBS NL Fund remains financially sound• Reduced accrual in RBS NL Fund• Save or consume increase in salary• Possibility of accrual in Net Pension Arrangement for full

time incomes exceeding EUR 100k• Responsibility for retirement income shifts to you

• Pension accrual/saving/investing or consuming

• Insurance coverage >100k via opting-out

• Mortality risk

• Morbidity risk

What’s next

• Choices > EUR 100k net pension arrangement to be made in December• Risk cover via opting-out

• Net pension accrual via opting in

• Via HR Payroll

• Presentation available on website• Action page available on website• Separate sessions with EUR 100k plus earners• Use On Track planning module• Launch get in control campaign 1Q2015

What’s next

• In 3Q14 a wide public debate has been started on the future of the retirement industry. We are faced with following challenges:• Low yield environment

• Retrenching government

• Changing labour market dynamics

• Demographics

• Exploding healthcare costs

• Suitable housing for the elderly

• Intergenerational fairness

• Changes to the pension scheme expected as a result of this debate but timing yet unknown

Remember

- Valuable pension for

valuable employees

- Reduced accrual in fund

- Get in control of your

future retirement income

- opt-in net pension

- opt-out risk cover