Changes to RBS’s UK Defined Benefit pension schemes RBS

— November, 2016

Contents 1 2 3 4 5 6 7

Introductions to pensions Changes to the UK State Pension RBS's response to the changes What do the bank’s changes mean?

8 9 10 11

Options available Summary of differences Questions and answers Further support

Support available Case studies Pension Calculator © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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2

1 Introduction to pensions (1) State Pension

Workplace pensions

Defined Contribution (DC) schemes In the UK you get a State Pension provided by the government

Personal pensions

Defined Benefit (DB) schemes

Workplace pension schemes are ways for you and your employer to save money for your retirement

You may also have your own personal pension arrangements

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1 Introduction to pensions (2) How do Defined Contribution schemes work? You put in

£

£

£

£

£ Your employer puts in

Growth in your investment returns

Your Pension Pot

The biggest impact you can have on your income in retirement is how much you regularly save towards your pension © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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1 Introduction to pensions (3) How do Defined Benefit pension schemes work?

Pensionable income per year

Years in scheme

Pensionable salary

Accrual rate

For example:

20 (years)

£24,000 (pensionable salary)

1 60 (accrual)

£8,000 per year

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Document Classification: KPMG Confidential

5

2 Changes to the UK State Pension After 6 April 2016

Prior to 6 April 2016 Basic State Pension State Second Pension (BSP) (S2P)

New Single State Pension

+ Basic State Pension Up to £115.95 PER WEEK

Current State Second Pension Based on earnings

— RBS Defined Benefit pension schemes were ‘contracted out’ of State Second Pension — Hence, employer and employee paid a lower rate of National Insurance

New Single Tier Pension Up to £155.65 per week

— Bank unable to ‘contract out’ of the New State Pension — National Insurance contributions (paid by both employer and employee) did increase

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Document Classification: KPMG Confidential

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3 RBS’s response to the changes — Cost of providing DB pension schemes increasing — Gap between DB and DC pension provision widening — Bank’s response

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Document Classification: KPMG Confidential

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4 What do the bank’s changes mean? The 2% increase in base salary will be applied in 0.5% increments in: — June 2017 — December 2017 — June 2018 — December 2018

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Document Classification: KPMG Confidential

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4 What do the bank’s changes mean? (2) For members of the Group Fund who make Additional Pension Contributions and get the additional 7% discretionary top up, this will stop from 1 June 2017

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Document Classification: KPMG Confidential

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5 Support available

Pensions explained

Animated film

Pension Calculator

Helplines Phone: 0207 3114040 [email protected]

Pension statements

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6 Case study 1 — Richard Salary £1,667 (£20,000 per year) From 5 April 2016 Increase in National Insurance Contributions: £17

After 1 June 2017 1 June 2017

1 December 2017

1 June 2018

1 December 2018

Increase in cost of membership of Defined Benefit pension scheme

£8

£17

£25

£33

Reduction in take home pay

£6

£13

£20

£26

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Document Classification: KPMG Confidential

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6 Case study 2 — Becky Salary £3,333 (£40,000 per year) From 5 April 2016 Increase in National Insurance Contributions: £40

After 1 June 2017 1 June 2017

1 December 2017

1 June 2018

1 December 2018

Increase in cost of membership of Defined Benefit pension scheme

£17

£33

£50

£67

Reduction in take home pay

£13

£27

£40

£53

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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7 Pension Calculator (1)

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Document Classification: KPMG Confidential

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7 Pension Calculator (2)

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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7 Pension Calculator (3)

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Document Classification: KPMG Confidential

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7 Pension Calculator (4)

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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7 Pension Calculator (5)

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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7 Pension Calculator (6)

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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7 Pension Calculator (7)

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Document Classification: KPMG Confidential

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8 Options available Do nothing: Changes will happen automatically The Bank believes that membership of the UK Defined Benefit pension schemes remains a valuable benefit If you are a member of the Group Fund and paying the 5% additional RBSelect charge to maintain NPA 60, you can stop paying this and move to NPA 65

Review amount of Additional Contributions

Opt out of your Defined Benefit pension scheme into the Defined Contribution pension scheme © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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8 Options available (2) RBS Retirement Savings Plan

Benefits depend on how well your investments perform, how much is paid into the pension and how you decide to access your pension benefits. The risk is with the member, however added flexibility around form of benefit.

Investment Return

Contributions made through RBSelect

Retirement Savings Plan

Pensions Benefits

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Document Classification: KPMG Confidential

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8 Options available (3) How you take your benefits in the Retirement Savings Plan? When you retire you have lots of choices on how to take your Retirement Savings Plan pension benefits

And /or

Buy an annuity (an annual pension)

If you buy an annuity it can be tailored to your needs:

Or

Transfer to an external provider to access further flexible options

Take as cash (up to 25% is tax-free)

Allow for your health

Inflation increases

Dependant benefits

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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8 Options available (4) The impact on your Defined Benefit pension scheme if you opt out and join the Defined Contribution Scheme pension

If you stay in the Defined Benefit pension scheme

Past Defined Benefit pension

Currently increases in line with Pensionable Salary

Future Defined Benefit pension

Currently increases in line with how long you decide to stay in the Defined Benefit scheme and your Pensionable Earnings

If you opt out of the Defined Benefit pension scheme

Past Defined Benefit pension

Future pension in the Retirement Savings Plan

Currently increases in line with inflation up to a cap

Will depend on how well your investments perform, how much is paid into the pension and how you decide to access your pension benefits

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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8 Options available (5)

Other considerations The Defined Benefit pension scheme also includes a number of benefits which you wouldn’t receive if you opt-out Death in service and ill health benefits are included as part of the scheme You have the option to take undiscounted pension for age 55 and over in case of redundancy, for those eligible © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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9 Summary of differences Summary of differences for RBS and Ulster Bank Schemes Scheme

Will the 2% increase in the cost of membership apply?

Will the removal of the 7% APeCs uplift apply?

The Royal Bank of Scotland Group Pension Fund

Yes

Yes

The Ulster Bank Pension Scheme

Yes

No (the 7% uplift has never applied)

The RBS International Pensions Trust

No (as a non UK scheme)

Yes

The Isle of Man Bank Pension Fund

No (as a non UK scheme)

Yes

Definitions that differ for the Williams & Glyn Employees Definition in presentation

Equivalent definition for Williams & Glyn employees

Base salary

The monthly charge is calculated on the “RBS Salary Element” which has been emailed to each W&G colleague

Value Account

Fixed Pay

Retirement Savings Plan (RSP)

Williams & Glyn My Retirement Savings Plan (by Legal & General)

RBSelect

My HR

Default DC contributions of 10% for opt outs

If a W&G colleague opts out of DB they have the option to enrol in the Williams & Glyn My Retirement Savings Plan, The default contribution is 4% of salary, but can be flexed up or down

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Document Classification: KPMG Confidential

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10 Questions and answers This is your opportunity to ask any questions you might have. You can ask a question by pressing *1

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Document Classification: KPMG Confidential

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11 Further support What?

Where?

Pensions explained film

Visit the RBSelect pages at rbs.tbs.aon.com >Learn More> Great Britain OR Northern Ireland> Defined Benefit Pension Plan OR Retirement Savings Plan>Useful Information

Pensions explained guide Online Pension calculator KPMG – Pension change helpline HR People Services

W&G intranet > Colleague Resources > My HR Intranet > HR Support – Williams & Glyn employees Phone: 0207 311 4040 [email protected] Contact HR help (at the top right of any HR intranet page) Phone: 0808 100 4242 (0345 307 3464 – Williams & Glyn employees)

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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Disclaimer — This presentation provides outline information and indicative positions for discussion purposes and is not to be construed as advice or a basis for the evaluation of an individual’s circumstances. — KPMG act as advisers to the employer and not to individual employees - as such no individual advice can be given. — The future basis and rates of National Insurance contributions may vary, and the value of any tax relief available or tax payable will depend upon the individual circumstances of the investor. — All references to National Insurance Contributions are to UK taxation and are based on KPMG’s understanding of current UK law and HM Revenue & Customs practice which may change at any time. — You should obtain independent financial advice about your own circumstances. You can contact an independent financial adviser in your area by looking at the Money Advice Service www.moneyadviceservice.org.uk — The complete details of scheme benefits are set down in the formal Trust Deed and Rules for each scheme, which are summarised in the booklets available on RBSelect. In case of any discrepancies the Trust Deed & Rules will prevail. — The information contained in this webinar is of a general nature and is not intended to address the circumstances of any particular individual. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. — The webinar is designed to provide a few key facts and help you to better understand your options. You are responsible for carrying out your own investigations before making any changes to your scheme; and we recommend that you take independent financial advice about your own personal circumstances. You should not regard any of the information provided by the webinar as financial advice and no responsibility is taken for any decisions you make based on the webinar.

© 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Document Classification: KPMG Confidential

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2016 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. CRT064403J

Document Classification: KPMG Confidential