ulster bank pension scheme (roi) 2014 · a further updated estimate carried out as at 31 march...

Ulster Bank Pension Scheme (ROI)

Ulster Bank is part of the Royal Bank of Scotland Group

Members’ Newsletter2014

The Chairman’s message

In the pages that follow you can read a summary of the Ulster Bank Pension Scheme (ROI)’s annual report & accounts and get an overview of the Trustee Board’s activities over the past year.

Our article on page 6 explains some changes that have been made to the way the Scheme’s assets are invested and also tells you how

those investments have performed over the

last year.

In May, we sent you a report on the Scheme’s

funding position on the Statutory Minimum

Funding basis and the actions taken to

address the

deficit. This included an updated assessment by the Scheme Actuary which showed that the Scheme’s estimated funding level at 31 December 2013 was 93%. As in previous years, the Trustee Directors and the Bank have continued to work together constructively to seek to ensure the security of your pension benefits. As you will see on page 8, the Scheme’s estimated funding level at 31 March 2014 was 96%. The March figures now reflect the contingent asset agreement we have secured with the Bank.

On pages 9, 10 and 11 we’ve included the latest pensions news, to bring you up to date with what has an impact on our Scheme. We were disappointed that the Government took the decision to extend the Pensions Levy in to 2015 (albeit at the

I’m pleased to send you the 2014 Members’ Newsletter, updating you on the latest developments in your Scheme and the world of pensions.

lower level of 0.15%) despite previous assurances to the contrary. The levy, which was imposed on schemes like ours from 2011-2014, is set to increase in 2014 to 0.75% and 0.15% will be due in 2015. There is an update on this on page 10. Other news is that the Government has changed the way that priority orders work, in the event that a scheme is wound-up. You can read more on page 9.

I hope that you find this report helpful and that it gives you a good understanding of the Scheme and current pensions issues. We always welcome your feedback on how we can help you better understand your benefits. Please contact us via Pension Services, using the details on the back page.

Dom Williams Chairman of the Trustee Board

Members’ newsletter 20142

The Scheme’s estimated funding level at 31 March 2014 was 96%.

Your Trustee Board Contents Financial highlights 4

Investment report 6

Funding update 8

Pension news 9

Keep in touch 12

Members’ newsletter 2014 3

This newsletter is available in large print, Braille or audio on request from Pension Services.

Dom Williams (Chairman)

Tommy Kennedy* (IBOA)

Andrew Blair

Catherine Maher* (IBOA)

Eddie Brown

Eddie Cullen

During the year under review, Barbara O’Malley, Brian Clerkin and John Foley* resigned from the Trustee Board.

* Trustee Directors nominated by the Trade Unions

James Lidierth (appointed 19 March 2014)

Financial highlights

€ Opening asset value at 1 January 2013 695,467,126

Money into the Scheme:

- employer contributions* 32,531,818 - member contributions 3,253,649 - member transfers in 173,485 - net investment returns 22,960,217 Sub-total 58,919,169

Money out of the Scheme:

- benefit payments 17,920,336 - member transfers out 1,212,373 - Pensions Levy 4,194,482 - expenses 569,622 Sub-total 23,896,813

Closing asset value at 31 December 2013 730,489,482 * includes contributions of €16.9m to address the Scheme deficit.


Scheme financesThe table on the right shows the payments in to and out of the Scheme over the 12 months ending 31 December 2013.

The Scheme’s formal report & accounts for the year ended 31 December 2013 have been audited by Deloitte LLP, who have confirmed that they show a true and fair view of the Scheme’s financial transactions over the period.

We have summarised the report & accounts here to make it easy for you to read, but you can ask to see the full version if you want to. Just contact Pension Services to request a copy. Their contact details are on the back page.


MembershipThe following chart shows the Scheme’s membership figures as at 31 December 2013.

ACTIVE MEMBERS

2,462DEFERRED MEMBERS

2,727PENSIONER/DEPENDANT MEMBERS

610

2013

TOTAL MEMBERS 5,799

The RBS PeopleCharity The RBS PeopleCharity is for the benefit of RBS employees, past and present, and their dependants for the relief of financial hardship. The trustees of the charity have asked us to pass on this information to you. They will consider applications from potential beneficiaries with savings of less than €23,250 whose weekly household income from all sources, before deduction of tax and other statutory contributions, does not exceed €400.

The trustees’ investment strategy is designed to ensure the long-term future of the charity and in order to protect the underlying assets of the charity they set aside an annual budget for the provision of grants, which varies year on year depending on investment and other income, such as donations. In addition, the charity trustees want to help as many eligible beneficiaries as possible, therefore grants are restricted to one per eligible

household within any 12-month period. One-off grants of up to €250 are typically used for items such as eye tests and spectacles, State dental care, essential household items, or as a contribution towards special equipment e.g. a PC for a sight impaired person. The trustees can make grants of up to €1,000 towards the cost of a funeral, as long as the payment of the grant benefits a surviving former employee or a dependant, and not the beneficiaries under a Will. They also make grants towards the cost of personal care, including care home fees, supported living and other adjustments that would enable beneficiaries to continue to live at home.

To apply for a grant, please contact the charity for an application form.

Email: [email protected]

Postal address: The RBS PeopleCharity, PO Box 1391, Croydon CR9 1YE


Investment reportThe Trustee Directors are responsible for setting and managing the investment strategy of the Scheme. They have set up an Investment Review Committee (IRC) to focus on this important and complex aspect of managing the Scheme.

The IRC is made up of Bank employees and members of the Trustee Board. Richard Harding was appointed to replace Colin Kelly, following his resignation from the IRC in December 2013.

The IRC regularly considers the investment of the Scheme’s assets, in consultation with the Trustee’s investment consultant, Mercer (Ireland) Ltd. In 2013, the Committee sought to simplify the Scheme’s investment strategy by selling the Scheme’s assets in the hedge fund portfolio, reducing the

Overall return

+3%

Investment performance The overall return of the Scheme, for the year to 31 December 2013, was 3%, boosted especially by a 17% return on Global Equities. investments in alternatives and increasing

the allocation to passive investment strategies. The restructuring was not completed by the end of 2013, but altogether 13 managers were removed and one new manager (State Street Global Advisors) was appointed.

The Trustee Directors have outlined their investment aims for the Scheme in the Statement of Investment Principles, which is available from Pension Services.

“The Trustee Directors have outlined their investment aims for the Scheme in the Statement of Investment Principles, which is available from Pension Services.”


*Liability matching investments include bonds and other similar interest rate and inflation-linked type assets which are structured so as to match expected pension payments from the Scheme.

%

Equities 35.2%

Credit 27.2%

Property 3.4%

Hedge funds 1.1%

Alternatives 7.2%

Liability matching* (including cash) 25.9%

TOTAL 100.0%

Split of assetsThis chart shows how the Scheme’s assets were split across different types of investments at the end of 2013. The Trustee Directors aim to spread the investments so that if one fund manager performs poorly, or if a particular area of the market experiences a fall, the impact on the Scheme is minimised.


Funding updateEarlier this year, the Trustee Directors sent you an update, following the submission of the Funding Proposal to the Pensions Authority (the new name for the Pensions Board) and its approval by that body in January 2014. The following pages repeat some of that information but also provide an updated position as at 31 March 2014.

The table below compares the results of the 2012 valuation on the Statutory Minimum Funding Standard basis with the estimated funding position at 31 December 2013 and a further updated estimate carried out as at 31 March 2014.

Formal valuation as at 31 December 2012 (Minimum Funding Standard ‘MFS’ basis)

Estimated position as at

31 December 2013

Estimated position as at 31 March 2014

The value of the Scheme’s liabilities €743.2m €760.8m €782.3m

The value of the Scheme’s assets (*2014 figure includes an allowance for a contingent asset of €19.1m)

€674.8m €705.9m

€749.8*m

Leading to a (shortfall)/surplus of (€68.4m) (€54.9m) (€32.5m)

MFS funding level 91% 93% 96%

The Funding Proposal that was submitted to the Pensions Authority sets out the measures required to ensure the Scheme is 100% funded on the Statutory Minimum Funding Standard basis. Here are the highlights:

• The ‘regular’ Bank contribution rate to meet the cost of future pensions is increased from 12.7% of pensionable salaries to 16%. Employee contributions are payable in addition and have not been increased.

• The Bank contribution to reduce the Scheme deficit increases from €15.2m in 2013 to €16.9m which will increase annually in line with inflation.

• Scheme expenses are paid additionally – by the Bank.

• The Bank has agreed to provide the Scheme with a charge over a pool of assets (a contingent asset) which the Trustee Board can call on in certain circumstances. This pool of assets will increase to €75.8m by the end of the Funding Proposal.

• The length of the Funding Proposal is until 31 December 2023.

The next actuarial valuation will be prepared as at 31 December 2015.


Pension newsChanges to pensions priority orders On 13 November 2013, the Government announced a reform of the priority order, which includes changes to the way that the assets of defined benefit (DB) schemes are distributed in the event of the scheme winding-up.The changes are intended to lead to a fairer distribution of DB scheme assets on wind-up, sharing the risk between pensioners and other members. Apart from cases of ‘double insolvency’ – where there is a scheme shortfall and also an insolvent employer – the changes will have little impact on most pension schemes.

In the ‘double insolvency’ scenario, the new rules say that:

• All beneficiaries of the scheme (ie, pensioners, active members and deferred members) are to receive 50% of their benefits including post-retirement pension increases;

• Pensioners in receipt of pensions from the scheme are to receive 100% of their pension subject to a cap of €12,000 per annum (excluding post-retirement pension increases).

In the event that the scheme does not have sufficient assets to meet the above thresholds, the State will provide the shortfall to the scheme so that it can make up the difference. The Government intends to fund such shortfalls from the Pensions Levy. %

£=

Where there is a scheme shortfall and a solvent employer, pensioners will no longer receive full priority upfront on wind-up but will continue to receive priority over active and deferred members in respect of their benefits (excluding post-retirement pension increases), in accordance with the following limits:

• 100% of the pension if the annual pension is €12,000 or less;

• The greater of €12,000 or 90% of the pension where the annual pension is between €12,000 and €60,000;

• The greater of €54,000 or 80% of the pension if the annual pension is €60,000 or more.

Any remaining scheme assets would then be used to secure 50% of active and deferred members’ benefits (excluding post-retirement pension increases) before any further distribution can be made to ‘top up’ pensioners’ benefits to 100%.


Pension newsPensions Board now Pensions AuthorityFrom 7 March 2014, the Pensions Board has been renamed the Pensions Authority. The chief executive of the Pensions Authority is now known as the Pensions Regulator. Their website can be viewed at: www.pensionsauthority.ie

Pension increasesFor the majority of pensioners, pension increases from the Scheme are paid at the discretion of the Trustee Directors. This year the Trustee Directors have decided not to grant discretionary increases to pensions in payment. This position will be kept under review while the Bank continues to return to full strength and if the funding position of the Scheme continues to improve.

Pensions Levy extendedIn last year’s newsletter, we told you the Pensions Levy, imposed by the Government in 2011 on all pension schemes in the Republic of Ireland, was not expected to continue beyond 2014. The levy is an annual payment required from each scheme over a four-year period, based on the value of the scheme’s assets.

However, the Finance (no.2) Act 2013 has introduced an additional Pensions Levy of 0.15% for 2014 and 2015. This will result in an increase in the overall Pensions Levy for 2014 from 0.6% to 0.75% (as a result of the crossover of the two levies in the 2014 tax year). The total payable will then reduce to 0.15% for 2015.

In 2013, the Levy paid by the Scheme was €3.8m.


Standard Fund Threshold (SFT)The Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement before additional tax charges apply. In the 2013 Budget the Government announced that the SFT will reduce from its current level of €2.3m to €2m with effect from 1 January 2014. Under current tax legislation the value of any pension benefits on retirement in excess of the SFT would be subject to a one-off tax at the rate of 41%. After this is paid, your remaining benefits would then be taxed in the usual manner.

For members of a defined benefit scheme, like our Scheme, the value of your benefits for the purpose of the SFT is calculated as your annual pension multiplied by a relevant factor. The value of any Additional Voluntary Contributions (AVCs) you have is added to this amount and the total compared to the SFT. Previously the SFT was based on a factor of 20 times your accrued pension. This single factor is being replaced from 1 January 2014 with a range of higher factors varying with the age at which the pension is drawn.

For those who have a defined benefit pension accrued partly pre and partly post 1 January 2014, transitional arrangements will apply. These transitional arrangements will allow the part of your pension accrued pre 1 January 2014 to continue to be valued by a factor of 20. The higher age-related factor will be used to value your remaining pension accrued post 1 January 2014.

It is important to note that the impact of the SFT is a personal taxation issue and as such you may need personal financial advice.

Have you paid Additional Voluntary Contributions (AVCs)?The Finance Act 2013 allows members of occupational pension schemes in the Republic of Ireland a one-off option to withdraw up to 30% of their AVC fund. This option will remain in place until 27 March 2016.

Amounts paid under this option will be subject to income tax under PAYE. Please contact Pension Services for more information.

Pension news

Keep in touchRBS Pension Services provide pension administration services on behalf of the Trustee Board. The team provides dedicated services for all members of the Bank’s various pension schemes, including payment of benefits, provision of quotes and projections, sending out scheme communications, and answering any questions you may have about your benefits.

Data protectionWe hold information about you in order to provide your pension benefits (such as pensions, lump sums, death benefits), which may include information obtained from third parties. This information may be shared with: • Companies within the Royal Bank of Scotland Group (please

contact us if you do not want us to share your information with these companies);

• Other third parties who assist us in administering your benefits (e.g. updating personal data, calculating and paying benefits);

• Those where we have your permission to do so; and • Those where we are required to do so by law. If you want a copy

of the information we hold about you, please contact us.

Tell us if your details changeRemember to let us know if your address changes. A current address makes it easier for us to tell you about developments in the Scheme and also to pay your benefits without delay. You should review and, if necessary, update your Nomination Form if you get married or divorced or become a parent. This form lets the Trustee Directors know how you would like to see any benefits paid out in the event of your death.

Write to us:Royal Bank of Scotland Group, City Link House, 4 Addiscombe Road, Croydon CR9 5PB, UK (Depot Code 190)

Call us (active employees only):ROI 1 800 245 971 International +44 207 649 9499

Send an email:[email protected]

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ulster bank pension scheme (roi) 2014 · a further updated estimate carried out as at 31 march...

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