Document:

Exhibit 4.15

 

THIS INDEMNITY is given on the XX day of XX Two thousand and XX by The Royal Bank of Scotland Group plc (“the Group”) which has its registered office situated at 36 St Andrew Square, Edinburgh, EH2 2YB to [DIRECTOR NAME] (“the Director”).

 

WHEREAS the Director is a duly appointed director or officer of the Group and/or a wholly-owned subsidiary of the Group (collectively, “the Royal Bank Group”) and may be required, in connection with the business of the Royal Bank Group and subject to the Director’s consent, to accept office as:

 

	
(i)
    	
 
    	
a director or officer of any   company within the Royal Bank Group; and/or
    
	
 
    	
 
    	
 
    
	
(ii)
    	
 
    	
as   appropriate, an authorised or approved person, (or equivalent) under the   rules of any regulatory body; and/or
    
	
 
    	
 
    	
 
    
	
(iii)
    	
 
    	
a   director or officer of a company in which a member of the Royal Bank Group is   to invest or has invested in less than 50 per cent of the issued share   capital of such company (an “Investee Company”).
    

 

NOW THIS INDEMNITY WITNESSETH that in consideration of the Director continuing in or accepting (as the case may be) office as a director or officer of any company within the Royal Bank Group, or as an authorised or approved person (or equivalent), or as a director or officer of an Investee Company as contemplated above, THE GROUP hereby covenants with the Director that the Group will, at all times, hereafter indemnify and keep indemnified the Director, his estate and his personal representatives from all costs, charges, losses, expenses and liabilities incurred by him in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office including (without prejudice to the generality of the foregoing) any liability incurred by him in defending any proceedings, civil or criminal, which relate to anything done or omitted or alleged to have been done or omitted by him as an officer or employee of any company within the Royal Bank Group (or of an Investee Company) and in which decree or judgement is given in his favour (or the proceedings are otherwise disposed of without any finding or admission of any material breach of duty on his part) or in which he is acquitted or in connection with any application for relief from liability in respect of any such act or omission in which relief is granted to him by the Court.

 

PROVIDED THAT this Indemnity is given subject to the provisions of Section 234 Companies Act 2006.

 

THE DIRECTOR as a condition precedent to his right to be indemnified hereunder, shall, to the full extent permitted by law or other applicable regulatory requirements:

 

(i)                                  notify the Group in writing, addressed to the Chief Governance & Regulatory Officer and Board Counsel, as soon as reasonably possible

 

 

after having knowledge or becoming aware, of any such claim made against him or any circumstances which may subsequently give rise to a claim against him or lead to an official investigation, examination or other proceedings referred to above;

 

(ii)                              keep the Group, through its Chief Governance & Regulatory Officer and Board Counsel and or such individual nominated for that purpose by the Chief Governance & Regulatory Officer and Board Counsel, informed of all matters and supply such information as the Group shall request pertaining to any such claim and any such official investigation, examination or other proceedings referred to above;

 

(iii)                          obtain the prior consent of the Group before incurring any costs, charges or expenses in connection with any such claim, admitting any liability for or settling or compromising any such claim, and delegate to the Group the conduct of the defence against any such claim at such time and to such extent as shall be requested by the Group, and further render or cause to be rendered to the Group all such assistance as the Group shall require in connection therewith; and

 

(iv)                          use his best endeavours to have recourse to any indemnity or insurance to which he may be entitled before claiming his rights hereunder.

 

IN THE EVENT that the Director shall have incurred any tax liability as a result of any payment hereunder, the amount of such payment to be made by the Group to the Director shall be increased to the extent necessary to ensure that after taking into account such tax liability the Director will receive a net sum equal to the sum he would have received or retained had there been no such tax liability.

 

THIS INDEMNITY shall be construed in accordance with the laws of Scotland and shall extend to claims against the Director enforceable in any other jurisdiction and be fully effectual as and from the XX day of XX Two Thousand and XX.

 

Signed for and on behalf of The Royal Bank of Scotland Group plc conform to Commission dated the Nineteenth day of December Two Thousand and Sixteen and registered in the Books of Council and Session on the Twenty Fourth day of January Two Thousand and Seventeen.

 

 

 

	
 
    	
 
    	
 
    	
 
    
	
Commissioner and Attorney
    	
[DIRECTOR NAME]Exhibit 4.16

 

FRAMEWORK   AGREEMENT  DATED 28 September 2018  Between    National Westminster Bank Plc    The Royal Bank of Scotland Group plc    NatWest Holdings Limited  Royal   Bank of Scotland plc (previously known as Adam & Company PLC)  NatWest Markets Plc (previously known as   The Royal Bank of Scotland plc)  Royal   Bank of Scotland International Limited    Coutts and Company; and    Chartered Institute of Bankers in Scotland  And    RBS Pension Trustee Limited    relating to  THE ROYAL BANK OF   SCOTLAND  GROUP PENSION FUND    Allen & Overy LLP

    

 

This AGREEMENT   is made on 28 September 2018    BETWEEN:  (1) NATIONAL   WESTMINSTER BANK PLC registered in England with company number 929027 whose   registered office is at 135 Bishopsgate, London, EC2M 3UR (the Principal   Employer);  (2) THE ROYAL BANK OF   SCOTLAND GROUP PLC registered in Scotland with company number SC045551 whose   registered office is at 36 St Andrew Square, Edinburgh, EH2 2YB;  (3) NATWEST HOLDINGS LIMITED registered in   England with company number 10142224 whose registered office is at 280   Bishopsgate, London, EC2M 4RB;  (4) THE   ROYAL BANK OF SCOTLAND PLC (previously known as Adam & Company PLC)   registered in Scotland with company number SC083026 whose registered office   is at 25 St Andrew Square, Edinburgh, EH2 1AF;  (collectively the Bank Group);  (5) NATWEST MARKETS PLC (previously known   as The Royal Bank of Scotland plc) registered in Scotland with company number   SC090312 whose registered office is at 36 St Andrew Square, Edinburgh, EH2   2YB;  (6) THE ROYAL BANK OF SCOTLAND   INTERNATIONAL LIMITED registered in Jersey with company number 2304 whose   registered office is at PO BOX 64, Royal Bank House, 71 Bath Street, St   Helier, Jersey, JE4 8PJ;  (7) COUTTS   AND COMPANY registered in England with company number 00036695 whose   registered office is at 440 Strand, London, WC2R 0QS;  (8) CHARTERED INSTITUTE OF BANKERS IN   SCOTLAND registered charity number SC013927 whose registered office is at 38b   Drumsheugh Gardens, Edinburgh, EH3 7SW    (collectively the Leaving Employers);    and  (9) RBS PENSION TRUSTEE   LIMITED registered in England with company number 2726164 whose registered   office as at 1 Princes Street, London, EC2R 8PB (the Trustee).  BACKGROUND    (A) The retirement benefits scheme known as the Royal Bank of Scotland   Group Pension Fund (the Group Fund) is governed by a definitive trust deed   and rules dated 5 April 2006 (as amended from time to time) (the Trust Deed   and Rules). The Trustee is the trustee of the Main Fund Section of the Group   Fund (the Main Section) and also the trustee of the AA Section of the Group   Fund (the AA Section).  (B) The   Principal Employer is the principal employer of the Group Fund.  (C) The Principal Employer and the Trustee   entered into a non-legally binding Memorandum of Understanding dated 26   January 2016 under which, among other things:

    

 

 (i) The Trustee acknowledged that the Royal   Bank of Scotland Group must comply with the reforms proposed by the   Independent Commission on Banking, including the changes made to the   Financial Services and Markets Act 2000 (by the Banking Act 2013) and the   Financial Services and Markets Act 2000 (Banking Reform) (Pensions)   Regulation 2015 (the Pension Banking Regulations); and  (ii) The Principal Employer agreed to act   reasonably and in good faith (and procure that each participating employer   also act reasonably and in good faith) towards the Group Fund in the   implementation of these changes and the Trustee agreed to act reasonably and   in good faith towards each participating employer when considering any   proposal (including any apportionment proposal) relating to a participating   employer which results from compliance with these reforms, and the detriment   that the Group Fund will actually suffer as a result of compliance with the   reforms.  (D) The Bank Group and the   Trustee entered into a second non-legally binding Memorandum of Understanding   dated 16 April 2018 (the MoU) (included at Schedule 1 of this Agreement) in   good faith to document their intention in relation to the matters set out in   the MoU (and the terms set out in Schedule 1 to the MoU (the Term Sheet)),   including the future funding of the Main Section, the de-risking of the Main   Section investment strategy, the potential withdrawal of certain   participating employers (including the Leaving Employers) from the Main   Section and the mitigation for any detrimental effect on the Main Section of   the corporate restructuring that is necessary to comply with Part 9B of the   Financial Services and Markets Act 2000.    (E) The Bank Group and the Trustee entered into a third non-legally   binding Memorandum of Understanding dated 16 April 2018 (the AA Section MoU)   (included at Schedule 5 of this Agreement) in good faith to document their   intention in relation to the matters set out in the AA Section MoU, including   the future funding of the AA Section and a bulk transfer of members from the   Main Section to another segregated section of the Group Fund.  (F) The Bank Group and the Trustee wish to   enter into this Agreement to document the implementation of the MoU and the   timing of the steps required for such implementation.  (G) Under clause 4 of the MoU, the parties   agreed that the statutory valuation for the Main Fund, due as at 31 December   2018, would be brought forward to 31 December 2017 if the Bank Group gave   notice prior to 30 June 2018 that it wished to bring forward the valuation   date and paid the total cash contribution referred to in clause 5.1 below on   or before 25 March 2019. In accordance with clause 4 of the MoU, the Bank Group   notified the Trustee on 6 June 2018 that it wished to bring forward the   valuation date to 31 December 2017 and that it intends to pay the cash   contribution referred to in clause 5.1 on or before 25 March 2019. The   Trustee has therefore agreed that the statutory valuation for the Main   Section will be brought forward to 31 December 2017.  (H) In accordance with clause 8 of the MoU,   the Bank Group has obtained clearance from the Pensions Regulator in respect   of the Main Section for the purposes of Regulation 4 of the Pension Banking   Regulations. Clearance from the Pensions Regulator was provided on 23 August   2018 and a copy of this is included at Schedule 6.  (I) Under the Term Sheet, the Principal   Employer is required to notify the PRA of the proposed £2bn cash contribution   to be paid into the Main Section. The Principal Employer notified the PRA of   this payment on 7 June 2018 and the PRA has raised no objection to the £2bn   payment.  (J) A deed of amendment to   the Group Fund setting up the New Sections (defined below) was executed on or   shortly before the date of this Agreement; 

    

 

 (K) The following documents (the Agreed   Documents) have been or are to be signed by their respective parties on or   around the same date as this Agreement and those parties have agreed that the   Agreed Documents are to be held in escrow pending the Release Date (defined   below) as set out in clause 2.1 of this Agreement:  (i) A flexible apportionment arrangement   (attached at Schedule 2 to this Agreement) within the meaning of regulation   2(1) of the Debt Regulations (defined below) transferring the liabilities of   the Leaving Employers in relation to the Main Section, to the Principal   Employer (the Flexible Apportionment Arrangement);  (ii) Two bulk transfer agreements (attached   at Schedule 3 to this Agreement) (consisting of the NWM Bulk Transfer   Agreement and the RBSI Bulk Transfer Agreement and together, the Bulk   Transfer Agreements), transferring the liabilities of the Transferring   Members (as defined below) from the Main Section to the New Sections (the   Bulk Transfers);  (iii) The actuarial   funding documentation in respect of the actuarial valuation for the Main   Section as at 31 December 2017 (attached at Schedule 4 to this Agreement),   consisting of  (A) A statement of   funding principles for the Main Section agreed between the Trustee (after   having taken advice from the Group Fund actuary) and the Principal Employer,   as the duly appointed representative for all of the participating employers   of the Main Section, in accordance with the Pensions Act 2004 (the SFP);  (B) An actuarial valuation of the Main   Section as at 31 December 2017 carried out in accordance with the Pensions   Act 2004 and the SFP and signed by the Group Fund actuary;  (C) A schedule of contributions for the   Main Section agreed between the Trustee (after having taken advice from the   Group Fund actuary) and the Principal Employer, as the duly appointed   representative for all of the participating employers of the Main Section, in   accordance with the Pensions Act 2004; and    (D) A recovery plan for the Main Section agreed between the Trustee   (after having taken advice from the Group Fund actuary) and the Principal   Employer, as the duly appointed representative for all of the participating   employers of the Main Section, in accordance with the Pensions Act 2004;  (together the Actuarial Funding Agreements).  OPERATIVE PROVISIONS  NOW THIS DEED WITNESSES as follows:-  1. INTERPRETATION  1.1 In this Agreement:  Business Day means any day other than a   Saturday, Sunday or any other day which is a public holiday in Scotland or   England.  Conditions means the conditions   set out in clause 6.1;   

    

 

 Debt Regulations means the Occupational   Pension Schemes (Employer Debt) Regulations 2005; Employer has the meaning   given in the Debt Regulations;  Funding   Test Completion Date means the date on or after 4 October 2018 on which the   Trustee confirms the arrangement in clause 2 of the Flexible Apportionment   Arrangement meets the funding test set out in regulation 2(4A) of the Debt   Regulations (the Funding Test), in accordance with clause 4.3.  Implementation Date means 1 November 2018   or such other date as the Principal Employer and the Trustee agree.  NatWest Markets Section means the section   of the Group Fund set up by the deed of amendment dated on or shortly before   the date of this Agreement, mirroring the benefits provided under the Main   Section for and in respect of the NatWest Markets Transferring Members.  NatWest Markets Transferring Members means   the members transferring from the Main Section to the NatWest Markets Section   as listed in Schedule 2 to the NWM Bulk Transfer Agreement.  New Sections means together (i) The Royal   Bank of Scotland International Limited Section, and (ii) NatWest Markets   Section.  The Royal Bank of Scotland   International Limited Section means the section of the Group Fund set up by   the deed of amendment dated on or shortly before the date of this Agreement,   mirroring the benefits provided under the Main Section for and in respect of   the RBSI Transferring Members.  Release   Date means the date on or before the Implementation Date on which all the   Conditions are satisfied.  RBSI   Transferring Members means the members transferring from the Main Section to   The Royal Bank of Scotland International Limited Section as listed in   Schedule 2 to the RBSI Bulk Transfer Agreement.  Transferring Members means together the   NatWest Markets Transferring Members and the RBSI Transferring Members.  PART 1 - PRE-IMPLEMENTATION   OBLIGATIONS  2. TIMING FOR RELEASE OF   AGREED DOCUMENTS  2.1 The parties to   this Agreement agree that the Agreed Documents will be held in escrow until   the Release Date and that once released they will become effective and   legally binding unless otherwise provided below.  2.2 The Agreed Documents will be released   in accordance with clause 6 below.  3.   BULK TRANSFERS  3.1 The Trustee will   issue a notice to each Transferring Member on or before 1 October 2018 in the   same form as that required under regulation 12(4B) of the Occupational   Pension Schemes (Preservation of Benefit) Regulations 1991.  3.2 The Trustee and Principal Employer will   take all steps to ensure that the New Sections are set up and able to receive   the Transferring Members on the Implementation Date.

    

 

 4. FLEXIBLE APPORTIONMENT ARRANGEMENT  4.1 The Bank Group and Leaving Employers   agree to provide the Trustee with such information as it reasonably requests   to enable it to determine if the arrangement in clause 2 of the Flexible   Apportionment Arrangement meets the Funding Test.  4.2 The Trustee shall, with the Group Fund   actuary, carry out the relevant calculations and obtain any other information   or advice required to enable it to conclude that the arrangement in clause 2   of the Flexible Apportionment Arrangement meets the Funding Test.  4.3 The Trustee shall confirm in writing to   the Principal Employer whether the arrangement in clause 2 of the Flexible   Apportionment Arrangement meets the Funding Test as soon as practicable after   the Group Fund actuary has carried out the relevant calculations under clause   4.2. If the Trustee has concluded that the arrangement in clause 2 of the   Flexible Apportionment Arrangement meets the Funding Test, that date of   confirmation will be the Funding Test Completion Date.  4.4 As soon as reasonably practical, on or   after 5 October 2018, following the Funding Test Completion Date the   Principal Employer will give notice to the Trustee in accordance with clause   26.2 of the Trust Deed and Rules terminating the Leaving Employers’ liability   to contribute to the Main Section on and from the Implementation Date, and the   Trustee will accept that notice (including in respect of the shorter period   of that notice).  4.5 As soon as   reasonably practicable after the Funding Test Completion Date the Trustee   will notify the Pensions Regulator of the Flexible Apportionment Arrangement.  5. PAYMENT OF £2 BILLION CONTRIBUTION  5.1 In accordance with the Schedule of   Contributions for the Main Section, the Principal Employer will, following   the Funding Test Completion Date, make (or the Bank Group will procure that   another group entity will make on behalf of the Principal Employer) a payment   of £2 billion to the Main Section.  6.   PRE-IMPLEMENTATION CONDITIONS  6.1 On   or before the Implementation Date the following conditions must be   satisfied:  (a) A notice has been   issued to each Transferring Member in accordance with clause 3.1 above;  (b) The Trustee has confirmed in writing to   the Principal Employer that the arrangement in clause 2 of the Flexible   Apportionment Arrangement meets the Funding Test in accordance with clause   4.3 above;  (c) The Principal Employer   has, on or after 5 October 2018, provided notice terminating the Leaving   Employer’s liability to contribute to the Main Section in accordance with   clause 4.4 above; and  (d) The Trustee   has received a payment from the Principal Employer (or another group entity)   of £2 billion to the Main Section in accordance with clause 5.1 above,  (together the Conditions).  6.2 Following the satisfaction of the   Conditions, the Agreed Documents shall thereupon automatically be released   from escrow and the Agreed Documents that are deeds shall then automatically   be duly delivered. The Agreed Documents shall be dated with the date of the   Release Date and shall take 

    

 

 effect from the Release   Date (or as otherwise may be expressly stated in the Agreed Documents). The   parties shall use reasonable endeavours to ensure that the Agreed Documents   are valid and effectual at and from the Release Date, or such other date as   is expressly stated in the relevant Agreed Documents.  7. ACTUARIAL FUNDING AGREEMENTS FILING  7.1 The Trustee agrees that on or after the   Release Date it will (and will request its advisers to) carry out all steps   necessary to ensure that the Actuarial Funding Agreements are effective and   are filed with the Pensions Regulator on or as soon as possible after the   Release Date.  7.2 The Bank Group and   the Trustee agree that the Bank Group shall pay to the Main Section (or   procure payment of) a proportion of any amounts to be distributed to the   Royal Bank of Scotland Group plc shareholders (ordinary or special dividends   or share buy-backs). Such amounts shall constitute additional Employer   contributions and are potentially payable for a period of up to 20 years from   their start date and subject to an annual cap each calendar year in the   payment to the Main Section of £500 million and an overall aggregate amount   of £1,500 million in total. The agreed amount payable as an additional   contribution and the start date of such additional contributions are:  Date of Valuation Start date for   distribution- linked contributions Amounts to be paid as contributions to the   Main Section 31 December 2017 1 January 2020 100 per cent of distributions to   shareholders paid on or after the start date, subject to the annual cap.  7.3 For the avoidance of doubt, where the   Bank Group pays any amount to the Main Fund at its discretion (i.e. in   addition to the amount described in 7.2 above), that amount shall count   towards the expected level of £1,500 million.    7.4 Clauses 7.2 and 7.3 above repeat the provisions contained in the   schedule of contributions forming part of the Actuarial Funding Agreements.   For the avoidance of doubt, if the provisions in the schedule of   contributions relating to clauses 7.2 and 7.3 above are amended or removed   from any future or revised schedule of contributions for the Main Section   (agreed between the Trustee and the Principal Employer) the provisions in   clauses 7.2 and 7.3 above will be automatically amended or removed to the   extent required to reflect the agreed amendments to the Main Section schedule   of contributions.  PART 2—   POST-IMPLEMENTATION OBLIGATIONS  8.   SETTLEMENT OF MAIN SECTION FUNDING UNTIL 31 DECEMBER 2023  8.1 Subject to Clause 8.3, the Trustee   confirms that it does not expect to require any further employer   contributions to the Main Section (except contributions in respect of the   future service of active members and those set out in the Actuarial Funding   Agreements and expenses and augmentations after 31 December 2023 on a basis   consistent with the Actuarial Funding Agreements or subsequent actuarial   funding agreements (or as otherwise agreed by the Trustee and Bank)) before   the agreement of the statutory funding valuation for the Main Section due as   at 31 December 2023.    

    

 

 8.2 In particular, the Bank Group and the   Trustee agree that any statutory funding valuation due before 31 December   2023 will be on a basis consistent with the assumptions agreed in respect of   the statutory funding valuation as at 31 December 2017 (and as set out in the   SFP) taking account of experience and any changes to actuarial factors since   that valuation.  8.3 The Bank Group   acknowledges that the Trustee cannot fetter the exercise of its powers and   discretions in a way that would be inconsistent with its fiduciary duties and   legislation, so this clause 8 shall be subject to that principle. However,   the Trustee will consult with the Bank Group before taking any actions which   might increase the likelihood of additional contributions being required to the   Main Section before the agreement of the statutory funding valuation for the   Main Section due as at 31 December 2023.    8.4 The Trustee confirms that after having taken legal and actuarial   advice, as at the date of this Agreement, it is satisfied that its adoption   of the SFP and clauses 8.1 and 8.2 above are consistent with its fiduciary   duties.  9. EXIT OF ROYAL BANK OF   SCOTLAND PLC (PREVIOUSLY KNOWN AS ADAM & COMPANY PLC)  9.1 In the event that the Royal Bank of   Scotland plc ceases to be an Employer under the Main Section before 31   December 2024, NatWest Holdings Limited will at or prior to that time enter   into a legally binding guarantee with the Trustee. The terms of such a   guarantee will be in substantially the same form as the draft guarantee in   Appendix 2 of the Term Sheet.  9.2 If   the Trustee and NatWest Holdings Limited enter into a guarantee in accordance   with the provisions of clause 9.1 above, the Trustee and Bank Group will,   subject to clause 9.3, agree to apportion any liabilities of the Royal Bank   of Scotland plc under the Debt Regulations to the Principal Employer by way   of a flexible apportionment arrangement.    9.3 The Bank Group acknowledges that the apportionment arrangement   described above is conditional on the Trustee being satisfied that the   Funding Test is met at the relevant time.    9.4 As an alternative to clauses 9.1 and 9.2 above, the Trustee and   Bank Group may agree at or prior to such cessation that no covenant   mitigation by way of a NatWest Holdings Limited guarantee is required. If so,   the Royal Bank of Scotland plc will pay in full any debt which would arise   under the Debt Regulations.  10.   TRUSTEE MONITORING AND NOTIFICATION OF COVENANT  10.1 Until the dividend linked   contributions set out in the Actuarial Funding Agreements above (and referred   to is clause 7) have reached an aggregate of £1.5bn (the Monitoring Period),   the Trustee may require the Bank Group to provide within a reasonable period   the Trustee with the capital risk appetites, capital distribution plans and   capital targets of each of:  (a) the   Principal Employer;  (b) the Royal Bank   of Scotland plc (previously known as Adam & Company PLC) (but only while   it is a participating employer in the Main Section);  (c) NatWest Holdings Limited; and  (d) The Royal Bank of Scotland Group plc,   as approved by that entity’s Board of Directors.  

    

 

 10.2 The Bank Group will promptly notify the   Trustee if, in the opinion of the Board of Directors of the relevant entity,   at any time during the Monitoring Period, any such entity expects a material   change (including any series of non-material changes which have the   cumulative effect of amounting to a material change) to its stated capital   risk appetite, capital distribution plans or capital targets.  10.3 Nothing in this clause 10 shall   restrict the Trustee’s ability to monitor the covenant of the Bank Group to   the Fund as required to comply with legislation and the Trustee’s fiduciary   duties. The Bank Group shall continue to provide the Trustee with all   reasonable information in order for the Trustee to carry out such   monitoring.  11. MISCELLANEOUS  11.1 The Trustee, NatWest Markets Plc   (previously known as the Royal Bank of Scotland plc) and the Principal   Employer agree that the existing portfolio of interest rate swap and linear   inflation trades with the Main Section will be novated from NatWest Markets   Plc to the Principal Employer and the associated documentation (including   collateral agreements) between the Trustee and the Principal Employer   relating to the Main Section will be agreed, pursuant to which only   collateral posted by either party in excess of £1.5 billion can be   re-hypothecated by the other party. The Principal Employer, NatWest Markets   Plc and the Trustee will use their reasonable endeavours to finalise the   associated documentation by no later than 31 December 2018.  11.2 The Principal Employer and the Trustee   agree that following the execution of this Agreement they shall conduct a   joint review of the allocation of powers granted under the Trust Deed and   Rules to one or more of the employers participating in the Group Fund for the   purpose of agreeing a reallocation among the employers of those powers, with   the objective that a power should be exercisable by the employers   participating in a section of the Group Fund if its exercise would have an   impact on the cost of the benefits provided under that section, or the   employment relationship between an employer and a member of that section,   whilst taking into account the need for an efficient process for interaction   between the Trustee and the Bank Group. The Principal Employer and the   Trustee agree to use their reasonable endeavours to complete this review and   make such amendments to the Trust Deed and Rules as may be appropriate to   implement the matters agreed by 31 December 2018.  12. AMENDMENTS  12.1 This Agreement may be amended by   written agreement between the Principal Employer and the Trustee. However, no   amendment shall introduce any further obligation on, or introduce or increase   any liability in respect of, any other party to this Agreement without the   written agreement of that party.  13.   JURISDICTION  13.1 This Agreement and   any non-contractual obligations arising out of or in connection with it shall   be  governed by English law.  13.2 The English courts have exclusive   jurisdiction to settle any dispute arising out of, relating to or  having any connection with this Agreement,   and any dispute relating to non-contractual obligations arising out of or in   connection with it and each party submits to the exclusive jurisdiction of   the English courts. For the purpose of this clause, each party waives any   objection to the English courts on the grounds that they are an inconvenient   or inappropriate forum to settle any dispute.    14. COUNTERPARTS 

    

 

 14.1 This Agreement may be entered into in   any number of counterparts, all of which taken together shall constitute one   and the same agreement and any party may enter into this Agreement by   executing a counterpart.  IN WITNESS of   which this Agreement has been executed as a deed by the parties (or their   duly authorised representatives) and has been delivered on the date stated at   the beginning of this Agreement. 

    

 

 SIGNATORIES     EXECUTED and DELIVERED as a DEED for and on ) behalf of NATIONAL   WESTMINSTER BANK PLC by ) KATIE MURRAY acting under a power of attorney ) in   HER favour dated 6 September 2018 in the presence of: )  Signature of Witness:  Full name:    Address:  EXECUTED and DELIVERED   as a DEED for and on ) behalf of THE ROYAL BANK OF SCOTLAND GROUP PLC by )   KATIE MURRAY on acting under a power of attorney ) in HER favour dated 7   February 2018 in the presence of: )    Signature of Witness:  Full   name:  Address:  

    

 

EXECUTED and   DELIVERED as a DEED for and on ) behalf of NATWEST HOLDINGS LIMITED by )  KATIE MURRAY acting under a power of   attorney ) in HER favour dated 7 February 2018 in the presence of: )  Signature of Witness:  Full name:    Address:  EXECUTED and DELIVERED   as a DEED for and on ) behalf of THE ROYAL BANK OF SCOTLAND PLC ) (previously   known as Adam & Company PLC) by ) KATIE MURRAY acting under a power of   attorney ) in HER favour dated 6 September 2018 in the presence of: )  Signature of Witness:  Full name:    Address: 

    

 

 EXECUTED and DELIVERED as a DEED for and on   ) behalf of NATWEST MARKETS PLC ) (previously known as The Royal Bank of   Scotland plc) by ) Richard Place acting under a power of attorney ) in his   favour dated 23 July 2018 in the presence of: )  Signature of Witness:  Full name:    Address: 

    

 

  EXECUTED and DELIVERED as a DEED ) for and   on behalf of THE ROYAL BANK OF ) SCOTLAND INTERNATIONAL LIMITED. )  Director    Director

    

 

 EXECUTED and DELIVERED as a DEED for and on   behalf of COUTTS & COMPANY by:    Director  in the presence   of:  Signature of Witness:  Witness name:  Witness address:  Witness occupation:

    

 

EXECUTED as a   DEED by ) CHARTERED INSTITUTE OF BANKERS ) IN SCOTLAND acting by two   trustees: )    Trustee    Trustee

    

 

EXECUTED as a   DEED by ) RBS PENSION TRUSTEE LIMITED acting ) by two directors or a director   and its secretary: )     Director  Secretary

    

 

 

SCHEDULE 1  MEMORANDUM OF UNDERSTANDING

    

 

 MEMORANDUM OF UNDERSTANDING    16 April    2018     Between 

The Royal Bank   of Scotland Group plc 

NatWest   Holdings Limited 

Adam &   Company PLC (to be known as Royal Bank of Scotland plc) 

National   Westminster Bank Plc 

and 

RBS Pension   Trustee Limited    In relation to   various matters including the future funding of the 

Royal Bank of   Scotland Group Pension Fund (Main Section), mitigation for any detrimental   effect 

of corporate   restructuring necessary to comply with Part 9B of the Financial Services and 

Markets Act   2000 and the potential withdrawal of a number of participating employers in   the 

Main Section of   the Group Fund                       Allen & Overy LLP    0011398-0004743 CO:32479019.7  

    

 

 This MEMORANDUM OF UNDERSTANDING is made on   16 April  2018  BETWEEN:    (1) NATIONAL WESTMINSTER BANK PLC registered in England with company   number 929027 whose registered office is at 135 Bishopsgate, London, EC2M 3UR   (the Principal Employer);  (2) THE ROYAL   BANK OF SCOTLAND GROUP PLC registered in Scotland with company number   SC045551 whose registered office is at 36 St Andrew Square, Edinburgh, EH2   2YB;  (3) NATWEST HOLDINGS LIMITED   registered in England with company number 10142224 whose registered office is   at 280 Bishopsgate, London, EC2M 4RB;    (4) ADAM & COMPANY PLC (to be known as Royal Bank of Scotland plc)   registered in Scotland with company number SC083026 whose registered office   is at 25 St Andrew Square, Edinburgh, EH2 1AF;  (collectively the Bank Group); and  (5) RBS PENSION TRUSTEE LIMITED registered   in England with company number 2726164 whose registered office as at 1   Princes Street, London, EC2R 8PB (the Trustee).  BACKGROUND:    (A) The Trustee is the trustee of the Royal Bank of Scotland Group   Pension Fund (the Group Fund) as governed by a definitive deed dated 5 April   2006 as amended from time to time (the Trust Deed and Rules).  (B) The Principal Employer is the principal   employer of the Group Fund.  (C) The   Principal Employer and the Trustee entered into a Memorandum of Understanding   dated 26 January 2016 (the 2016 MoU) under which, among other things:  (i) The Trustee acknowledged that the Royal   Bank of Scotland Group must comply with the reforms proposed by the   Independent Commission on Banking, including the changes made to the   Financial Services and Markets Act 2000 (by the Banking Act 2013) and the   Financial Services and Markets Act 2000 (Banking Reform) (Pensions)   Regulation 2015; and  (ii) The Principal   Employer agreed to act reasonably and in good faith (and procure that each   participating employer also act reasonably and in good faith) towards the   Group Fund in the implementation of these changes and the Trustee agreed to   act reasonably and in good faith towards each participating employer when   considering any proposal (including any apportionment proposal) relating to a   participating employer which results from compliance with these reforms, and   the detriment that the Group Fund will actually suffer as a result of   compliance with the reforms.  (D) The   Bank Group and the Trustee wish to enter into this memorandum of   understanding relating to the Main Section of the Group Fund (the Main   Section) (the MoU).

    

 

 (E) The Trustee and the Bank Group wish to   set out their understanding in relation to various matters including the   future funding of the Main Section, mitigation for any detrimental effect on   the Main Section of corporate restructuring necessary to comply with Part 9B   of the Financial Services and Markets Act 2000 (in accordance with clause 9   of the 2016 MoU) and the potential withdrawal of the Royal Bank of Scotland   plc, Adam & Company PLC, Coutts & Company, the Royal Bank of Scotland   International Limited and The Chartered Institute of Bankers in Scotland as   participating employers in the Main Section in this MoU.  1. THE STATUS OF THIS MOU  1.1 The Trustee and the Bank Group enter   into this MoU in good faith to document their current intention in relation   to the matters hereunder. No provision of this MoU is legally binding or   enforceable on either party.  2.   TRUSTEE FIDUCIARY DUTIES AND PENSIONS REGULATOR  2.1 The Bank Group acknowledges that the   Trustee cannot fetter the exercise of its powers and discretions in a way   which would be inconsistent with its fiduciary duties and so the   understanding of the Trustee recorded in this MoU must be read subject to   that principle. In particular, any terms which are to be agreed under this   MoU relating to the investment of Group Fund assets are subject to the   Trustee’s duties and powers of investment and do not fetter the ability of   the Trustee to change the Group Fund’s investments in line with those duties   and powers. The Bank Group also recognises that the Trustee’s fiduciary   duties may include taking into account the views of the Pensions Regulator   (including Pensions Regulator guidance and codes of practice) and so the   understanding of the Trustee recorded in this MoU must be read subject to   this.  2.2 The Trustee confirms that as   at the date of this MoU (i) it is satisfied that entry into this MoU is   consistent with its fiduciary duties and Pensions Regulator guidance and   codes of practice and (ii) it is not aware of any views of the Pensions   Regulator which would conflict with the terms of this MoU.  3. BANK GROUP AND TRUSTEE TO ACT REASONABLY   AND IN GOOD FAITH  By entering into   this MoU and in carrying out their non-binding intentions hereunder the Bank   Group and the Trustee shall act reasonably and in good faith.  4. VALUATION DATE FOR MAIN SECTION  The statutory funding valuation for the   Main Section is due as at 31 December 2018. However the Trustee and Bank   Group agree that if the Bank Group (i) has given notice to the Trustee by 30   June 2018 that it wishes to bring forward the valuation date and (ii) has   made payment of the total cash contribution set out in clause 1 of the terms   set out in Schedule 1 (the Term Sheet) on or before 25 March 2019, the   statutory funding valuation for the Main Section will be as at 31 December   2017 and the relevant provisions of this MoU will be read accordingly.  5. SETTLEMENT OF MAIN SECTION FUNDING UNTIL   31 DECEMBER 2024 (OR 31 DECEMBER 2023)    5.1 This MoU and the Term Sheet sets out the intentions of the Bank   Group and the Trustee in respect of the statutory funding valuation for the Main   Section due as at 31 December 2018 (or 31 December 2017 if 4 above applies),   the employer contributions payable and the de-risking of the Main Section   investment strategy. Neither the Bank Group nor the Trustee expect, subject   to the implementation of this MoU and the Term Sheet, that the Main Section   will require any further employer 

    

 

 contributions (except contributions in   respect of the future service of active members) before the agreement of the   statutory funding valuation for the Main Section due as at 31 December 2024   (or 31 December 2023 if 4 above applies).    5.2 In particular the Bank Group and the Trustee intend that any   statutory funding valuation due before 31 December 2024 (or 31 December 2023   if 4 above applies) will be on a basis consistent with the assumptions agreed   in respect of the statutory funding valuation as at 31 December 2018 or 31   December 2017 (as appropriate) (and as set out in the Term Sheet) taking   account of experience and any changes to actuarial factors since that   valuation. Furthermore, the Trustee will consult with the Bank Group before   taking any actions which might increase the likelihood of additional employer   contributions being required to the Main Section before the agreement of the   statutory funding valuation for the Main Section due as at 31 December 2024   (or 31 December 2023 if 4 above applies).    6. INTENTION OF THE BANK GROUP AND THE TRUSTEE TO IMPLEMENT THE TERM   SHEET  Subject to 1 to 3 above the Bank   Group and Trustee intend to use reasonable endeavours to take all such   decisions, actions and other steps (including instructing respective advisers   accordingly) to implement the Term Sheet.    7. TIMING OF IMPLEMENTATION OF THE TERM SHEET  7.1 The Bank Group and the Trustee intend   to use reasonable endeavours to enter into legally binding documentation to   give effect to each of the provisions set out in the Term Sheet no later than   the date, if any, specified in the Term Sheet in respect of each relevant   provision and where no date is specified in the Term Sheet, no later than 31   March 2020.  7.2 Each member of the   Bank Group confirms that it will provide to the Trustee such information as   the Trustee reasonably requests to enable the Trustee to determine if the   “funding test” is met for the purposes of the Occupational Pension Schemes   (Employer Debt) Regulations 2005.  7.3   The Bank Group and the Trustee accept that either party is entitled to reopen   negotiations relating to all matters to which this MoU relates if:  (a) the events, actions and agreements   anticipated to give effect to the Term Sheet which are due to be completed by   no later than 31 March 2020 do not take place before 1 April 2020;  (b) at any time the Trustee or any member   of the Bank Group fails to comply with any provision of this MoU;  (c) there is a material change to the   position of the Main Section or the Bank Group (other than one anticipated by   the parties as at the date of this MoU);    (d) any event relating to the Bank Group which is anticipated by the   parties as at the date of this MoU takes place in a way which is materially   different to the expectation of the parties; or  (e) the Bank Group or the Trustee is   prevented from implementing any provision of this MoU in full or in part due   to a change in any law or regulation that is applicable to either party   (including but not limited to regulations on clean holding company   requirements).

    

 

 8. PENSIONS REGULATOR CLEARANCE  8.1 The Bank Group intends to apply for   clearance from the Pensions Regulator in respect of the Main Section for the   purposes of Regulation 4 of the Financial Services and Markets Act 2000   (Banking Reform) (Pensions) Regulations 2015 in advance of the entry into any   flexible apportionment arrangement anticipated in the Term Sheet and in any   event by 31 December 2018. The Trustee confirms that it intends to support   that application for clearance but on the condition that the provisions of   the Term Sheet will be implemented.    8.2 The Bank Group acknowledges that the clearance referred to in 8.1   above will be based on the Term Sheet, the terms of which form part of this   MoU, and on the information provided to the Pensions Regulator relating to   the events which are to take place, and the consequences of those events,   arising from the compliance of the Bank Group with Part 9B of the Financial   Services and Markets Act 2000. Accordingly, the Bank Group confirms that it   intends to apply to the Pensions Regulator for supplementary clearance in   relation to the Main Section should the Bank Group and Trustee agree further   provisions which differ materially from the provisions of the Term Sheet or   if there is a material change to information provided to the Pensions   Regulator as part of the clearance application referred to in 8.1 above.  9. CESSATION OF MOU  9.1 This MoU shall cease to apply if:  (i) the Trustee or the Principal Employer   gives notice of termination to the other party that it considers one or more   of the circumstances set out in 7.3 above applies; or  (ii) the Trustee and the Principal Employer   agree to terminate this MoU.  10.   COUNTERPARTS  This MoU may be executed   in any number of counterparts, all of which taken together will constitute   one and the same document and any party may enter into this MoU by executing   a counterpart. 

    

 

 Signed on behalf of NATIONAL WESTMINSTER   BANK PLC  by   Signed on behalf of THE ROYAL BANK OF   SCOTLAND GROUP PLC  by    Signed on behalf of NATWEST HOLDINGS   LIMITED  by    Signed on behalf of ADAM & COMPANY   PLC  by

    

 

 Signed on behalf of RBS PENSION TRUSTEE   LIMITED  by (Director)    and (Director/Secretary)

    

 

 SCHEDULE 1    TERM SHEET  

    

 

 Schedule 1     Term Sheet  This Term Sheet is   contained in a schedule to, and should be read with, the MoU between National   Westminster Bank plc (as principal employer of the Main Section of the RBS   Group Pension Fund), the Royal Bank of Scotland Group plc, NatWest Holdings   Limited, Adam & Company PLC (to be known as Royal Bank of Scotland plc),   and RBS Pension Trustee Limited. Terms defined in the MoU have the same   meaning in this Term Sheet.  The   purpose of this Term Sheet is to outline the intention of the Bank Group and   the Trustee on certain material terms relating to the Main Section. The   parties propose the terms of this Term Sheet are incorporated into one or   more formal legally binding agreements at a future date. In accordance with   clause 1 of the MoU, the provisions set out in this Term Sheet are not   legally binding or enforceable unless and until they are formalised into a   legally binding agreement.  The Term   Sheet covers the Bank Group’s and Trustee’s proposed arrangements in relation   to the Main Section for dealing with:    - the statutory funding valuation of the Main Section due as at 31   December 2018 (or 31 December 2017 if clause 4 of the MoU applies)  - the future investment objectives for the   Main Section; and  - the mitigation   required as a result of the Bank Group’s proposed arrangement for   implementation of the ring-fencing requirements (including the mitigation   required to facilitate the withdrawal of specified participating employers) 

Key terms   Description

1. Cash Contributions   The Principal Employer will make (or will procure that another Bank Group   entity makes) a payment of £2bn to the Main Section by 31 March 2020. At the   option of the Principal Employer this payment may be made in instalments,   provided that the total amount paid by 31 March 2020 is £2bn.

The current   intention is that the Bank Group will use reasonable endeavours to make all   or part of this payment as soon as possible provided it determines it has   sufficient balance sheet capacity to do so and provided that no objection has   been raised by the PRA.

2.   Distribution-linked contributions In addition to the payment due under 1   above, to assist with de-risking, the Bank Group intends to pay to the Main   Section (or procure payment of) a proportion of any amounts to be distributed   to Royal Bank of Scotland Group Plc shareholders (ordinary or special   dividends or share buy-backs). Such amounts shall constitute additional   contributions and  are potentially   payable for a period of up to 20 years from their start date

    

 

  and subject to an annual cap each calendar   year in the payment to the Main Section of £500m and to an expected level of   £1.5bn in total. The agreed amount payable as an additional contribution and   the start date of such additional contributions are set out below.    Date of valuation Start date for   distribution-linked  contributions   Amounts to be paid as  contributions to   the  Main Section   31 December 2017 1 January 2020 100 % of   distributions to shareholders paid after the start date, subject to the   annual cap.   31 December 2018 1   January 2019 25 % of distributions to shareholders paid between the start   date and 31 December 2020, subject to the annual cap     100 % of distributions to shareholders   paid after 1 January 2021, subject to the annual cap.    For the avoidance of doubt, where the   Bank Group pays any amount to the Main Section at its discretion (i.e. not   otherwise described in 1 or 2 above) after the signing of the MoU, that amount   shall count towards the expected level of £1.5bn. 3.  Technical Provisions Assumptions For the   purposes of the statutory actuarial valuation of the Main Section due as at   31 December 2018 (or 31 December 2017 if clause 4 of the MoU applies), the   Principal Employer and the Trustee agree the assumptions as per Appendix 1.   The Principal Employer and the Trustee will work to finalise the valuation   results, the Statement of Funding Principles and the Schedule of   Contributions as soon as possible following the valuation date. 4.  Investment Risk The Trustee has agreed to   move to an investment strategy which targets a return of swaps + 80 bps over   the long term based on current market conditions but subject to variation   resulting from changes to market conditions. The Trustee is entitled to link the   timing of the steps required 

    

 

to move to this   revised investment strategy with the payments due under 1 and 2 above.   5.  Swap Transfer  The parties intend that the existing   portfolio of interest rate swap and linear inflation trades with the Main   Section will move from Royal Bank of Scotland plc to the Principal Employer   (either through novation or another agreed route) and that associated   documentation (including collateral agreements) between the Trustee and the   Principal Employer relating to the Main Section will be agreed, pursuant to   which only collateral posted by either party in excess of £1.5bn can be   re-hypothecated by the other party. The Principal Employer and the Trustee   will work to finalise the associated documentation as soon as possible. 6.  Guarantee for covenant mitigation In the   event that Adam & Company PLC ceases to be an employer (as defined for   the purposes of Part 3 of the Pensions Act 2004 and Section 75 of the   Pensions Act 1995) under the Main Section before 31 December 2024, NatWest   Holdings Limited will at or prior to such time enter into a legally binding   guarantee with the Trustee. The terms of such a guarantee will be in   substantially the same form as the draft guarantee contained in Appendix 2.   The Trustee and Bank Group will also agree to apportion the liabilities of   Adam & Company PLC under Section 75 of the Pensions Act 1995 in   accordance with 7 below.  The   requirement for this guarantee shall not be subject to the 31 March 2020   timeframe set out in clause 7.1 of the MoU.    However the Trustee and Bank Group may alternatively agree at or prior   to such cessation that no covenant mitigation by way of a NatWest Holdings   Limited guarantee is required. If so, Adam & Company PLC will pay in full   any debt which would arise under Section 75 of the Pensions Act 1995. 7.  Statutory Employers The following   participating employers will cease to employ active members in the Main   Section on or before 31 March 2020:  •   Royal Bank of Scotland plc (to be known as NatWest Markets plc); • Royal Bank   of Scotland International Limited; • Coutts & Company; and • Chartered   Institute of Bankers in Scotland. The Trustee will agree to apportion the   liabilities of the employers listed above and any former employers who have   not previously paid a debt under Section 75 of the Pensions Act 1995 to the   Principal Employer by way of entering into one or more flexible apportionment   arrangements.  The Trustee will also   agree to apportion the liabilities of Adam & 

    

 

Company PLC to   the Principal Employer by way of a flexible apportionment arrangement in the   event that it ceases to be an employer prior to 31 December 2024 and the   guarantee referred to in 6 above is put in place. This provision is not   subject to the 31 March 2020 time frame set out in clause 7.1 of the MoU.  The Bank Group entities acknowledge that   the apportionment arrangements referred to above are conditional on:  • The Bank Group complying with all other   aspects of this Term 

Sheet; and  • The Trustee being satisfied that the   funding test laid down by 

legislation is   met at the relevant time. 8. Trustee monitoring and notification of covenant   In order to protect against a reduction in the overall scale of the covenant,   the Trustee will continue to monitor the performance of the Bank Group under   applicable confidentiality agreements and subject to applicable law and   regulation (including but not limited to the Market Abuse Regulation, or   equivalent U.K. regulation). In addition to the quarterly covenant review,   from the date of the MoU to such time as the contribution set out in 1 above   has been paid in full and the contributions set out in 2 above have reached   an aggregate amount of £1.5bn (the Monitoring Period), the Trustee will be   provided with the capital risk appetites, capital distribution plans and   capital targets of each of:  (i) the   Principal Employer;  (ii) Adam &   Company PLC (but only while it is a participating employer in the Main   Section);  (iii) Natwest Holdings plc;   and  (iv) The Royal Bank of Scotland   Group plc, as approved by that entity’s Board of Directors.  The Bank Group will promptly notify the   Trustee if, in the opinion of the Board of Directors of the relevant entity,   at any time during the Monitoring Period any such entity expects a material   change (including any series of non-material changes which have the   cumulative effect of amounting to a material change) to its stated capital   risk appetite, capital distribution plans or capital targets. 

    

 

 Appendix 1    Actuarial Assumptions

    

 

 Main Fund Section  1. Financial assumptions (Technical   Provisions)  Switching to HDC   curves  At the next valuation date   which will be either 31/12/17 or 31/12/18 (the “Valuation Date”) the   liabilities shall be discounted at swaps+0.8% and with inflation based on   swaps RPI (LPI adjusted according to the methodology described below). At the   Valuation Date the discount rate shall be restated to the HDC curve plus a   fixed spread and with the inflation assumption based on the HIC curve, with   the fixed spread being set at a level (to the nearest basis point) which   provides a present value of the past service liability closest to that on the   swaps discount and inflation basis.    Discount rate:  From the Valuation   Date liabilities shall be discounted using the Hedging Discount Curve (HDC)   plus the fixed spread where the yield at each yearly tenor is the arithmetic   weighted average of:  a) Spot yield at   each tenor on the gilt yield curve, and    b) Spot yield at each tenor on the Libor swap yield curve.  By way of example, if the Valuation Date   was 31/12/17 the following weightings would apply when calculating the   HDC1:  Tenor point band2 HDC gilt   proportion HDC swap proportion 0-5 years 11% 89% 5+-10 years 15% 85% 10+-15   years 14% 86% 15+-20 years 27% 73% 20+-25 years 60% 40% 25+-30 years 67% 33%   30+-40 years 72% 28% 40+ years 77% 23%    The HDC gilt and swap proportion shall be updated at 31 December 2018   and annually thereafter based on the gilts (and any other bonds used in the   liability hedging portfolio) in the Trustee’s liability hedging portfolio as   a proportion of total hedging at each tenor.    The spread shall remain unchanged between valuations regardless of any   update to the HDC curve except where the Trustee and the Bank agree   otherwise.        1 Weightings based on   31/12/17 risk ladders (will be updated based on risk ladders at the Valuation   Date, as appropriate)  2 For   pragmatism, the HDC proportions are based on 5 yearly tenor point interest   rate risk ladders but applied to yields at each yearly tenor point on the   yield curves 

    

 

  In the event the proportion of gilts at any   tenor exceeds 100% of the total hedging at that tenor the HDC gilt proportion   shall be set as 100%. In the event the proportion of gilts at any tenor is   below 0% of the total hedging at that tenor the HDC gilt proportion shall be   set as 0%.  RPI inflation:  Hedging Inflation Curve (HIC) where the   yield at each tenor is the arithmetic weighted average of:  a) Spot inflation at each tenor on the gilt   breakeven RPI inflation curve, and  b)   Spot inflation at each tenor on the RPI swap inflation curve.  By way of example, if the Valuation Date   was 31/12/17 the following weightings would apply when  calculating the HIC 3:  Tenor point band 4 HIC gilt proportion HIC   swap proportion 0-5 years 11% 89% 5+-10 years 17% 83% 10+-15 years 19% 81%   15+-20 years 43% 57% 20+-25 years 96% 4% 25+-30 years 100% 0% 30+-40 years   100% 0% 40+ years 100% 0%  The HIC gilt   and swap proportion shall be updated at 31 December 2018 and annually   thereafter based on the gilts (and any other bonds used in the liability   hedging portfolio) in the Trustee’s liability hedging portfolio as a   proportion of total hedging at each tenor.    In the event the proportion of gilts at any tenor exceeds 100% of the   total hedging at that tenor the HIC gilt proportion shall be set as 100%. In   the event the proportion of gilts at any tenor is below 0% of the total   hedging at that tenor the HIC gilt proportion shall be set as 0%.  CPI inflation: RPI inflation minus 1.1%  LPI pension increases: Higher of  (a) LPI derived using a Black Scholes model   with 1.5% implied volatility (symmetric), and    (b) CPI or RPI inflation as applicable for each pension tranche 

subject in all   cases to the cap/floor applicable for each pension tranche.  Salary and pension increases     3 Weightings based on 31/12/17 risk   ladders (will be updated based on risk ladders at the Valuation Date, as   appropriate)  4 For pragmatism, the HDC   proportions are based on 5 yearly tenor point interest rate risk ladders but   applied to yields at each yearly tenor point on the yield curves  

    

 

 Salary increases (pensionable/basic) 1.8%   p.a. Increases to the earnings cap 1.8% p.a. Revaluations to deferred   pensions in excess of GMP The RPI price inflation assumption Rate of GMP   increases in active service before GMP age The RPI price inflation assumption   plus 1.0% p.a. at all durations Fixed rate revaluation on GMPs GMP fixed rate   revaluation according to date of leaving. For active members assumed to   withdraw from service in future, a fixed revaluation rate of 3.5% p.a. is   assumed to apply after the assumed date of withdrawal. Increases to pensions   in payment The LPI pension increase assumption for the relevant tranche   Promotional salary increases Nil Discretionary increases Nil  2. Other assumptions (Technical   Provisions)  Calculation method  Actuarial method: Projected Unit   Method  Control Period: 10 years  Pre-retirement mortality 

Males: 40% of   AM92 Ultimate 

Females: 50%   AF92 Ultimate  Post-retirement   mortality — Base tables 

Males: standard   table S2PMA Light 

Females:   standard table S2PFA Light  Normal   health retirees and dependants:    Current membership group Member sex Member base table Member  equivalent    single  scaling factor   Member’s  dependant  base table Member’s  dependant    equivalent  single  scaling factor Actives M S2PMA Light 113%   S2PFA Light 102% 

    

 

  F S2PFA Light 100% S2PMA Light 124%   Deferreds M S2PMA Light 113% S2PFA Light 102%    F S2PFA Light 98% S2PMA Light 120% Pensioners M S2PMA Light 104% S2PFA   Light 96%  F S2PFA Light 96% S2PMA   Light 117% Dependants M S2PMA Light 104% - -    F S2PFA Light 98% - -    III-health retirees:  A scaling   factor adjustment is applied to the standard tables shown above equal to 150%   for males and 151% for females    Post-retirement mortality — Future improvements  CMI 2017 Core Projections Model with   smoothing parameter Sx = 8.0.  Long   term rate to the improvements of 1.5% p.a. for males and females  Early retirements  Allowance is made for members to retire   before or after their Normal Retirement Age. Where  pensions are assumed to be payable before   or after Normal Retirement Age for a particular tranche of benefits, they are   adjusted for early or late payment using the Main Fund Section’s early and   late retirement factors applicable from 1 February 2018.  The tables below illustrate the percentage   of members retiring each year.  Active   members:  Age Current schedule  Actives non-NPA65 Schedule Actives NPA65   Schedule  Active Post-withdrawal Active   Post-withdrawal 55 10% 10% 10% 10% 56 10% 5% 10% 5% 57 10% 5% 10% 5% 58 20%   5% 10% 5% 59 25% 5% 10% 5% 60 100% 100% 25% 40% 61 100% 100% 20% 20% 62 100%   100% 20% 20% 63 100% 100% 20% 20% 64 100% 100% 20% 20% 65 100% 100% 100% 100%   

    

 

 Deferred members with a Normal Retirement   Age (for service outside the Retiring Age 65 Schedule) of 60, and not on   special redundancy packages:  Age   Current schedule  NPA60 Schedule NPA65   Schedule 55 10% 10% 56 5% 5% 57 5% 5% 58 5% 5% 59 5% 5% 60 100% 40% 61 100%   20% 62 100% 20% 63 100% 20% 64 100% 20% 65 100% 100%  Deferred members with a Normal Retirement   Age (for service outside the Retiring Age 65 Schedule) other than 60, and not   on special redundancy packages, are assumed to retire at their Normal Retirement   Age.  Members on special redundancy   packages are assumed to retire at age 55, with the appropriate reduction   applied in each case.  Family Details  A man is assumed to be three years older   than his wife.  90% of male and 65% of   female members are assumed to be married at retirement or earlier death.  A children’s loading of 5% is applied to   benefits payable on death before retirement.    Transfer values  Allowance made   for transfers equivalent to £630M per annum over the period to 31 December   2021, based on the same demographic profile as those members transferring out   of the Main Fund Section over the three years to 31 December 2017. CETV   assumptions are assumed to be as follows for this purpose:  • Discount rate: swaps +2.2% p.a.  • Post-retirement mortality: As above   except with 1.25% p.a long term rate of improvement  • RPI/CPI inflation and LPI pension   increases: As above  • Commutation: No   allowance made

    

 

 Notwithstanding the use of the above CETV   assumptions for the purpose of the valuation, the Trustee shall review and   amend CETVs from time to time in accordance with the Rules and legislation,   as appropriate.  Expenses  An addition of £32M pa increasing annually   with RPI inflation, payable by the Bank in addition to the future service   rate. The allowance for expenses excludes investment-related expenses (which   are paid from the Main Fund Section) and excludes PPF levies in excess of £2M   in any year which are paid from the Main Fund Section.  Decrements for withdrawal, death before   retirement and ill health retirement    As well as death before retirement, allowance made for withdrawals   from service and ill health    retirements: 

Age Withdrawal   from service Death before  retirement   -  Males Death before  retirement -  Females Ill health  retirement -  Males Ill health retirement - Females 25   8.75 0.02 0.01 0.03 0.03 26 8.75 0.02 0.01 0.03 0.03 27 8.75 0.02 0.01 0.03   0.03 28 8.75 0.02 0.01 0.03 0.03 29 8.75 0.02 0.02 0.03 0.03 30 8.75 0.02   0.02 0.03 0.04 31 8.75 0.02 0.02 0.03 0.04 32 8.75 0.02 0.02 0.03 0.04 33   8.75 0.03 0.02 0.03 0.04 34 8.75 0.03 0.02 0.03 0.05 35 8.75 0.03 0.02 0.03   0.05 36 8.75 0.03 0.03 0.03 0.06 37 8.75 0.03 0.03 0.03 0.07 38 8.75 0.03   0.03 0.04 0.07 39 8.75 0.03 0.03 0.04 0.08 40 8.75 0.04 0.04 0.05 0.09 41 8.75   0.04 0.04 0.05 0.09 42 8.75 0.04 0.04 0.06 0.10 43 8.75 0.05 0.05 0.07 0.11   44 8.75 0.05 0.05 0.07 0.12 45 8.75 0.06 0.06 0.08 0.13 46 8.75 0.06 0.06   0.09 0.14 

    

 

 

 47 8.75 0.07 0.07 0.11 0.15 48 8.75 0.08   0.08 0.12 0.17 49 8.75 0.09 0.09 0.14 0.19 50 8.75 0.10 0.09 0.15 0.20 51   8.75 0.11 0.10 0.17 0.22 52 8.75 0.13 0.11 0.19 0.25 53 8.75 0.14 0.13 0.22   0.27 54 8.75 0.16 0.14 0.24 0.30 55 5 0.18 0.15 0.27 0.33 56 5 0.20 0.17 0.31   0.37 57 5 0.23 0.19 0.34 0.40 58 5 0.25 0.21 0.38 0.44 59 5 0.29 0.23 0.43   0.48 60 2 0.32 0.25 0.47 0.54 61 2 0.36 0.28 0.53 0.59 62 2 0.40 0.31 0.58   0.65 63 2 0.45 0.34 0.65 0.71 64 2 0.51 0.38 0.72 0.78 65 2 0.57 0.42 0.80   0.87  Factors for the calculation of   the Technical Provisions  Early and   late retirement — Where pensions are assumed to be payable before or after   Normal  Retirement Age for a particular   tranche of benefits, they are adjusted for early or late payment using  the Main Fund Section’s early and late   retirement factors which came into force with effect from  1 February 2018, summarised below:  Years retiring early/late Early retirement   (for revaluing  pension in excess of   GMP) Late retirement 0 1.000 1.000 1 0.962 1.027 2 0.925 1.055 3 0.890 1.084   4 0.856 1.116 5 0.824 1.150 6 0.793 1.187 7 0.762 1.227 8 0.734 1.269 9 0.706   1.314 10 0.679 1.362 

    

 

Commutation —   Allowance for members to commute 18% of their pension under the following set   of commutation factors:  Age Unisex 55   23.37 56 22.86 57 22.35 58 21.83 59 21.30 60 20.76 61 20.22 62 19.68 63 19.12   64 18.56 65 18.00  3. Trustee   definition of self-sufficiency  All   assumptions in line with Technical Provisions except as follows.  Discount rate: The better (higher) of spot   gilt and swap yields at each yearly tenor plus a 0% spread. Inflation: The   better (lower) of spot gilt RPI breakeven and swap RPI at each yearly   tenor.  Expense reserve:  • 3% of liabilities up to £50M, 2% of   liabilities between £50M and £100M, and 1% of liabilities in excess of   £100M  • Pensioners  Age Expense allowance per member < 60   £900 60 — 70 £800 70 — 80 £600 > 80 £500    • Non-pensioners: An allowance of £1,000 per member.  (No ongoing contributions from the   employers for expenses.)  4. Future   service contributions  Using a discount   rate 0.1% below that of the Technical Provisions and otherwise using   assumptions in line with the Technical Provisions.

    

 

Appendix 2   Draft Guarantee

    

 

GUARANTEE  DATED    By  NATWEST HOLDINGS   LIMITED  Relating to any detrimental   effect on the Main Fund Section of Royal Bank of Scotland Group Pension  Fund in respect of the withdrawal of Adam   & Company PLC (to be known as Royal Bank of Scotland  plc) from the Main Fund Section of the   Royal Bank of Scotland Group Pension Fund.              Allen & Overy LLP

    

 

CONTENTS  Clause Page     1. Interpretation 1    2. Guarantee and indemnity 2    3. Termination 5    4. Affordability clause 6    5. Representations 6    6. General undertakings 7    7. Changes to the Parties 7    8. Payment mechanics 7    9. Notices 8    10. Calculations and certificates 9    11. Partial invalidity 9    12. Remedies and waivers 10    13. Amendments and waivers 10    14. Counterparts 10    15. Governing law 10    16. Enforcement 10    Signatories 11

    

 

THIS DEED is   dated and is made BETWEEN:  (1) NATWEST   HOLDINGS LIMITED registered in England with company number 10142224 whose   registered office is 280 Bishopsgate, London, England, EC2M 4RB as guarantor   (the Guarantor); and  (2) RBS PENSION   TRUSTEE LIMITED registered in England with company number 2726164 whose   registered office as at 1 Princes Street, London, EC2R 8PB (the   Trustee).  BACKGROUND  (A) The Trustee is the trustee of the Group   Fund.  (B) Pursuant to a memorandum of   understanding dated 2018 the Guarantor has agreed  to provide a guarantee as mitigation for   any detrimental effect in respect of the withdrawal of Adam & Company PLC   from the Main Fund Section of the Group Fund.    IT IS AGREED as follows:  1.   INTERPRETATION  1.1 Definitions  In this Deed:  Authorisation means an authorisation,   consent, approval, resolution, licence, exemption, filing, notarisation or   registration.  Business Day means any   day other than a Saturday, Sunday or any other day which is a public holiday   in Scotland or England.  Employer means   each or any employer participating in the Main Fund Section from time to time   and Employers shall mean all of them.    Group Fund means the Royal Bank of Scotland Group Pension Fund as   governed by a definitive deed dated 5 April 2006 as amended from time to   time.  Guaranteed Liabilities means all   present and future obligations and liabilities (whether actual or contingent   and whether owed jointly or severally and in any capacity whatsoever) of each   Employer to make payments to the Main Fund Section.  Main Fund Section means the segregated   section of the Group Fund with that name referred to in clause 3.4 of the   definitive deed dated 5 April 2006 of the Group Fund (as amended from time to   time).  Party means a party to this   Deed.  Quarter End means, in any   calendar year, 31 March, 30 June, 30 September and 31 December.  1.2 Construction  (a) Unless a contrary indication appears,   any reference in this Deed to:

    

 

(i) either   Party shall be construed so as to include its successors in title, permitted   assigns and permitted transferees to, or of, its rights and/or obligations   under this Deed;  (ii) assets includes   present and future properties, revenues and rights of every description;  (iii) any agreement or instrument is a   reference to that agreement or instrument as amended, novated, supplemented,   extended or restated;  (iv) a person   includes any individual, firm, company, corporation, government, state or   agency of a state or any association, trust, joint venture, consortium,   partnership or other entity (whether or not having separate legal   personality);  (v) a regulation   includes any regulation, rule, official directive, request or guideline   (whether or not having the force of law) of any governmental,   intergovernmental or supranational body, agency, department or of any   regulatory, self-regulatory or other authority or organisation;  (vi) a provision of law is a reference to that   provision as amended or re-enacted; and    (vii) a time of day is a reference to London time.  (b) Section, clause and schedule headings   are for ease of reference only.  1.3   Third party rights  (a) A person who is   not a Party has no right under the Contracts (Rights of Third Parties) Act   1999 to enforce or to enjoy the benefit of any term of this Deed.  (b) The consent of any person who is not a   Party is not required to rescind or vary this Deed at any time.  2. GUARANTEE AND INDEMNITY  2.1 Guarantee and indemnity  The Guarantor irrevocably and   unconditionally:  (a) guarantees to the   Trustee the punctual performance by each Employer of all of its Guaranteed   Liabilities;  (b) undertakes with the   Trustee that whenever an Employer does not pay any amount when due in respect   of its Guaranteed Liabilities, it must after receiving a written demand from   the Trustee pay that amount as if it instead of the Employer was the   principal obligor in respect of that amount; and  (c) agrees with the Trustee that if any obligation   guaranteed by the Guarantor is or becomes unenforceable, invalid or illegal,   it will, as an independent and primary obligation indemnify the Trustee   immediately on demand against any cost, loss or liability the Trustee incurs   as a result of an Employer not paying any Guaranteed Liability which would,   but for such unenforceability, invalidity or illegality, have been payable by   that Employer in respect of any Guaranteed Liability on the date when it   would have been due. The amount payable by the Guarantor under this indemnity   will not exceed the amount it would have had to pay under this Deed if the   amount claimed had been recoverable on the basis of a guarantee.

    

 

2.2 Limit on   the amount recoverable  The amount   which may be recovered from the Guarantor shall not exceed the lower of the   following limits:  (a) in respect of   any demand made on the Guarantor by the Trustee under Subclause 2.1, an   amount equal to the entire aggregate liability of every employer (within the   meaning set out in Section 318 of the Pensions Act 2004 and regulations made   thereunder) in relation to the Main Fund Section, were a debt under Section   75 of the Pensions Act 1995 to have become due from every employer on that   date; and  (b) £7 billion.  2.3 Continuing guarantee  This guarantee is a continuing guarantee   and will extend to the ultimate balance of sums payable by the Employers in   respect of the Guaranteed Liabilities, regardless of any intermediate payment   or discharge in whole or in part.  2.4   Reinstatement  If any discharge,   release or arrangement (whether in respect of the obligations of the   Employers or any security for those obligations or otherwise) is made by the   Trustee in whole or in part on the basis of any payment, security or other   disposition which is avoided or must be restored in insolvency, liquidation,   administration or otherwise, without limitation, then the liability of the   Guarantor under this Clause will continue or be reinstated as if the   discharge, release or arrangement had not occurred.  2.5 Waiver of defences  The obligations of the Guarantor under this   Clause will not be affected by any act, omission, matter or thing which, but   for this Clause would reduce, release or prejudice any of its obligations   under this Clause including (without limitation and whether or not known to   it or the Trustee):  (a) any time,   waiver or consent granted to, or composition with, any person;  (b) the release of any person under the   terms of any composition or arrangement;    (c) the taking, variation, compromise, exchange, renewal or release   of, or refusal or neglect to perfect, take up or enforce, any rights against,   or security over assets of, any person;    (d) any non-presentation or non-observance of any formality or other   requirement in respect of any instrument or any failure to realise the full   value of any security;  (e) any   incapacity or lack of power, authority or legal personality of or dissolution   or change in the members or status of any other person;  (f) any amendment of this Deed, any Guaranteed   Liability or any other document;  (g)   any unenforceability, illegality, invalidity or non-provability of any   obligation of any person under any Guaranteed Liability or any other   document; or  (h) any insolvency,   resolution or similar proceedings.

    

 

2.6 Immediate   recourse  (a) The Guarantor waives any   right it may have of first requiring the Trustee to proceed against or   enforce any other right or security or claim payment from any person before   claiming from the Guarantor under this Clause.  (b) This waiver applies irrespective of any   law to the contrary.  2.7   Appropriations  Until all amounts which   may be or become payable by the Employers in respect of the Guaranteed   Liabilities have been irrevocably paid in full, the Trustee may:  (a) refrain from applying or enforcing any   other moneys, security or rights held or received by the Trustee in respect   of those amounts, or apply and enforce them in such manner and order as it   sees fit (whether against those amounts or otherwise) and the Guarantor will   not be entitled to the benefit of such moneys, security or rights; and  (b) hold in an interest-bearing suspense   account any moneys received from the Guarantor or on account of the   Guarantor’s liability under this Clause.    2.8 Deferral of Guarantor’s rights    (a) Until all amounts which may be or become payable by the Employers   in respect of the Guaranteed Liabilities have been irrevocably paid in full   or unless the Trustee otherwise directs, the Guarantor will not exercise any   rights which it may have by reason of performance by it of its obligations in   respect of the Guaranteed Liabilities or by reason of any amount being   payable, or liability arising under this Clause:  (i) to be indemnified by an Employer;  (ii) to claim any contribution from any   other guarantor of any Employer’s obligations in respect of the Guaranteed   Liabilities;  (iii) to take the benefit   (in whole or in part and whether by way of subrogation or otherwise) of any   rights of the Trustee in respect of the Guaranteed Liabilities or of any   other guarantee or security taken pursuant to, or in connection with, the   Guaranteed Liabilities by the Trustee;    (iv) to bring legal or other proceedings for an order requiring any   Employer to make any payment, or perform any obligation, in respect of which   the Guarantor has given a guarantee, undertaking or indemnity under this   Clause;  (v) to exercise any right of   set-off against any Employer; and/or    (vi) to claim or prove as a creditor of any Employer in competition   with the Trustee.  (b) If the Guarantor   receives any benefit, payment or distribution in relation to such rights it   must hold that benefit, payment or distribution to the extent necessary to   enable all amounts which may be or become payable to the Trustee by the   Employers under or in connection with the Guaranteed Liabilities be repaid in   full on trust for the Trustee and must promptly pay or transfer them to the   Trustee or as the Trustee may direct for application in accordance with   Clause 8 (Payment mechanics).

    

 

 2.9 Additional security  This guarantee is in addition to and is not   in any way prejudiced by any other guarantee or security now or subsequently   held by the Trustee.  2.10   Limitations  This guarantee does not   apply to any liability to the extent that it would result in this guarantee   constituting unlawful financial assistance within the meaning of sections 678   or 679 of the Companies Act 2006.  3.   TERMINATION  3.1 Agreement in   writing  This Deed may be terminated at   any time by the Guarantor with the agreement in writing of the Trustee.  3.2 Automatic termination  (a) This Deed will automatically terminate   in the event that:  (i) the Main Fund   Section has been fully wound up and has ceased to exist;  (ii) the Main Fund Section is on any four   consecutive Quarter Ends more than 100% funded on the basis of its technical   provisions (as defined under the statement of funding principles in force at   the relevant time in accordance with Part 3 of the Pensions Act 2004) but   using a discount rate of the better (higher) of spot gilt and swap yields at   each yearly tenor plus a 0% spread and using an inflation assumption of the   better (lower) of spot gilt RPI breakeven and swap RPI at each yearly tenor   and incorporating an expense reserve (the Guarantee Technical Provisions);   or  (iii) the Guarantor demonstrates to   the satisfaction of the Trustee (acting reasonably) that the Guarantor is   prohibited from continuing to provide this guarantee in full or in part due   to a change in any law or regulation (including but not limited to   regulations on clean holding company requirements).  (b) For the purpose of Clause 3.2(a)(ii)   above:  (i) the Guarantor may within 30   days of any Quarter End notify the Trustee that it wishes to assess the Main   Fund Section’s funding level in accordance with this Clause 3.2(b);  (ii) on receipt of a notice from the   Guarantor in accordance with Clause 3.2(b)(i), the Trustee (with the advice   of the actuary to the Main Fund Section) shall within 90 days of the relevant   Quarter End (or such longer period as the Trustee and the Guarantor may   agree) report to the Guarantor in writing its assessment of the Fund’s level   of funding on the basis of the Guarantee Technical Provisions as at the four   relevant Quarter Ends and shall also provide such information as the   Guarantor may reasonably require to enable it to verify that assessment;   and  (iii) in the event that the   Guarantor does not agree with the Trustee’s assessment it may refer the   matter to an independent actuary agreed between it and the Trustee (or, in   the event of their failure to agree, nominated by the President for the time   being of the Institute and Faculty of Actuaries) whose decision as to whether   the Main Fund Section was, on the relevant Quarter

    

 

Ends, more than   100% funded on the basis of the Guarantee Technical Provisions shall be   final.  4. AFFORDABILITY CLAUSE  The Parties acknowledge and agree that the   Trustee may give due regard to the Guarantor’s obligations to the Main Fund   Section under this Deed when considering the strength or otherwise of the   sponsor covenant supporting the Main Fund Section and in particular may take   such obligations into account for the following purposes:  (a) determining which methods and   assumptions are to be used in calculating the Main Fund Section’s technical   provisions for the purpose of Part 3 of the Pensions Act 2004 and Regulations   thereunder;  (b) the preparation and/or   revision of any recovery plan prepared for the purpose of section 226 of the   Pensions Act 2004 including when assessing the affordability of contributions   to be paid by the Employers under such a recovery plan; and  (c) the preparation and/or revision of any   schedule of contributions prepared for the purpose of section 227 of the   Pensions Act 2004.  5.   REPRESENTATIONS  5.1   Representations  The representations   and warranties set out in this Clause are made by the Guarantor to the   Trustee on the dates set out in Clause 5.6 (Times for making   representations).  5.2 Binding   obligations  (a) The obligations   expressed to be assumed by it in this Deed are, subject to any general   principles of law limiting its obligations, legal, valid, binding and   enforceable obligations.  5.3   Non-conflict with other obligations    The entry into and performance by it of, and the transactions   contemplated by, this Deed do not conflict with:  (a) any law or regulation applicable to   it;  (b) its constitutional documents;   or  (c) any agreement or instrument   binding on it or any of its assets.    5.4 Power and authority  It has   the power to enter into and perform, and has taken all necessary action to   authorise its entry into and performance of, this Deed and the transactions   contemplated by this Deed.  5.5   Validity and admissibility in evidence    All Authorisations required or desirable to enable it lawfully to   enter into, exercise its rights and comply with its obligations in this Deed   have been obtained or effected and are in full force and effect.

    

 

5.6 Times for   making representations  The   representations and warranties set out in this Clause are made by the   Guarantor on the date of this Deed.  6.   GENERAL UNDERTAKINGS  6.1 General  The Guarantor agrees to be bound by the   undertakings set out in this Clause.    6.2 Authorisations  The   Guarantor must promptly obtain, comply with and do all that is necessary to   maintain in full force and effect any Authorisation required under any   applicable law or regulation to enable it to perform its obligations under   this Deed.  6.3 Pari passu ranking  The Guarantor must ensure that its payment   obligations under this Deed at all times rank at least pari passu with the   claims of all its unsecured and unsubordinated creditors, except for   obligations mandatorily preferred by law applying to companies generally.  7. CHANGES TO THE PARTIES  7.1 Assignments and transfers by the   Guarantor(s)  The Guarantor may not   assign or transfer any of its rights and obligations under this Deed without   the prior consent of the Trustee.  7.2   Assignments and transfers by the Trustee    The Trustee may not assign or transfer any of its rights and   obligations under this Deed without the prior consent of the Guarantor except   that such consent is not required for any assignment or transfer to any   successor as trustee of the Group Fund.    8. PAYMENT MECHANICS  8.1 Payments   to the Trustee  (a) On each date on   which the Guarantor is required to make a payment to the Trustee under this   Deed, the Guarantor must make the payment available to the Trustee for value   on the due date at the time and in such funds specified by the Trustee to the   Guarantor as being customary at the time for settlement of transactions in   the relevant currency in the place of payment.  (b) All payments must be made to such   account as the Trustee specifies.  8.2   Business Days  (a) Any payment under   this Deed which is due to be made on a day that is not a Business Day will be   made on the next Business Day in the same calendar month (if there is one) or   the preceding Business Day (if there is not).

    

 

(b) During any   extension of the due date for payment of any principal under this Deed   interest at the prevailing discount rate used for the Main Section at the   relevant time is payable on the principal from the original due date.  8.3 Timing of payments  If this Deed does not provide for when a   particular payment is due, that payment will be due within three Business   Days of demand by the person to whom the payment is to be made.  9. NOTICES    9.1 Communications in writing    Any communication to be made under or in connection with this Deed   must be made in writing and, unless otherwise stated, may be made by fax or   letter.  9.2 Addresses  (a) Except as provided below, the contact   details of each Party for any communication to be made or delivered under or   in connection with this Deed are those notified by that Party to the other   Party for this purpose.  (b) The   contact details of the Guarantor for this purpose are:  Address:    Fax number:  E-mail:  Attention:    (c) The contact details of the Trustee for this purpose are:  Address:    Fax number:  E-mail:  Attention:    (d) Any Party may change its contact details by giving five Business   Days’ notice to the other Parties.  9.3   Delivery  Except as provided below, any   communication made or delivered by one Party to another under or in   connection with this Deed will only be effective:  (a) if by way of fax, when received in   legible form; or  (b) if by way of   letter, when it has been left at the relevant address or five Business Days   after being deposited in the post postage prepaid in an envelope addressed to   it at that address,  and, if a   particular department or officer is specified as part of its address details   provided under Clause 9.2 (Addresses), if addressed to that department or   officer. 

    

 

9.4 Electronic   communication  (a) Any communication to   be made between the Parties under or in connection with this Deed may be made   by electronic mail or other electronic means (including, without limitation,   by way of posting to a secure website), if the Parties:  (i) notify each other in writing of their   electronic mail address and/or any other information required to enable the   transmission of information by that means; and  (ii) notify each other of any change to   their electronic mail address or any other such information supplied by   them.  (b) Any electronic communication   as specified in paragraph (a) above to be made between the Guarantor and the   Trustee may only be made in that way to the extent that they agree that,   unless and until notified to the contrary, this is an accepted form of   communication.  (c) For the purposes of   this Deed, an electronic communication will be treated as being in   writing.  (d) Any electronic communication   as specified in paragraph (a) above made between the Parties will be   effective only when actually received (or made available) in readable   form.  (e) Any electronic communication   which would otherwise become effective on a non-working day or after business   hours in the place in which the Party to whom the relevant communication is   sent (or made available) has its address for the purposes of this Deed will   be deemed only to become effective on the next working day in that   place.  (f) Any reference in this Deed   to a communication being sent or received will be construed to include that   communication being made available in accordance with this Clause 9.4   (Electronic communication).  10.   CALCULATIONS AND CERTIFICATES  10.1   Accounts  In any litigation or   arbitration proceedings arising out of or in connection with the Guaranteed   Liabilities, the entries made in the accounts maintained by the Trustee are   prima facie evidence of the matters to which they relate.  10.2 Certificates and determinations  Any certification or determination by the   Trustee of a rate or amount in respect of the Guaranteed Liabilities is, in   the absence of manifest error, conclusive evidence of the matters to which it   relates.  10.3 Day count   conventions  Any interest, commission or   fee accruing under this Deed will accrue from day to day and is calculated on   the basis of the actual number of days elapsed and a year of 360 days.  11. PARTIAL INVALIDITY  If, at any time, any term of this Deed is   or becomes illegal, invalid or unenforceable in any respect under any law of   any jurisdiction that will not affect:  (a) the legality, validity or enforceability   in that jurisdiction of any other term of this Deed; or 

    

 

(b) the   legality, validity or enforceability in other jurisdictions of that or any   other term of this Deed.  12. REMEDIES   AND WAIVERS  No failure to exercise,   nor any delay in exercising, on the part of the Trustee, any right or remedy   in respect of the Guaranteed Liabilities will operate as a waiver, nor will   any single or partial exercise of any right or remedy prevent any further or   other exercise or the exercise of any other right or remedy. The rights and   remedies provided in this Deed are cumulative and not exclusive of any rights   or remedies provided by law and may be waived only in writing and   specifically.  13. AMENDMENTS AND WAIVERS  Any term of or any right or remedy under   this Deed may be amended or waived only with the consent of the Guarantor and   the Trustee and any such amendment or waiver will be binding on both Parties.  14. COUNTERPARTS  This Deed may be executed in any number of   counterparts. This has the same effect as if the signatures on the   counterparts were on a single copy of this Deed.  15. GOVERNING LAW  This Deed and any non-contractual   obligations arising out of or in connection with it are governed by English   law.  16. ENFORCEMENT  16.1 Jurisdiction  (a) The English courts have exclusive   jurisdiction to settle any dispute arising out of or in connection with this   Deed (including a dispute relating to existence, validity or termination of   this Deed or any non-contractual obligation arising out of or in connection   with this Deed) (a Dispute).  (b) The   Parties agree that the English courts are the most appropriate and convenient   courts to settle Disputes and accordingly no Party will argue to the   contrary.  This Deed has been entered   into on the date stated at the beginning of this Deed.

    

 

SIGNATORIES  Guarantor    NATWEST HOLDINGS LIMITED    By:   (Director)  and      (Director/Secretary)    Trustee  RBS PENSION TRUSTEE   LIMITED  By:    (Director)  and      (Director)

    

 

SCHEDULE 2  FLEXIBLE APPORTIONMENT ARRANGEMENT 

    

 

FLEXIBLE   APPORTIONMENT AGREEMENT  DATED   2018  relating to  THE ROYAL BANK OF SCOTLAND  GROUP PENSION FUND  FLEXIBLE APPORTIONMENT ARRANGEMENT  RELATING TO:  (i) NatWest Markets Plc (formerly known as   The Royal Bank of Scotland plc)  (ii)   Royal Bank of Scotland International Limited    (iii) Coutts and Company;    and  (iv) Chartered Institute of   Bankers in Scotland     Allen &   Overy LLP 

    

 

THIS AGREEMENT   is made as a deed on 2018    BETWEEN:  (1) NatWest Markets   Plc (previously known as The Royal Bank of Scotland plc) registered in   Scotland with company number SC090312 whose registered office is at 36 St   Andrew Square, Edinburgh, EH2 2YB;  (2)   The Royal Bank of Scotland International Limited registered in Jersey with   company number 2304 whose registered office is at PO BOX 64, Royal Bank   House, 71 Bath Street, St Helier, Jersey, JE4 8PJ;  (3) Coutts and Company registered in   England with company number 00036695 whose registered office is at 440   Strand, London, WC2R 0QS;  (4)   Chartered Institute of Bankers in Scotland registered charity number SC013927   whose registered office is at 38b Drumsheugh Gardens, Edinburgh, EH3   7SW;  (together the Leaving   Employers);  (5) RBS Pension Trustee   Limited registered in England with company number 2726164 whose registered   office is at 1 Princes Street, London EC2R 8PB (the Trustee); and  (6) National Westminster Bank PLC   registered in England with company number 929027 whose registered office is   at 135 Bishopsgate, London EC2M 3UR (the Replacement Employer).  BACKGROUND    (A) The retirement benefits scheme known as the Royal Bank of Scotland   Group Pension Fund (the Group Fund) is governed by a definitive trust deed   and rules dated 5 April 2006 (as amended from time to time) (the Trust Deed   and Rules). The parties wish to enter into this flexible apportionment   agreement in relation to the Main Section of the Group Fund (the Main   Section).  (B) The Replacement Employer   is a participating employer in the Main Section and the Trustee is the   present trustee of the Main Section.    (C) Under Clause 26.2 of the Trust Deed and Rules, a participating   employer shall cease to participate in the Group Fund or a section of the   Group Fund if the Replacement Employer gives three months’ written notice to   the Trustee (or such shorter period of notice as it may accept) terminating   the participating employer’s liability to contribute to the Group Fund or a   section of the Group Fund and such notice (without being withdrawn)   expires.  (D) Under Clause 26.3, if an   employer ceases to be a participating employer under the Group Fund or a   section of the Group Fund under Clause 26.2, then from the date it ceases to   participate no further pension or other benefits shall accrue under the Group   Fund or section of the Group Fund for or in respect of any employees of the   participating employer and its liability to contribute to the Fund shall   cease, except in respect of:  (i)   contributions (including suspended contributions) and administration expenses   which became due before the date it ceased to participate;  (ii) administration expenses incurred in   connection with its ceasing to participate; and  (iii) any liability in relation to section   75 of the Pensions Act 1995.

    

 

(E) The Leaving   Employers, the Replacement Employer and the Trustee (amongst others) entered   into a Framework Agreement at or around the same date as this Agreement (the   Framework Agreement). The parties to the Framework Agreement agreed that this   Agreement would be held in escrow pending the Release Date (as defined in the   Framework Agreement) as set out in clause 2.1 of the Framework   Agreement.  (F) The Replacement   Employer provided written notice to the Trustee in accordance with Clause   26.2 of the Trust Deed and Rules terminating the Leaving Employers’ liability   to contribute to the Main Section on and from the Implementation Date (as   defined below), and the Trustee accepted that notice (including the shorter   period of that notice).  (G) On the   Implementation Date (as defined below), the Leaving Employers will therefore   cease to employ any active members of the Main Section. At this time, the   Replacement Employer, who is not a defined contribution employer (as defined   in the Occupational Pension Schemes (Employer Debt) Regulations 2005 (the   Debt Regulations)), continues to employ at least one active member of the   Main Section. As a result, but for the operation of regulation 6ZA(7) of the   Debt Regulations and the arrangement contemplated by this Agreement, an   employment cessation event (as defined below) would have occurred in relation   to the Leaving Employers which would have triggered a debt under section 75   of the Pensions Act 1995 (as modified by the Debt Regulations).  (H) Under Clause 26.3A of the Trust Deed   and Rules, the Trustee may enter into any form of arrangement or agreement   prescribed by the Debt Regulations, in respect of any sum that falls to be   treated as a debt due under section 75 of the Pensions Act 1995 from an   employer who ceases to participate under Clause 26.2, or which would fall to   be treated as a debt, but for the existence of the arrangement under the Debt   Regulations.  (I) In accordance with   the power under Clause 26.3A of the Trust Deed and Rules described in Recital   H above and the general statutory power under the Debt Regulations, the parties   wish to enter into a flexible apportionment arrangement within the meaning of   regulation 2(1) of the Debt Regulations (a Flexible Apportionment   Arrangement) on the terms set out in this Agreement so that the Replacement   Employer takes over responsibility for all the Leaving Employers’ liabilities   in relation to the Main Section.  (J)   Each of the parties consents to the liabilities of the Leaving Employers   being dealt with in the manner contemplated in this Agreement, and intends   that this Agreement shall constitute a Flexible Apportionment Arrangement so   that, pursuant to regulation 6ZA(7) of the Debt Regulations, no employment   cessation event will occur in relation to the Leaving Employers when they   cease to employ any active members of the Main Section, as described in   Recitals (F) and (G) above.  (K) The   Trustee is satisfied that the Flexible Apportionment Arrangement entered into   under this Agreement has met the funding test requirement as prescribed in   regulation 2(4A) of the Debt Regulations.    (L) The Main Section is not currently in an assessment period under   section 132 of the Pensions Act 2004 in relation to the Pension Protection   Fund and the Trustee is satisfied that such an assessment period is unlikely   to begin in relation to the Main Section within the period of 12 months   beginning with the Implementation Date (as defined below). The Main Section   is not being wound up.  (M) The Leaving   Employers are not in a period of grace in accordance with regulation 6A of   the Debt Regulations.  (N) The Leaving   Employers and the Replacement Employer respectively meet the requirements of   ‘the leaving employer’ and ‘the replacement employer’ set out in regulation   6E(7) of the Debt Regulations in relation to the Flexible Apportionment   Arrangement entered into under this Agreement. 

    

 

 

(O) In entering   into this Agreement, the Trustee is not entering into a legally enforceable   agreement which has the effect of reducing the amount of any debt due to the   Main Section under section 75 of the Pensions Act 1995 which may be recovered   by (or on behalf of) the Trustee so that the Main Section would cease to be   an eligible scheme by reason of regulation 2(2) of the Pension Protection   Fund (Entry Rules) Regulations 2005 (the Entry Regulations), and the parties   intend that the arrangement set out in Clause 2 of this Agreement will   qualify as a Flexible Apportionment Arrangement and agree that in these   circumstances regulation 2(4) of the Entry Regulations will apply.  OPERATIVE PROVISIONS  1. INTERPRETATION  1.1 In this Agreement:  Employer and employment cessation event   shall have the meanings given to them in the Debt Regulations;  Implementation Date means 1 November 2018   or such other date as is determined to be the Implementation Date in   accordance with the Framework Agreement; and    liabilities in relation to the Main Section in relation to the Leaving   Employers means all liabilities of the Leaving Employers within the meaning   of Regulation 6ZB(17) of the Debt Regulations as those liabilities stand   immediately before the Implementation Date.    2. FLEXIBLE APPORTIONMENT ARRANGEMENT    2.1 An employment cessation event is due to occur on the   Implementation Date in relation to the Leaving Employers for the purposes of   the Debt Regulations.  2.2 The   Replacement Employer agrees to take over and shall, on and from the   Implementation Date, take over responsibility for all of the Leaving   Employers’ liabilities in relation to the Main Section in accordance with   Regulation 6E(2)(b)(i) of the Debt Regulations.  2.3 The Trustee agrees that, in accordance   with Regulation 6ZA(7) of the Debt Regulations, on and from the   Implementation Date the Leaving Employers shall cease to participate in the   Main Section and at this time an employment cessation event will not occur in   respect of the Leaving Employers and no amount shall be treated as a debt due   to the Trustee of the Main Section as a result of the Leaving Employers   ceasing to employ active members in the Main Section in the circumstances set   out in Recitals (C) and (G) of this Agreement.  2.4 In accordance with the power under   Clause 26.3A, described in Recital (H) above and the general statutory power   under the Debt Regulations, the Trustee agrees that on and from the   Implementation Date, the Flexible Apportionment Arrangement entered into   under this Agreement constitutes full and final discharge and/or   apportionment of all of the Leaving Employers’ liabilities in relation to the   Main Section so that the Leaving Employers shall have no further liability to   or in respect of the Main Section. For the avoidance of doubt, the Trustee   agrees that this shall include any liabilities under sections 75 and 75A of   the Pensions Act 1995 (as amended by the Debt Regulations) and any   liabilities that would otherwise be payable under Clause 26.3 of the Trust   Deed and Rules, as described in Recital (D) above.  2.5 Each of the Trustee, the Leaving   Employers and the Replacement Employer consents to the Flexible Apportionment   Arrangement for the purposes of Regulation 6E(2)(c) of the Debt Regulations.

    

 

2.6 For the   avoidance of doubt, the events contemplated by and in this Agreement, and in   particular the employment cessation event referred to in Recital (C) and   Clause 2.1 of this Agreement shall not trigger a partial winding-up of the   Main Section in relation to the Leaving Employers.  3. FUNDING TEST  3.1 The Trustee has concluded that the   arrangement in Clause 2 meets the funding test set out in regulation 2(4A) of   the Debt Regulations.  3.2 The parties   agree that if all of the conditions in Regulation 6E of the Debt Regulations   are not met within 28 days of the date of the Funding Test Completion Date   (as defined in the Framework Agreement), the Agreement will become void and   the Flexible Apportionment Arrangement will not take effect.  4. GENERAL    4.1 The Replacement Employer shall pay the Trustee’s reasonable legal   costs incurred in relation to this Agreement.    4.2 The parties intend this Agreement to satisfy the requirements for   a Flexible Apportionment Arrangement.    4.3 In the event that a court decides that any provision of this   Agreement breaches the requirements for a Flexible Apportionment Arrangement,   that provision shall be void and unenforceable but, subject to Clauses 4.4,   4.5 and 4.6, the remainder of the provisions of this Agreement shall remain in   force.  4.4 In the event that a court   decides that this Agreement breaches the requirements for a Flexible   Apportionment Arrangement and:  (i) it   is not possible to rectify that breach by declaring one or more provisions of   the Agreement void under Clause 4.3; or    (ii) the effect of any such declaration would, in the reasonable   opinion of the Trustee, render the Agreement as no longer representing the   original intention of the parties as set out in the Recitals to this   Agreement,  the parties will use all reasonable   endeavours to agree to amend this Agreement to remedy the breach of the   requirements for a Flexible Apportionment Arrangement, or enter into a   similar Flexible Apportionment Arrangement or any other arrangement permitted   under the Debt Regulations or provisions that replace the Debt Regulations   representing the intentions of the parties as set out in the Recitals to this   Agreement. 

    

 

4.5 In the   event that the parties are unable to agree to the amendments to this   Agreement under Clause 4.4, this Agreement shall be void and unenforceable in   its entirety and will not constitute a legally enforceable agreement as   defined in Regulation 2(2) of the PPF Entry Regulations.  4.6 If any part of this Agreement is held   to be invalid or unenforceable, the rest of this Agreement will be construed   (to the maximum extent possible after making suitable grammatical and other   minor consequential changes) as if it had been executed omitting the invalid   or unenforceable words or parts of words and will remain in full force and   effect.  4.7 The Leaving Employers and   the Replacement Employer each represent and warrant to the Trustee that all   authorisations required in connection with the entry into and performance of   its obligations under this Agreement have been obtained or effected and are   in full force and effect and that the persons signing this Agreement on its   behalf are authorised to do so.  4.8   The Replacement Employer further represents and warrants to the Trustee that   the entry into this Agreement and the performance of its obligations under   this Agreement does not conflict with any law or regulation or judicial or   official order to which it is subject or conflict with its constitutional   documents or conflict with any document which is binding upon any of its   assets.  4.9 The application of the   Contracts (Rights of Third Parties) Act 1999 to this Agreement is expressly   excluded. No person who is not a party to this Agreement may enforce any of   its terms under that Act, except that any future trustee of the Main Section   and any successor employer to the Replacement Employer may enforce a term of   this Agreement in that respective capacity.    5. GOVERNING LAW  This Agreement   and any non-contractual obligations arising out of or in connection with it shall   be governed by English law.  6.   JURISDICTION  The English courts have   exclusive jurisdiction to settle any dispute arising out of, relating to or   having any connection with this Agreement, and any dispute relating to   non-contractual obligations arising out of or in connection with it and each   party submits to the exclusive jurisdiction of the English courts. For the   purpose of this Clause 6, each party waives any objection to the English   courts on the grounds that they are an inconvenient or inappropriate forum to   settle any Dispute.  7.   COUNTERPARTS  This Agreement may be   entered into in any number of counterparts, all of which taken together shall   constitute one and the same agreement and any party may enter into this   Agreement by executing a counterpart.    IN WITNESS of which this Agreement has been executed as a deed by the   parties (or their duly authorised representatives) and has been delivered on   the date stated at the beginning of this Agreement. 

    

 

SIGNATORIES  EXECUTED and DELIVERED as a DEED for and on   ) behalf of NATWEST MARKETS PLC ) (previously known as The Royal Bank of   Scotland plc) by ) Richard Place acting under a power of attorney ) in his   favour dated 23 July 2018 in the presence of: )    Signature of Witness:  Full name:    Address:

    

 

EXECUTED and   DELIVERED as a DEED ) for and on behalf of THE ROYAL BANK OF ) SCOTLAND   INTERNATIONAL LIMITED. )  Director  Director 

    

 

EXECUTED and   DELIVERED as a DEED  for and on behalf   of COUTTS & COMPANY by:    Director   in the presence   of:     Signature of Witness:  Witness name:  Witness address:   Witness occupation:

    

 

EXECUTED as a   DEED by ) CHARTERED INSTITUTE OF BANKERS ) IN SCOTLAND acting by two   trustees: )  Trustee  Trustee

    

 

EXECUTED as a   DEED by ) RBS PENSION TRUSTEE LIMITED acting ) by two directors or a director   and its secretary: )  Director  Director/Secretary 

    

 

 EXECUTED and DELIVERED as a DEED for and on   ) behalf of NATIONAL WESTMINSTER BANK PLC by ) Ewen Stevenson acting under a   power of attorney ) in his favour dated 6 September 2018 in the presence of:   )      Signature of Witness:  Full name:    Address:

    

 

SCHEDULE 3  BULK TRANSFER AGREEMENTS  

    

 

BULK TRANSFER   AGREEMENT dated 2018 relating to the bulk transfer from the RBS Main Fund   Section to the Royal Bank of Scotland International Limited Section of the   Royal Bank of Scotland Group Pension Fund Allen & Overy LLP

    

 

CONTENTS   Clause    Page 1 Interpretation 2 2 Transfer Conditions 2 3 Transfer of Assets 3   4 Transfer of Liabilities 4 5 Contributions to the new sections  4 6 Discharge of Liabilities 5 7 period   before bulk transfer Completed 5 8 Payment on Account 5 9 Non-Satisfaction of   Transfer Conditions 5 10 Fair Treatment and Discretionary Practices 5 11 HMRC   and Contracting-Out 6 12 Indemnity 7 13 Governing Law and Jurisdiction 7 14   Severability 7 15 Miscellaneous 7     Schedule  1 Calculation of   Transfer Amount 2 Transferring Members 3 Trustee’s self-sufficiency funding   assumptions 4 Schedule of payments 

    

 

THIS AGREEMENT   is made by way of deed on 2018 BY: RBS PENSION TRUSTEE LIMITED (registered in   England under number 02726164) 1 Princes Street, London, EC2R 8PB (the   Trustee); and NATIONAL WESTMINSTER BANK PLC (registered in England under   number 00929027) 135 Bishopsgate, London, EC2M 3UR (the Bank). BACKGROUND:   The Trustee is the trustee of the RBS Main Fund Section (the Transferring   Section), the Royal Bank of Scotland International Limited Section and the   NatWest Markets Section (the New Sections) of the Royal Bank of Scotland   Group Pension Fund (the Group Fund). The Bank and the Trustee (amongst   others) entered into a non-legally binding Memorandum of Understanding dated   16 April 2018 (the AA MoU) in good faith to document their intention in   relation to a bulk transfer of members from the Transferring Section to the   RBS AA Section of the Group Fund or a new segregated section of the Group   Fund. The parties have decided that the New Sections will be used for this   purpose. The Bank and the Trustee have therefore set up the New Sections in   order to facilitate the transfer of liabilities of the Transferring Members   (as defined below) from the Transferring Section to the New Sections. This   Agreement shall effect the transfer of Transferring Members to the Royal Bank   of Scotland International Limited Section (the RBSI Section). The Transferring   Members will transfer from the Transferring Section to the RBSI Section. The   Royal Bank of Scotland International Limited will cease to participate in the   Transferring Section on 1 November 2018. Accordingly, the Transferring   Members will cease accrual in the Transferring Section. In accordance with   clause 5.1 of the AA MoU the Transferring Members’ accrued pension benefits   are to remain the same, and the Transferring Members shall be entitled to   accrue future pension benefits on the same basis, after the transfer to the   RBSI Section. The Transferring Members will therefore join the RBSI Section   from 1 November 2018 on an identical basis to their current participation in   the Transferring Section. It is also intended that the basis on which actuarial   factors are determined in the RBSI Section will be no less favourable than in   the Transferring Section from the Bulk Transfer Date (as defined below).   However, benefits and factors may be amended in future as circumstances   require. In accordance with clause 5.3 of the AA MoU, the Bank intends to   transfer the past service benefits of the Transferring Members from the   Transferring Section to the RBSI Section. In order to facilitate this a bulk   transfer of assets and liabilities from the Transferring Section to the RBSI   Section in respect of Transferring Members’ accrued benefits to the date of   transfer is therefore also required. At the Bank's request, the Trustee has   agreed to transfer from the Transferring Section to the RBSI Section assets   and liabilities relating to the Transferring Members. In accordance with   clause 5.4(e) of the AA MoU, the Bank and the Trustee have agreed that the   transfer from the Transferring Section to the RBSI Section under this   Agreement will be carried out as if it is made between two separate schemes. 

    

 

(1) The Bank   and the Trustee (amongst others) entered into a Framework Agreement at or   around the same date as this Agreement. The parties to the Framework   Agreement agreed that this Agreement would be held in escrow pending the   Release Date (as defined in the Framework Agreement) as set out in clause 2.1   of the Framework Agreement. It is the intention of the parties that this   document be executed as a deed.  THIS   DEED WITNESSES as follows: 1. INTERPRETATION 1.1 The following expressions   have the following meanings in this Agreement: Actuary means, in relation to   the Group Fund, the actuary appointed pursuant to section 47 of the Pensions   Act 1995. Bulk Transfer Date means midnight on 31 October 2018. Conditions   means the conditions set out in clause 2. GMP means a guaranteed minimum   pension within the meaning of the Pension Schemes Act 1993. RBSI Section   Rules means the documents governing the RBSI Section. Section 9(2B) rights   has the same meaning as in the Occupational Pension Schemes (Contracting-out)   Regulations 1996. Transfer means the transfer of assets from the Transferring   Section to the RBSI Section pursuant to clause 3. Transfer Amount has the   meaning given in Schedule 1 (Calculation of Transfer Amount). Transferring   Section Rules means the documents governing the Transferring Section.   Transferring Members means the employees listed in Schedule 2 (subject to any   additions or removals agreed by the Trustee and Bank prior to the Bulk   Transfer Date) unless any such employees have provided the Bank with notice   that they wish to opt out of the Transfer and are included on a list of   opt-out members provided by the Bank to the Trustee before 1 November 2018.   1.2 In this Agreement: any reference to a party to this Agreement includes   the successors and assigns (immediate or otherwise) of that party; any   reference to a clause, sub-clause or schedule is to a clause, sub-clause or   schedule of or to this Agreement; the schedules form part of this Agreement;   and the headings do not affect the interpretation of this Agreement. 2.   TRANSFER CONDITIONS 2.1 The Bank and Trustee agree that the Transfer will be   made without the consent of the Transferring Members and the requirements   under Part IV (Protection for Early Leavers) of the Pension Schemes

    

 

Act 1993, the   Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 and   the Contracting-out (Transfer and Transfer Payment) Regulations 1996 in   respect of a transfer between two occupational pension schemes will be   applied as if those requirements apply to the transfer of liabilities set out   in this Agreement. 2.2 Accordingly the following conditions must be satisfied   before a Transfer can be made: the Trustee has received an actuarial certificate   in the same form as that required under regulation 12(3) of the Occupational   Pension Schemes (Preservation of Benefit) Regulations 1991, the date of the   Transfer is within three months of the date of the Actuary's signature to the   relevant certificate and by the date of such Transfer there are no   significant changes to the benefits, data and documents used in making the   certificate; the RBSI Section is able to accept the transfer of the accrued   rights to, and the liability for the payment of, guaranteed minimum pensions   and section 9(2B) rights under the Transferring Section; at least one month's   notice has been provided to each Transferring Member in the same form as that   required under regulation 12(4B) of the Occupational Pension Schemes   (Preservation of Benefit) Regulations 1991. 2.3 The parties agree to use all   reasonable endeavours to satisfy the Conditions as soon as is reasonably   practicable and to ensure compliance with any requirement attaching to them   in relation to each Transfer. 3. TRANSFER OF ASSETS 3.1 A Transfer Amount   will be calculated by the Actuary for the RBSI Section as set out in Schedule   1. 3.2 The Trustee acknowledges that the Bank will (or will procure that   another group entity will) make a payment of £2 billion to the Transferring   Section in accordance with clause 5 of the Framework Agreement before the   Bulk Transfer Date. For the purposes of the calculation of the Transfer   Amount, the assets of the Transferring Section shall be deemed to include the   £2 billion contribution. 3.3 Any liability which there may be in respect of   any difference as between a man and a woman relating to the guaranteed   minimum pension of a Transferring Member recognised after the Bulk Transfer   Date will not be included in the calculation. 3.4 The parties will promptly   provide the Actuary with any documents and information which the Actuary may   reasonably require to facilitate the calculation. 3.5 In accordance with   clause 28.1.2 of the trust deed dated 5 April 2006 governing the Group Fund,   the parties agree, having considered the advice of the Actuary, that the   Transfer Amount may be greater than the cash equivalent of Transferring   Members’ accrued rights calculated in accordance with Chapter IV of Part IV   of the Pension Schemes Act 1993. 3.6 The Trustee will arrange the transfer of   the relevant Transfer Amount from the Transferring Section to the RBSI   Section in accordance with Schedule 1, as long as the Conditions have been   and remain satisfied. 3.7 When transferring the Transfer Amount to the RBSI   Section, the Trustee will also transfer any money purchase assets in respect   of the relevant Transferring Members.

    

 

4. TRANSFER OF   LIABILITIES 4.1 On and from the Bulk Transfer Date in relation to the   Transferring Members: no further benefits will accrue or, except as stated in   this Agreement, be payable under the Transferring Section; for the purposes   of determining the benefits payable under the Transferring Section, the   Transferring Members are deemed not to receive any increase in earnings; the   provisions of the Transferring Section providing for benefits in the event of   death while in any employment to which the Transferring Section applies do   not apply on or after the Bulk Transfer Date and such benefits will instead   be provided under the RBSI Section; and subject to the powers of alteration   and termination in the RBSI Section and to the other provisions of this   Agreement, the Trustee will provide under the RBSI Section the benefits set   out in clause 4.2. 4.2 On the Bulk Transfer Date, the Trustee shall provide   in respect of each Transferring Member the same future service benefits,   entitlements and accrued rights to benefits which were payable under the   Transferring Section, subject to the same employee contributions, conditions   and options as applied under the Transferring Section immediately before the   Bulk Transfer Date, as set out in the Transferring Section Rules. 4.3 The   Trustee will apply the relevant part of the Transferring Section’s assets   which is attributable to Transferring Members' money purchase benefits to   provide benefits in respect of each such Transferring Member on a money   purchase basis and so that no such assets will be disinvested and will be   transferred in specie. 4.4 The Trustee will treat as members' contributions for   the purposes of the RBSI Section the amounts (if any) as decided by the   Trustee. 5. CONTRIBUTIONS TO THE RBSI SECTION 5.1 The Trustee and Bank agree   that the Trustee will carry out an actuarial valuation for the RBSI Section   with an effective date of 31 December 2018 in accordance with the Pensions   Act 2004. 5.2 The Trustee and the Bank will agree a statement of funding   principles, schedule of contributions and, if necessary, recovery plan, for   the RBSI Section (the Funding Documents) in accordance with the Pensions Act   2004 for an actuarial valuation with an effective date of 31 December 2018.   The Trustee and the Bank agree to use reasonable endeavours to complete the   Funding Documents so that the schedule of contributions takes effect from a   date no later than 1 October 2019. 5.3 On and from the Bulk Transfer Date   until the date the schedule of contributions referred to in clause 5.2 above   takes effect, the future service contributions to the RBSI Section in respect   of the Transferring Members will be as set out in the Schedule of Payments   appended at Schedule 4 to this Agreement. 5.4 On and from the first valuation   of the RBSI Section, the future service contribution rate for Transferring   Members shall be recalculated to reflect the actuarial assumptions agreed in   the statement of funding principles for the RBSI Section.

    

 

6. DISCHARGE OF   LIABILITIES 6.1 On the Transfer being made, benefits of the Transferring   Members cease to be payable under the Transferring Section and the Trustee is   discharged from all liability under the Transferring Section in respect of   the benefits which the Trustee has agreed to provide under the RBSI Section.   7. PERIOD BEFORE BULK TRANSFER COMPLETED 7.1 If a Transfer is not made to the   RBSI Section on the Bulk Transfer Date, then until the relevant Transfer is   made in full (or the parties agree that such Transfer will not proceed): the   Trustee will exercise its powers and duties under the Transferring Section   and with a view to implementing this Agreement; and benefits and entitlements   in respect of relevant Transferring Members which arise or have arisen by   reference to the Transferring Section Rules will be paid by the Trustee from   the Transferring Section but once the Transfer has been made in full such payments   will be treated as having been made from the RBSI Section. 7.2 The Bank and   the Trustee undertake between the date of this Agreement and the completion   of the Transfer, to the extent reasonably practicable, to administer the RBSI   Section and Transferring Section in a manner consistent with their respective   obligations under this Agreement and otherwise on a basis consistent with its   administration in the ordinary course of business. 8. PAYMENT ON ACCOUNT The   Trustee may make a payment from the Transferring Section to the RBSI Section   on account of the Transfer or repay from the RBSI Section to the Transferring   Section as required. 9. NON-SATISFACTION OF TRANSFER CONDITIONS If the   conditions or requirements which must be fulfilled as mentioned in this Agreement   or by law before the Transfer to the RBSI Section can be made have not been   fulfilled by 31 March 2019 (or any later date that is agreed): the Transfer   to the RBSI Section will not be made; benefits attributable to pensionable   service before the Bulk Transfer Date will be payable out of the Transferring   Section and benefits will be payable out of the RBSI Section (in accordance   with clause 4) for subsequent pensionable service. 10. FAIR TREATMENT AND   DISCRETIONARY PRACTICES 10.1 The Bank and the Trustee will (and will use   reasonable endeavours to ensure that their successors will), when exercising   discretionary powers under the RBSI Section relating to benefits for or in   respect of Transferring Members: take into account the manner in which   comparable powers have (so far as disclosed to or as may have come to the   knowledge of the Trustee) been exercised under the Transferring Section prior   to the Bulk Transfer Date; and consider, but not be bound by, the manner in   which comparable powers have been exercised under the Transferring Section   after the Bulk Transfer Date.        

10.2 When   exercising any discretionary powers in line with 10.1 above, the Trustee will   have regard to the “Discretions Table” being prepared by the Trustee in   relation to the Transferring Section. 10.3 On and from the Bulk Transfer Date   the basis on which the actuarial factors applicable to Transferring Members   are determined shall be no less favourable than the basis which applied to   the Transferring Members in the Transferring Section. However, in addition to   clause 10.4, such actuarial factors may be reviewed from time to time taking   into account the prevailing circumstances in the RBSI Section at that time.   10.4 The Trustee shall within 12 months of the Bulk Transfer Date, review the   actuarial factors relating to cash equivalent transfer values from the RBSI   Section, taking into account any change in the funding position and   investment strategy, and will notify the Bank of any necessary changes that   have been agreed by the Trustee on the advice of the Actuary. 11. HMRC AND   CONTRACTING-OUT 11.1 The RBSI Section Rules contain provisions complying with   Part I of Schedule 1 to the Contracting-out (Transfer and Transfer Payment)   Regulations 1996 (rights to guaranteed minimum pensions of an earner who has   not entered contracted-out employment by reference to the New Sections) and   Part III of Schedule 1 to the Contracting-out (Transfer and Transfer Payment)   Regulations 1996 (payment of guaranteed minimum pensions in payment). 11.2   Where any Transferring Member has an entitlement to a GMP or to Section 9(2B)   rights in the Transferring Section, the Trustee on behalf of the RBSI Section   will: assume responsibility to provide to and in respect of that Transferring   Member the GMP benefits and any Section 9(2B) rights as required by the   contracting-out provisions of Pension Schemes Act 1993; in relation to the   transfer of GMPs, comply with the conditions referred to in regulations 3(c)   and (e) of the Contracting-out (Transfer and Transfer Payment) Regulations   1996; and in relation to the transfer of any Section 9(2B) rights, comply   with the conditions referred to in regulation 9(a) of those Regulations.

    

 

10.2 When   exercising any discretionary powers in line with 10.1 above, the Trustee will   have regard to the "Discretions Table" being prepared by   the,Trustee in relation to the Transferring Section. 10.3 On and from the   Bulk Transfer Date the basis on which the actuarial factors applicable to   Transferring Members are determined shall be no less favourable than the   basis which applied to the Transferri:llg Members in the Transferring   Section. However, in addition to clause 10.4, such actuarial factors may be reviewed   from time to time taking into account the prevailing circumstances in the   RBSI Section at that time. 10.4 The Trustee shall within 12 months ofthe Bulk   Transfer Date, review the actuarial factors relating to cash equivalent   transfer values from the RBSI Section, taking into account any change in the   funding position and investment strategy, and will notify the Bank of any   necessary changes that have been agreed by the Trustee on the advice of the   Actuary. 11. HMRC AND CONTRACTING-OUT 11.1 The RBSI Section Rules contain   provisions complying with Part I of Schedule 1 to the Contracting­ out   (Transfer and Transfer Payment) Regulations 1996 (rights to guaranteed   minimum pensions of an earner who has not entered contracted-out employment   by reference to the New Sections) and Part lli of Schedule 1 to the   Contracting-out (Transfer and Transfer Payment) Regulations 1996 (payment of   guaranteed minimum pensions in payment). 11.2 Where any Transferring Member   has an entitlement to a GMP or to Section 9(2B) rights in the Transferring   Section, the Trustee on behalf of the RBSI Section will: (a) assume   responsibility to provide to and in respect of that Transferring Member the   GMP benefits and any Section 9(2B) rights as required by the contracting-out   provisions of Pension Schemes Act 1993; (b) in relation to the transfer of   GMPs, comply with the conditions referred to in regulations 3(c) and (e) of   the Contracting-out (Transfer and Transfer Payment) Regulations 1996; and.   (c) in relation to the transfer of any Section 9(2B) rights, comply with the   conditions referred to in regulation 9(a) of those Regulations. 6   0011398-0004743 C0:33833575.11 

    

 

12. INDEMNITY   12.1 The Bank will indemnify and keep indemnified the Trustee and each of its   current and former directors against all or any claims, costs, losses or   damages which the Trustee or director may pay or incur or which may be made   against the Trustee or director in connection with the carrying out of the   transfer contemplated by this Agreement. This indemnity does not apply to any   amount which is attributable to a breach of trust intentionally committed by   the Trustee or by a current or former director (whether by reason of their   professional position or any other reason) or as a result of other   circumstances where the Trustee or that current or former director fails to   act in good faith. To the extent that this clause 12 is rendered ineffective   by sections 232-235 of the Companies Act 2006 or by any other legislation   restricting the rights of company directors to be indemnified, this clause 12   will not apply to any such director or former director of the Trustee.   However, provisions identical to those in this clause 12 will apply to such   director or former director to the greatest extent permitted by law. 12.2 The   provisions of this clause 12 shall not entitle the Trustee to an indemnity   from the Bank in circumstances where: a Transfer Amount has been incorrectly   calculated or otherwise underpaid and there are sufficient assets in the   Transferring Section for the Trustee to make a balancing payment in full or   in part to the RBSI Section up to the correct value of the relevant Transfer   Amount; or a Transferring Member makes a claim in respect of the calculation   of benefits and any associated costs and increase in benefits would not have   been indemnified by the Bank if those circumstances had arisen in respect of   the Transferring Member under the Transferring Section. 12.3 Where payment is   only obtained in part in respect of any claims, costs, losses or damages   under sub-clause 12.2(a) above the indemnity from the Bank shall extend to   the part remaining unpaid. 13. GOVERNING LAW AND JURISDICTION 13.1 This   Agreement and any non-contractual obligations arising out of or in connection   with it are governed by English law. 13.2 The English courts have exclusive   jurisdiction to settle any dispute arising out of, relating to or having any   connection with this Agreement, and any dispute relating to any   non-contractual obligations arising out of or in connection with it and each   party submits to the exclusive jurisdiction of the English courts. 14.   SEVERABILITY The provisions contained in each clause and sub-clause of this   Agreement are enforceable independently of each of the others and their   validity is not affected if any of the others are invalid. If any of those   provisions is void but would be valid if some part of the provision were   deleted, the provision in question will apply with such modification as may   be necessary to make it valid. 15. MISCELLANEOUS 15.1 Each of the parties   will do all things required to be done by it to implement this Agreement and   will co-operate with the other parties so as to facilitate the implementation   by them of this Agreement. 15.2 A person who is not a party to this Agreement   may not enforce any of its terms under the Contracts (Rights of Third   Parties) Act 1999.

    

 

15.3 Any   amendment to this Agreement will not be binding on the parties unless set out   in writing, expressed to vary this Agreement, and executed as a deed by   authorised representatives of each of the parties. 15.4 This Agreement may be   executed in any number of counterparts and this has the same effect as if the   signatures on the counterparts were on a single copy of this Agreement. IN   WITNESS of which this deed has been executed and has been delivered on the   date which appears first on page 1 

    

 

 

SIGNATORIES   EXECUTED as a DEED by )  RBS PENSION   TRUSTEE LIMITED acting )  by two   directors or a director and its secretary: )    Director     Director/Secretary

    

 

EXECUTED and   DELIVERED as a DEED for and on )    behalf of NATIONAL WESTMINSTER BANK PLC by )  Ewen Stevenson acting under a power of   attorney )  in his favour dated 6   September 2018 in the presence of : )       Signature of Witness: Full name: Address:

    

 

SCHEDULE 1   CALCULATION OF TRANSFER AMOUNT This Schedule sets out the manner in which the   amount (Transfer Amount) to be transferred from the Transferring Section to   the RBSI Section will be assessed. 1. Calculation of Transfer Amount  The Transfer Amount shall be calculated as   the Initial Payment plus the Core Transfer Amount plus the Market Value   Adjustment where: The Initial Payment is £2m; The Core Transfer Amount is the   lower of: the Transferring Members' Past Service Reserve multiplied by the   value of the Transferring Section’s assets divided by the Transferring   Section’s Past Service Reserve where for this purpose the Actuarial   Assumptions used to calculate the Past Serve Reserve figures are in line with   the S179 Assumptions set out below, and the Transferring Members' Past   Service Reserve calculated using the Actuarial Assumptions in line with the   Self-Sufficiency Assumptions set out below, Less the Initial Payment and   (where relevant) the amount of any benefit paid in respect of the   Transferring Members from the Transferring Section between 1 November 2018   and the date on which the Core Transfer Amount is paid. The Market Value   Adjustment is the sum of The performance of the growth asset benchmark   calculated by BNY Mellon as the sum across all growth assets of the nominal   benchmark target exposure in each asset class multiplied by the corresponding   benchmark return, in percentage terms. The calculation period shall be 1 to   30 November 2018 in which case the growth assets will be invested in line   with the strategic benchmark on or around 1 December 2018 or, if the Core   Transfer Amount is paid after 30 November, from 1 November to such date when   the growth assets have been invested in line with the strategic benchmark,   and The performance of the hedging benchmark calculated by Aon Hewitt based   on the interest rate and inflation hedging ratios set out in the strategic   benchmark. The calculation period shall be 1 November to 31 December 2018 and   the hedging assets will be invested in line with the strategic benchmark on   or around 1 January 2019. The growth asset benchmark and the hedging   benchmark used in (a) and (b) above will be for the RBSI Section and the   nominal amounts will be based on the nominal benchmark set by the Trustee by   reference to the sum of the Initial Payment and the Core Transfer Amount (including   any top-up payment if required under "Minimum Transfer Amount"   below). The Past Service Reserve means the value of the liabilities   calculated in accordance with the Actuarial Assumptions set out below. It   will be based on the membership data as at 31 December 2017, with an   adjustment made to reflect continued pensionable service to 31 October 2018   and an assumed 

    

 

pensionable/basic   salary increase in April 2018 of 1.8% in respect of the active membership. It   will also include an allowance for transfers paid out prior to 31 October   2018. The effective date of the calculation will be 31 October 2018. The   value of the Transferring Section’s assets used to calculate the Core   Transfer Amount will be taken from the custodian, BNY Mellon, as at 31   October 2018 and will be an unaudited asset value. A summary of the method   and Actuarial Assumptions for determining the Transfer Amount for the RBSI   Section is set out below: 2. Actuarial Assumptions   S179 Assumptions These will be in line with   those prescribed by the Pensions Protection Fund for carrying out an   actuarial valuation under s.179 Pensions Act 2004 as at the effective date of   the calculation. For the effective calculation date of 31 October 2018 the   calculation will use the following: s179 assumptions: A8 s179 guidance: G7   Self-Sufficiency Assumptions Assumptions for Self-Sufficiency are set out in   Schedule 3. Minimum Transfer Amount    The Core Transfer Amount plus the Initial Payment, as calculated   above, will be no less than the sum of the Transferring Members' Cash   Equivalent Transfer Value (CETV), calculated as at 31 October 2018 using the   Transferring Section CETV basis in force at the time of calculation. 3.   Payment of Transfer Amount The Initial Payment shall be paid in cash on 1   November 2018. The Core Transfer Amount shall be calculated by the Actuary   and paid in cash or in-specie non-cash assets on or before 31 December 2018.   The Market Value Adjustment shall be calculated and paid as soon as   reasonably practicable after the date of payment of the Core Transfer Amount.   The Market Value Adjustment may be positive or negative. If the Market Value   Adjustment is positive that amount will be payable from the Main Fund Section   to the RBSI Section. If the Market Value Adjustment is negative that amount   will be payable from the RBSI Section to the Main Fund Section.

    

 

SCHEDULE 2   TRANSFERRING MEMBERS

    

 

SCHEDULE 3  TRUSTEE’S SELF-SUFFICIENCY FUNDING   ASSUMPTIONS  Assumptions for   Self-Sufficiency are the same as the technical provisions assumptions as set   out in the Transferring Section’s Statement of Funding Principles for the   actuarial valuation as at 31 December 2017 (included as a schedule to the   Framework Agreement) amended as follows:    1. Allowance for transfers out: Nil    2. Discount rate:  At each   yearly tenor (spot rate), the higher of:    • Bank of England nominal gilt yield curve plus a spread of 0.0%   p.a.  • Nominal swap yield curve plus a   spread of 0.0% p.a.  3. RPI   inflation:  At each yearly tenor (spot   rate), the lower of:  • Bank of England   breakeven RPI gilt yield curve  • RPI   swap yield curve  4. Expenses:  A reserve for future expenses equal to  • 3% of liabilities up to £50m, 2% of   liabilities between £50m and £100m and 1% of liabilities in excess of   £100m  • Non-pensioners: An allowance   of £1,000 per member.  •   Pensioners:  Age Expense allowance   per  member < 60 £900 60 — 70 £800   70 — 80 £600 > 80 £500 

    

 

SCHEDULE 4   SCHEDULE OF PAYMENTS 

    

 

THE ROYAL BANK   OF SCOTLAND GROUP PENSION FUND – ROYAL BANK OF SCOTLAND INTERNATIONAL LIMITED   SECTION ("RBSI SECTION") SCHEDULE OF PAYMENTS Introduction This   Schedule of Payments has been prepared by the Trustee of The Royal Bank of   Scotland Group Pension Fund (the "Fund") as part of the formation   of the new RBSI Section. The contributions payable to the RBSI Section of the   Fund are to be agreed between the Trustee and the Principal Employer. The   Trustee and the Principal Employer have agreed this Schedule of Payments by   the authorised signatories set out below. This document will apply from 1   November 2018 and will remain in force until the first formal actuarial valuation   of the RBSI Section under the Pensions Act 2004 is completed. The first   formal actuarial valuation of the RBSI Section is due to be undertaken with   an effective date of 31 December 2018, and the first schedule of   contributions will be put in place no later than 31 March 2020. Participating   Employers This Schedule covers contributions payable to the RBSI Section by   the employers who participate in the RBSI Section from time to time (the   "Employers"). The contributions due to the RBSI Section under this   schedule shall be paid by the Employers in such amounts or proportions as the   Principal Employer shall determine. If any contributions are not paid within   the time limits specified in this schedule the Trustee may demand payment of   them by one or more of the Employers as the Trustee shall decide. Member   Contributions All employees who are active members of the RBSI Section and   accruing DB benefits in the RBSI Section will contribute to the RBSI Section   as follows: From 1 November 2018 to 30 November 2018 (inclusive): 1.5% of   Contribution Salary From 1 December 2018: 2% of Contribution Salary These   amounts do not include members’ Additional Voluntary Contributions. The   Employers will ensure that the Trustee receives the contributions payable by   their employees within 19 days of the end of the calendar month in which the   contributions were deducted from the employees’ salaries.

    

 

Normal Employer   Contributions  The Employers will pay   contributions to the RBSI Section as follows:   Period Amount Payable by From 1 At least   37.8% of Contribution Salary for Normal Employer November 2018 employees who   are active members of the Contributions will be   Retiring Age 65 Schedule of the RBSI   calculated and paid on a   Section,   less any member contributions payable. monthly basis.     Contributions will be paid   At least 44.0% of Contribution Salary for   within three months of   employees who are   active members of all the end of the calendar   other Schedules of the RBSI Section, less   month to which they   any member   contributions payable. relate.   Plus   contributions in respect of pension elections made through RBSelect    The Employers may, from time to time, pay   additional contributions to the RBSI Section as advised to the Trustee in   writing. Administration expenses and Pension Protection Fund levies The   Employers will pay contributions to the Section to meet estimated   administration expenses, Pension Protection Fund levies and other levies   collected by the Pensions Regulator. Period Amount Payable by From 1 Expense   Contributions – £10,000 per Expense Contributions will November 2018 month.   be paid monthly and by no later than 90 days following   Levy Contributions - Reimbursement of the   period to which they   PPF levies in   excess of £30,000 in a levy year (nil otherwise). relate.     Levy Contributions will be paid annually   and by no later than 90 days following the payment of such levies from the   Section or, if later, 30 days following the     Trustee notifying the     Employers of such amounts which are due.  . Payments to cover Augmentations   Augmentations and the payment of unreduced pensions on retirements at the   request of the Employers will not be granted without agreement from the   Employers to provide additional contributions to meet the cost of such   augmentations.

    

 

Date of   Schedule of Payments: Signed on behalf of the Employers Signature:  Name:    Capacity:  Date:  Signed on behalf of RBS Pension Trustee   Limited  Signature:  Name:    Capacity:  Date: 

    

 

 BULK TRANSFER AGREEMENT  dated 2018    relating to the bulk transfer from the RBS Main Fund Section  to the NatWest Markets Section of the  Royal Bank of Scotland Group Pension   Fund    Allen & Overy LLP 

    

 

CONTENTS  Clause Page     1. Interpretation 2    2. Transfer Conditions 2    3. Transfer of Assets 3    4. Transfer of Liabilities 4    5. Contributions to the New Sections   4    6. Discharge of Liabilities 5    7. Period before bulk transfer Completed   5    8. Payment on Account 5    9. Non-Satisfaction of Transfer   Conditions 5    10. Fair Treatment and   Discretionary Practices 6    11. HMRC   and Contracting-Out 6    12. Indemnity   7    13. Governing Law and Jurisdiction   7    14. Severability 7    15. Miscellaneous 7   Schedule    1. Calculation of Transfer Amount     2. Transferring Members   3.   Trustee’s self-sufficiency funding assumptions   4. Schedule of payments  

    

 

THIS AGREEMENT   is made by way of deed on 2018    BY:  (1) RBS PENSION TRUSTEE   LIMITED (registered in England under number 02726164) 1 Princes Street,   London, EC2R 8PB (the Trustee); and    (2) NATIONAL WESTMINSTER BANK PLC (registered in England under number   00929027) 135 Bishopsgate, London, EC2M 3UR (the Bank).  BACKGROUND:    (A) The Trustee is the trustee of the RBS Main Fund Section (the   Transferring Section), the Royal Bank of Scotland International Limited   Section and the NatWest Markets Section (the New Sections) of the Royal Bank   of Scotland Group Pension Fund (the Group Fund).  (B) The Bank and the Trustee (amongst others)   entered into a non-legally binding Memorandum of Understanding dated 16 April   2018 (the AA MoU) in good faith to document their intention in relation to a   bulk transfer of members from the Transferring Section to the RBS AA Section   of the Group Fund or a new segregated section of the Group Fund. The parties   have decided that the New Sections will be used for this purpose.  (C) The Bank and the Trustee have therefore   set up the New Sections in order to facilitate the transfer of liabilities of   the Transferring Members (as defined below) from the Transferring Section to   the New Sections. This Agreement shall effect the transfer of Transferring   Members to the NatWest Markets Section (the NWM Section).  (D) The Transferring Members will transfer   from the Transferring Section to the NatWest Markets Section.  (E) NatWest Markets Plc (previously known   as The Royal Bank of Scotland plc) will cease to participate in the   Transferring Section on 1 November 2018. Accordingly, the Transferring   Members will cease accrual in the Transferring Section. In accordance with   clause 5.1 of the AA MoU the Transferring Members’ accrued pension benefits   are to remain the same, and the Transferring Members shall be entitled to   accrue future pension benefits on the same basis after the transfer to the   NWM Section. The Transferring Members will therefore join the NWM Section   from 1 November 2018 on an identical basis to their current participation in   the Transferring Section. It is also intended that the basis on which   actuarial factors are determined in the NWM Section will be no less   favourable than in the Transferring Section from the Bulk Transfer Date (as   defined below). However, benefits and factors may be amended in future as   circumstances require.  (F) In   accordance with clause 5.3 of the AA MoU, the Bank intends to transfer the   past service benefits of the Transferring Members from the Transferring   Section to the NWM Section. In order to facilitate this a bulk transfer of   assets and liabilities from the Transferring Section to the NWM Section in   respect of Transferring Members’ accrued benefits to the date of transfer is   therefore also required.  (G) At the   Bank’s request, the Trustee has agreed to transfer from the Transferring   Section to the NWM Section assets and liabilities relating to the   Transferring Members.  (H) In   accordance with clause 5.4(e) of the AA MoU, the Bank and the Trustee have   agreed that the transfer from the Transferring Section to the NWM Section   under this Agreement will be carried out as if it is made between two   separate schemes.

    

 

(I) The Bank   and the Trustee (amongst others) entered into a Framework Agreement at or   around the same date as this Agreement. The parties to the Framework   Agreement agreed that this Agreement would be held in escrow pending the   Release Date (as defined in the Framework Agreement) as set out in clause 2.1   of the Framework Agreement.  (J) It is   the intention of the parties that this document be executed as a deed.  THIS DEED WITNESSES as follows:  1. INTERPRETATION  1.1 The following expressions have the following   meanings in this Agreement:  Actuary   means, in relation to the Group Fund, the actuary appointed pursuant to   section 47 of the Pensions Act 1995.    Bulk Transfer Date means midnight on 31 October 2018.  Conditions means the conditions set out in   clause 2.  GMP means a guaranteed   minimum pension within the meaning of the Pension Schemes Act 1993.  NWM Section Rules means the documents   governing the NWM Section.  Section   9(2B) rights has the same meaning as in the Occupational Pension Schemes   (Contracting-out) Regulations 1996.    Transfer means the transfer of assets from the Transferring Section to   the NWM Section pursuant to clause 3.    Transfer Amount has the meaning given in Schedule 1 (Calculation of   Transfer Amount). Transferring Section Rules means the documents governing   the Transferring Section.  Transferring   Members means the employees listed in Schedule 2 (subject to any additions or   removals agreed by the Trustee and Bank prior to the Bulk Transfer Date) unless   any such employees have provided the Bank with notice that they wish to opt   out of the Transfer and are included on a list of opt-out members provided by   the Bank to the Trustee before 1 November 2018.  1.2 In this Agreement:  (a) any reference to a party to this   Agreement includes the successors and assigns (immediate or otherwise) of   that party;  (b) any reference to a   clause, sub-clause or schedule is to a clause, sub-clause or schedule of or   to this Agreement;  (c) the schedules   form part of this Agreement; and  (d)   the headings do not affect the interpretation of this Agreement.  2. TRANSFER CONDITIONS  2.1 The Bank and Trustee agree that the   Transfer will be made without the consent of the Transferring Members and the   requirements under Part IV (Protection for Early Leavers) of the Pension   Schemes  

    

 

Act 1993, the   Occupational Pension Schemes (Preservation of Benefit) Regulations 1991 and   the Contracting-out (Transfer and Transfer Payment) Regulations 1996 in   respect of a transfer between two occupational pension schemes will be   applied as if those requirements apply to the transfer of liabilities set out   in this Agreement.  2.2 Accordingly the   following conditions must be satisfied before a Transfer can be made:  (a) the Trustee has received an actuarial   certificate in the same form as that required under regulation 12(3) of the   Occupational Pension Schemes (Preservation of Benefit) Regulations 1991, the   date of the Transfer is within three months of the date of the Actuary’s   signature to the relevant certificate and by the date of such Transfer there   are no significant changes to the benefits, data and documents used in making   the certificate;  (b) the NWM Section   is able to accept the transfer of the accrued rights to, and the liability   for the payment of, guaranteed minimum pensions and section 9(2B) rights   under the Transferring Section;  (c) at   least one month’s notice has been provided to each Transferring Member in the   same form as that required under regulation 12(4B) of the Occupational   Pension Schemes (Preservation of Benefit) Regulations 1991.  2.3 The parties agree to use all reasonable   endeavours to satisfy the Conditions as soon as is reasonably practicable and   to ensure compliance with any requirement attaching to them in relation to   each Transfer.  3. TRANSFER OF   ASSETS  3.1 A Transfer Amount will be   calculated by the Actuary for the NWM Section as set out in Schedule 1.  3.2 The Trustee acknowledges that the Bank   will (or will procure that another group entity will) make a payment of £2   billion to the Transferring Section in accordance with clause 5 of the   Framework Agreement before the Bulk Transfer Date. For the purposes of the   calculation of the Transfer Amount, the assets of the Transferring Section   shall be deemed to include the £2 billion contribution.  3.3 Any liability which there may be in   respect of any difference as between a man and a woman relating to the   guaranteed minimum pension of a Transferring Member recognised after the Bulk   Transfer Date will not be included in the calculation.  3.4 The parties will promptly provide the   Actuary with any documents and information which the Actuary may reasonably   require to facilitate the calculation.    3.5 In accordance with clause 28.1.2 of the trust deed dated 5 April   2006 governing the Group Fund, the parties agree, having considered the   advice of the Actuary, that the Transfer Amount may be greater than the cash   equivalent of Transferring Members’ accrued rights calculated in accordance   with Chapter IV of Part IV of the Pension Schemes Act 1993.  3.6 The Trustee will arrange the transfer   of the relevant Transfer Amount from the Transferring Section to the NWM   Section in accordance with Schedule 1, as long as the Conditions have been   and remain satisfied .  3.7 When   transferring the Transfer Amount to the NWM Section, the Trustee will also   transfer any money purchase assets in respect of the relevant Transferring   Members.

    

 

 4. TRANSFER OF LIABILITIES  4.1 On and from the Bulk Transfer Date in   relation to the Transferring Members:    (a) no further benefits will accrue or, except as stated in this   Agreement, be payable under the Transferring Section;  (b) for the purposes of determining the   benefits payable under the Transferring Section, the Transferring Members are   deemed not to receive any increase in earnings;  (c) the provisions of the Transferring   Section providing for benefits in the event of death while in any employment   to which the Transferring Section applies do not apply on or after the Bulk   Transfer Date and such benefits will instead be provided under the NWM   Section; and  (d) subject to the powers   of alteration and termination in the NWM Section and to the other provisions   of this Agreement, the Trustee will provide under the NWM Section the   benefits set out in clause 4.2.  4.2 On   the Bulk Transfer Date the Trustee shall provide in respect of each   Transferring Member the same future service benefits, entitlements and   accrued rights to benefits which were payable under the Transferring Section,   subject to the same employee contributions, conditions and options as applied   under the Transferring Section immediately before the Bulk Transfer Date, as   set out in the Transferring Section Rules.    4.3 The Trustee will apply the relevant part of the Transferring   Section’s assets which is attributable to Transferring Members’ money   purchase benefits to provide benefits in respect of each such Transferring   Member on a money purchase basis and so that no such assets will be   disinvested and will be transferred in specie.  4.4 The Trustee will treat as members’   contributions for the purposes of the NWM Section the amounts (if any) as   decided by the Trustee.  5.   CONTRIBUTIONS TO THE NWM SECTION  5.1   The Bank will (or will procure that another group entity will) make a one-off   contribution, or series of contributions, to the NWM Section by no later than   three months after the amount of the contribution has been calculated by the   Actuary as set out in this clause and notified to the Bank. The contribution   (or total contributions if more than one) shall be equal to the amount   required to bring the NWM Section up to full funding as at the Bulk Transfer   Date on the Trustee’s self-sufficiency funding basis after allowing for the   Initial Payment and the Core Transfer Amount (together with any uplift required   as a result of the Minimum Transfer Amount) as set out in Schedule 1. For   this purpose the self-sufficiency liabilities will be calculated as at the   Bulk Transfer Date in accordance with the Past Service Reserve methodology   set out in Schedule 1 but using the Trustee’s self-sufficiency funding   assumptions set out in Schedule 3 and using post retirement mortality,   proportion commuted and commutation factor assumptions as recorded in the AA   Section Statement of Funding Principles dated 28 June 2018.  5.2 The Trustee and Bank agree that the   Trustee will carry out an actuarial valuation for the NWM Section with an   effective date of 31 December 2018 in accordance with the Pensions Act   2004.  5.3 The Trustee and the Bank   will agree a statement of funding principles, schedule of contributions and,   if necessary, recovery plan, for the NWM Section (the Funding Documents) in   accordance with the Pensions Act 2004 for an actuarial valuation with an   effective date of 31 December 2018.

    

 

The Trustee and   the Bank agree to use reasonable endeavours to complete the Funding Documents   so that the schedule of contributions takes effect from a date no later than   1 October 2019.  5.4 On and from the   Bulk Transfer Date until the date the schedule of contributions referred to   in clause 5.3 above takes effect, the future service contributions to the NWM   Section in respect of the Transferring Members will be as set out in the   Schedule of Payments appended at Schedule 4 to this Agreement.  5.5 As part of the first actuarial   valuation the future service contribution rate for Transferring Members shall   be recalculated on the actuarial assumptions consistent with Trustee’s   self-sufficiency funding basis as set out Schedule 3 to this Agreement and   otherwise consistent with the demographic assumptions agreed under the   Statement of Funding Principles for the actuarial valuation as at 31 December   2018.  6. DISCHARGE OF LIABILITIES  6.1 On the Transfer being made, benefits of   the Transferring Members cease to be payable under the Transferring Section   and the Trustee is discharged from all liability under the Transferring   Section in respect of the benefits which the Trustee has agreed to provide   under the NWM Section.  7. PERIOD   BEFORE BULK TRANSFER COMPLETED  7.1 If   a Transfer is not made to the NWM Section on the Bulk Transfer Date, then   until the relevant Transfer is made in full (or the parties agree that such   Transfer will not proceed):  (a) the   Trustee will exercise its powers and duties under the Transferring Section and   with a view to implementing this Agreement; and  (b) benefits and entitlements in respect of   relevant Transferring Members which arise or have arisen by reference to the   Transferring Section Rules will be paid by the Trustee from the Transferring   Section but once the Transfer has been made in full such payments will be   treated as having been made from the NWM Section.  7.2 The Bank and the Trustee undertake   between the date of this Agreement and the completion of the Transfer, to the   extent reasonably practicable, to administer the NWM Section and Transferring   Section in a manner consistent with their respective obligations under this   Agreement and otherwise on a basis consistent with its administration in the   ordinary course of business.  8.   PAYMENT ON ACCOUNT  The Trustee may   make a payment from the Transferring Section to the NWM Section on account of   the Transfer or repay from the NWM Section to the Transferring Section as   required.  9. NON-SATISFACTION OF   TRANSFER CONDITIONS  If the conditions   or requirements which must be fulfilled as mentioned in this Agreement or by   law before the Transfer to the NWM Section can be made have not been   fulfilled by 31 March 2019 (or any later date that is agreed):  (a) the Transfer to the NWM Section will   not be made;  (b) benefits attributable   to pensionable service before the Bulk Transfer Date will be payable out of   the Transferring Section and benefits will be payable out of the NWM Section   (in accordance with clause 4) for subsequent pensionable service. 

    

 

10. FAIR   TREATMENT AND DISCRETIONARY PRACTICES    10.1 The Bank and the Trustee will (and will use reasonable endeavours   to ensure that their successors will), when exercising discretionary powers   under the NWM Section relating to benefits for or in respect of Transferring   Members:  (a) take into account the   manner in which comparable powers have (so far as disclosed to or as may have   come to the knowledge of the Trustee) in the past been exercised under the   Transferring Section prior to the Bulk Transfer Date; and  (b) consider, but not be bound by, the   manner in which comparable powers have been exercised under the Transferring   Section after the Bulk Transfer Date.    10.2 When exercising any discretionary powers in line with 10.1 above,   the Trustee will have regard to the “Discretions Table” being prepared by the   Trustee in relation to the Transferring Section.  10.3 On and from the Bulk Transfer Date the   basis on which the actuarial factors applicable to Transferring Members are   determined shall be no less favourable than the actuarial basis which applied   to the Transferring Members in the Transferring Section. However, in addition   to clauses 10.4 and 10.5 below, such actuarial factors may be reviewed from   time to time taking into account the prevailing circumstances in the NWM   Section at that time.  10.4 The Trustee   shall within 12 months of the Bulk Transfer Date, review the actuarial   factors relating to cash equivalent transfer values from the NWM Section,   taking into account any change in the funding position and investment   strategy, and will notify the Bank of any necessary changes that have been   agreed by the Trustee on the advice of the Actuary.  10.5 As part of the first actuarial   valuation, the actuarial factors relating to the commutation of benefits,   early and late retirements will be updated based upon the factors applicable   within the AA Section adjusted where appropriate for the demographic   assumptions agreed under the Statement of Funding Principles for the   actuarial valuation as at 31 December 2018 and any differences in   benefits.  11. HMRC AND   CONTRACTING-OUT  11.1 The NWM Section   Rules contain provisions complying with Part I of Schedule 1 to the Contracting-out   (Transfer and Transfer Payment) Regulations 1996 (rights to guaranteed   minimum pensions of an earner who has not entered contracted-out employment   by reference to the New Sections) and Part III of Schedule 1 to the   Contracting-out (Transfer and Transfer Payment) Regulations 1996 (payment of   guaranteed minimum pensions in payment).    11.2 Where any Transferring Member has an entitlement to a GMP or to   Section 9(2B) rights in the Transferring Section, the Trustee on behalf of   the NWM Section will:  (a) assume   responsibility to provide to and in respect of that Transferring Member the   GMP benefits and any Section 9(2B) rights as required by the contracting-out   provisions of Pension Schemes Act 1993;    (b) in relation to the transfer of GMPs, comply with the conditions   referred to in regulations 3(c) and (e) of the Contracting-out (Transfer and   Transfer Payment) Regulations 1996; and    (c) in relation to the transfer of any Section 9(2B) rights, comply   with the conditions referred to in regulation 9(a) of those Regulations.

    

 

12.   INDEMNITY  12.1 The Bank will indemnify   and keep indemnified the Trustee and each of its current and former directors   against all or any claims, costs, losses or damages which the Trustee or   director may pay or incur or which may be made against the Trustee or   director in connection with the carrying out of the transfer contemplated by   this Agreement. This indemnity does not apply to any amount which is   attributable to a breach of trust intentionally committed by the Trustee or   by a current or former director (whether by reason of their professional   position or any other reason) or as a result of other circumstances where the   Trustee or that current or former director fails to act in good faith. To the   extent that this clause 12 is rendered ineffective by sections 232-235 of the   Companies Act 2006 or by any other legislation restricting the rights of   company directors to be indemnified, this clause 12 will not apply to any   such director or former director of the Trustee. However, provisions   identical to those in this clause 12 will apply to such director or former   director to the greatest extent permitted by law.  12.2 The provisions of this clause 12 shall   not entitle the Trustee to an indemnity from the Bank in circumstances where:  (a) a Transfer Amount has been incorrectly   calculated or otherwise underpaid and there are sufficient assets in the   Transferring Section for the Trustee to make a balancing payment in full or   in part to the NWM Section up to the correct value of the relevant Transfer   Amount; or  (b) a Transferring Member   makes a claim in respect of the calculation of benefits and any associated   costs and increase in benefits would not have been indemnified by the Bank if   those circumstances had arisen in respect of the Transferring Member under   the Transferring Section.  12.3 Where   payment is only obtained in part in respect of any claims, costs, losses or   damages under sub-clause 12.2(a) above the indemnity from the Bank shall   extend to the part remaining unpaid.    13. GOVERNING LAW AND JURISDICTION    13.1 This Agreement and any non-contractual obligations arising out of   or in connection with it are governed by English law.  13.2 The English courts have exclusive   jurisdiction to settle any dispute arising out of, relating to or having any   connection with this Agreement, and any dispute relating to any   non-contractual obligations arising out of or in connection with it and each   party submits to the exclusive jurisdiction of the English courts.  14. SEVERABILITY  The provisions contained in each clause and   sub-clause of this Agreement are enforceable independently of each of the   others and their validity is not affected if any of the others are invalid.   If any of those provisions is void but would be valid if some part of the   provision were deleted, the provision in question will apply with such   modification as may be necessary to make it valid.  15. MISCELLANEOUS  15.1 Each of the parties will do all things   required to be done by it to implement this Agreement and will co-operate   with the other parties so as to facilitate the implementation by them of this   Agreement.  15.2 A person who is not a   party to this Agreement may not enforce any of its terms under the Contracts   (Rights of Third Parties) Act 1999. 

    

 

15.3 Any   amendment to this Agreement will not be binding on the parties unless set out   in writing, expressed to vary this Agreement, and executed as a deed by   authorised representatives of each of the parties.  15.4 This Agreement may be executed in any   number of counterparts and this has the same effect as if the signatures on   the counterparts were on a single copy of this Agreement.  IN WITNESS of which this deed has been   executed and has been delivered on the date which appears first on page 1 

    

 

 

SIGNATORIES   EXECUTED as a DEED by ) RBS PENSION   TRUSTEE LIMITED acting ) by two directors or a director and its secretary:   )  Director  Director/Secretary

    

 

EXECUTED and   DELIVERED as a DEED for and on ) behalf of NATIONAL WESTMINSTER BANK PLC by )   Ewen Stevenson acting under a power of attorney ) in his favour dated 6   September 2018 in the presence of: )     Signature of Witness:  Full   name:  Address:

    

 

SCHEDULE 1  CALCULATION OF TRANSFER AMOUNT  This Schedule sets out the manner in which   the amount (Transfer Amount) to be transferred from the Transferring Section   to the NWM Section will be assessed.    1. Calculation of Transfer Amount    The Transfer Amount shall be calculated as the Initial Payment plus   the Core Transfer Amount plus the Market Value Adjustment where:  • The Initial Payment is £6m;  • The Core Transfer Amount is the   Transferring Members’ Past Service Reserve multiplied by the value of the   Transferring Section’s assets divided by the Transferring Section’s Past   Service Reserve, less the Initial Payment and (where relevant) the amount of   any benefit paid in respect of the Transferring Members from the Transferring   Section between 1 November 2018 and the date on which the Core Transfer   Amount is paid.  The Market Value   Adjustment is the sum of:  a) The   performance of the growth asset benchmark calculated by BNY Mellon as the sum   across all growth assets of the nominal benchmark target exposure in each   asset class multiplied by the corresponding benchmark return, in percentage   terms. The calculation period shall be 1 to 30 November 2018 in which case   the growth assets will be invested in line with the strategic benchmark on or   around 1 December 2018 or, if the Core Transfer Amount is paid after 30 November,   from 1 November to such date when the growth assets have been invested in   line with the strategic benchmark, and    b) The performance of the hedging benchmark calculated by Aon Hewitt   based on the interest rate and inflation hedging ratios set out in the   strategic benchmark. The calculation period shall be 1 November to 31   December 2018 and the hedging assets will be invested in line with the   strategic benchmark on or around 1 January 2019.  The growth asset benchmark and the hedging   benchmark used in (a) and (b) above will be for the NWM Section and the   nominal amounts will be based on the nominal benchmark set by the Trustee by   reference to the sum of the Initial Payment and the Core Transfer Amount   (including any top-up payment if required under “Minimum Transfer Amount”   below) plus, if applicable, any top up to self-sufficiency, calculated in   accordance with clause 5 of this Agreement.    The Past Service Reserve means the value of the liabilities calculated   in accordance with the Actuarial Assumptions set out below. It will be based   on the membership data as at 31 December 2017, with an adjustment made to   reflect continued pensionable service to 31 October 2018 and an assumed   pensionable/basic salary increase in April 2018 of 1.8% in respect of the active   membership. It will also include an allowance for transfers paid out prior to   31 October 2018. The effective date of the calculation will be 31 October   2018.  The value of the Transferring   Section’s assets used to calculate the Core Transfer Amount will be taken   from the custodian, BNY Mellon, as at 31 October 2018 and will be an   unaudited asset value.  A summary of   the method and Actuarial Assumptions for determining the Transfer Amount for   the NWM Section is set out below:

    

 

Actuarial   Assumptions  The technical provisions   assumptions of the Transferring Section’s Statement of Funding Principles for   the actuarial valuation as at 31 December 2017 (included as a schedule to the   Framework Agreement), updated to reflect market conditions as at the date of   calculation.  2. Minimum Transfer   Amount  The Core Transfer Amount plus   the Initial Payment, as calculated above, will be no less than the sum of the   Transferring Members’ Cash Equivalent Transfer Value (CETV), calculated as at   31 October 2018 using the Transferring Section CETV basis in force at the   time of calculation.  3. Payment of   Transfer Amount  The Initial Payment   shall be paid in cash on 1 November 2018.    The Core Transfer Amount shall be calculated by the Actuary and paid   in cash or in-specie non-cash assets on or before 31 December 2018.  The Market Value Adjustment shall be   calculated and paid as soon as reasonably practicable after the date of   payment of the Core Transfer Amount. The Market Value Adjustment may be   positive or negative. If the Market Value Adjustment is positive that amount   will be payable from the Main Fund Section to the NWM Section. If the Market   Value Adjustment is negative that amount will be payable from the NWM Section   to the Main Fund Section.

    

 

SCHEDULE 2  TRANSFERRING MEMBERS

    

 

SCHEDULE 3  TRUSTEE’S SELF-SUFFICIENCY FUNDING   ASSUMPTIONS  Assumptions for   Self-Sufficiency are the same as the technical provisions assumptions as set   out in the Transferring Section’s Statement of Funding Principles for the   actuarial valuation as at 31 December 2017 (included as a schedule to the   Framework Agreement) amended as follows:    1. Allowance for transfers out: Nil    2. Discount rate:  At each   yearly tenor (spot rate), the higher of:    • Bank of England nominal gilt yield curve plus a spread of 0.0%   p.a.  • Nominal swap yield curve plus a   spread of 0.0% p.a.  3. RPI   inflation:  At each yearly tenor (spot   rate), the lower of:  • Bank of England   breakeven RPI gilt yield curve  • RPI   swap yield curve  4. Expenses:  A reserve for future expenses equal to  • 3% of liabilities up to £50m, 2% of   liabilities between £50m and £100m and 1% of liabilities in excess of   £100m  • Non-pensioners: An allowance   of £1,000 per member.  •   Pensioners:  Age Expense allowance   per  member < 60 £900 60 — 70 £800   70 — 80 £600 > 80 £500 

    

 

SCHEDULE 4  SCHEDULE OF PAYMENTS  THE ROYAL BANK OF SCOTLAND GROUP PENSION   FUND —  NATWEST MARKETS SECTION (“NWM   SECTION”)  SCHEDULE OF PAYMENTS    

    

 

THE ROYAL BANK   OF SCOTLAND GROUP PENSION FUND —  NATWEST   MARKETS SECTION (“NWM SECTION”)    SCHEDULE OF PAYMENTS    Introduction  This Schedule of   Payments has been prepared by the Trustee of The Royal Bank of Scotland Group   Pension Fund (the “Fund”) as part of the formation of the new NWM Section.   The contributions payable to the NWM Section of the Fund are to be agreed   between the Trustee and the Principal Employer. The Trustee and the Principal   Employer have agreed this Schedule of Payments by the authorised signatories   set out below.  This document will apply   from 1 November 2018 and will remain in force until the first formal   actuarial valuation of the NWM Section under the Pensions Act 2004 is   completed. The first formal actuarial valuation of the NWM Section is due to   be undertaken with an effective date of 31 December 2018, and the first   schedule of contributions will be put in place no later than 31 March   2020.  Participating Employers  This Schedule covers contributions payable   to the NWM Section by the employers who participate in the NWM Section from time   to time ( the “Employers”). The contributions due to the NWM Section under   this schedule shall be paid by the Employers in such amounts or proportions   as the Principal Employer shall determine. If any contributions are not paid   within the time limits specified in this schedule the Trustee may demand   payment of them by one or more of the Employers as the Trustee shall   decide.  Member Contributions  All employees who are active members of the   NWM Section and accruing DB benefits in the NWM Section will contribute to   the NWM Section as follows:  From 1   November 2018 to 30 November 2018 (inclusive): 1.5% of Contribution Salary   From 1 December 2018: 2% of Contribution Salary  These amounts do not include members’   Additional Voluntary Contributions.    The Employers will ensure that the Trustee receives the contributions   payable by their employees within 19 days of the end of the calendar month in   which the contributions were deducted from the employees’ salaries.

    

 

Normal Employer   Contributions  The Employers will pay   contributions to the NWM Section as follows:    Period Amount Payable by From 1 At least 38.1% of Contribution Salary   for Normal Employer November 2018 employees who are active members of the   Contributions will be Retiring Age 65 Schedule of the NWM calculated and paid   on a Section, less any member contributions payable. monthly basis.   Contributions will be paid At least 42.4% of Contribution Salary for within   three months of employees who are active members of all the end of the   calendar other Schedules of the NWM Section, less month to which they any   member contributions payable. relate. Plus contributions in respect of   pension elections made through RBSelect    The Employers may, from time to time, pay additional contributions to   the NWM Section as advised to the Trustee in writing.  Administration expenses and Pension   Protection Fund levies  The Employers   will pay contributions to the Section to meet estimated administration   expenses, Pension Protection Fund levies and other levies collected by the   Pensions Regulator.  Period Amount   Payable by From 1 Expense Contributions — £25,000 per Expense Contributions   will be November 2018 month paid monthly and by no later than 90 days following   the  Levy Contributions - Reimbursement   of period to which they relate.  PPF   levies in excess of £100,000 in a     levy year (nil otherwise). Levy Contributions will be paid annually   and by no later than 90 days following the payment of such levies from the   Section or, if later, 30 days following the Trustee notifying the Employers   of such amounts which are due.    Payments to cover Augmentations    Augmentations and the payment of unreduced pensions on retirements at   the request of the Employers will not be granted without agreement from the   Employers to provide additional contributions to meet the cost of such   augmentations.

    

 

Date of   Schedule of Payments:   Signed on   behalf of the Employers  Signature:   Name:   _ _   Capacity: Date:  _    Signed on behalf of RBS Pension Trustee Limited  Signature: Name:   _ _     Capacity: Date:   

    

 

SCHEDULE 4  ACTUARIAL FUNDING AGREEMENTS 

    

 

The Royal Bank   of Scotland Group Pension Fund  Main   Fund Section  Statement of Funding   Principles — 31 December 2017  Introduction   This statement has been prepared by RBS Pension Trustee Limited (the   “Trustee”) after obtaining the advice of David Eteen, the Scheme Actuary and   after obtaining the agreement of The Royal Bank of Scotland Group plc and the   Participating Employers of the Main Fund Section (collectively the   “Bank”).    It has been prepared with   specific reference to the actuarial valuation being carried out as at 31   December 2017 for the Main Fund Section of the Royal Bank of Scotland Group   Pension Fund (the “Group Fund”), and will be reviewed at subsequent actuarial   valuations, or earlier if required.    The Statutory Funding Objective This statement sets out the Trustee’s   policy for securing that the Statutory Funding Objective is met. The   Statutory Funding Objective is defined in section 222 of the Pensions Act   2004, which states that every scheme must have sufficient and appropriate   assets to cover its Technical Provisions.    Technical Provisions The Technical Provisions are the amount that will   be needed to pay the Main Fund Section benefits that relate to service up to   the actuarial valuation date, if the assumptions made regarding the future   experience of the Main Fund Section are borne out in practice.    The assumptions used to calculate the   Technical Provisions are intended to provide a prudent estimate of the future   experience of the Main Fund Section, with a modest allowance for the future   potential outperformance of the assets from continued investment in asset   classes whose expected return exceeds that of the Technical Provisions. There   is an underlying assumption that the Main Fund Section continues as a going   concern, i.e. benefits will continue to be met from the Main Fund Section as   they fall due.    The method and   assumptions used to calculate the Technical Provisions are summarised in the   Appendix.  Employer contributions   Normal Employer contributions, payable as a rate of members’ basic salaries,   are assessed by calculating the cost of future benefit accrual for members   accruing DB benefits in the Main Fund Section using more prudent assumptions   than those used to calculate the Technical Provisions (as summarised in the   Appendix): • Less any member contributions; • Plus RBSelect contributions; •   Plus contributions in respect of employees who are active members of the   NatWest Defined Contribution Schedule of the Main Fund Section. The following   Employer contributions are payable in addition: • Contributions to meet   estimated administration expenses, Pension Protection Fund (PPF) levies and   other levies collected by the Pensions Regulator; 

    

 

 • Contributions to meet any additional costs   in excess of £10M p.a. from benefit augmentations or early retirements   granted at the Bank’s request.    The   resulting contributions are then adjusted by the amounts needed to eliminate   any shortfall relative to the Technical Provisions.    There are no arrangements in place for   any persons other than the Bank and members to contribute to the Main Fund   Section.  Payments to the Bank  The Trust Deed does not allow for any   payment of the Main Fund Section’s assets back to the Bank unless it is wound   up with surplus assets.   Dealing with   shortfalls Should an actuarial valuation reveal a shortfall of assets   relative to the Technical Provisions, the Trustee will prepare an appropriate   recovery plan at that time in agreement with the Bank. The shortfall will be   eliminated by the payment of additional contributions over a stated recovery   period of appropriate length.    In   determining the recovery period at any particular actuarial valuation the   following factors will be taken into account:    • the size of the funding shortfall;    • the financial strength and business   plans of the Bank;    • the Trustee’s   overall assessment of the covenant of the Bank and its participating   employers;    • any risk mitigation   arrangements or security provided by the Bank to the Trustee; and    • relevant legislation and regulatory   guidance.    In preparing the recovery   plan, the Trustee and Bank may agree for allowance to be made for the future   expected investment returns on the Main Fund Section’s assets to exceed the   Technical Provisions discount rate over the recovery period. Any allowance   made will be reviewed at each actuarial valuation.    The recovery plan for the 31 December   2017 actuarial valuation will be such that a contribution of £2bn is   sufficient to meet the Statutory Funding Objective.   Dealing with surpluses If an actuarial   valuation reveals a funding surplus, this surplus will be wholly retained   within the Main Fund Section as a cushion against adverse future experience.   Any alternative approach to dealing with surplus, were it to be considered in   the future, would be subject to agreement between the Trustee and the Bank   and subject to the provisions of the Trust Deed and Rules.  

    

 

Policy on   discretionary increases and funding strategy Under the provisions of the   Group Fund’s Trust Deed and Rules, there are certain discretionary powers to   provide or increase benefits for, or in respect of, all or any of the members   of the Main Fund Section.   The Bank   has confirmed that it does not wish to make advance provision for any   increases to pensions in excess of those provided for in the Trust Deed and   Rules, in particular the award of discretionary pension increases in payment   equal to full RPI inflation for all members.    If discretionary increases to benefits are to be made for which no   advance provision has been set, the Trustee’s current policy is to assess at   that time whether a request for immediate additional contributions to meet   the cost of such increases should be made.     Policy on reduction of cash equivalent transfer values  The Trustee will ask the Scheme Actuary to   advise it at each actuarial valuation of the extent to which assets are   sufficient to provide Cash Equivalent Transfer Values (CETVs) for all   non-pensioners without adversely affecting the security of the benefits of   other members and beneficiaries. Where coverage is less than 100%, the   Trustee will take advice from the Scheme Actuary regarding whether to reduce   CETVs and, if appropriate, the extent of such reduction.   If at any other time, after obtaining   advice from the Scheme Actuary, the Trustee is of the opinion that the   payment of CETVs at a previously agreed level may adversely affect the   security of the benefits of other members and beneficiaries, the Trustee will   take advice from the Scheme Actuary regarding whether and, if appropriate,   the extent to which, CETVs should be reduced.     Monitoring employer covenant  The Trustee monitors the covenant on an   ongoing basis and gives due regard to its assessment of the condition of the   covenant when setting the Technical Provisions, the recovery plan and the   investment strategy.    Every three   years the Trustee shall commission an actuarial valuation for the Main Fund Section   under Part 3 of the Pensions Act 2004. The Trustee may make a request to the   Bank for it to consent to an actuarial valuation at an earlier effective date   if, after considering the Scheme Actuary’s advice, it believes it would be   unsafe to continue to rely on the results of the previous actuarial valuation   as the basis for future contributions or if it considers it appropriate for   any other reason.   Frequency of   actuarial valuations Between actuarial valuations an actuarial report on   developments affecting the Main Fund Section’s funding level will be obtained   annually or more frequently where the Trustee considers necessary.     Review of the Statement of Funding   Principles This Statement of Funding Principles will be updated at each   actuarial valuation or more frequently, if required. Any update to the   Statement of Funding Principles will be subject to the agreement of both the   Trustee and the Bank. 

    

 

Risks The   Trustee and the Bank recognise that there are a number of risks inherent to   the success of the funding plan and that additional funding may be required   at future actuarial valuations if the experience of the Main Fund Section is   not in line with the assumptions made. The major risks include investment   risk, demographic risks including longevity and covenant risk.   Investment risk The Main Fund Section   invests in a portfolio of assets which has a higher    expected return than the expected growth of   the liabilities which is consistent with the discount rate. The Trustee expects   that investing in such assets reduces the contributions which will be   required from the Bank in the long-term.      In consultation with the Scheme Actuary, and the Trustee’s other   advisors, as appropriate, the expected return from such investments will be   taken into account in calculating the Main Fund Section’s Technical   Provisions. If, due to underperformance of the assets, the Technical   Provisions are not met over the long term, any shortfall will ultimately need   to be met by increased contributions from the Bank.    The Trustee regularly reviews the Main   Fund Section’s investment strategy taking into account factors such as the   funding position, liability profile, risk appetite and the covenant. The   Trustee will continue to consult with the Bank regarding the investment   strategy.   Longevity risk A funding   strain could arise if life expectancies are greater than expected.    In setting the Technical Provisions,   mortality assumptions are set based on standard tables appropriate to   comparable pension schemes with adjustments to reflect the Main Fund   Section’s recent experience and the socio-economic information inferred from   the characteristics of the Main Fund Section’s members, and to make allowance   for future improvements in mortality. The mortality assumptions are reviewed   at each actuarial valuation.  Other   demographic risks Members have options including early or late retirement,   transferring out and commuting a proportion of pension to a pension   commencement lump sum. The Technical Provisions are based on demographic   assumptions for future retirement patterns, transfers out and commutations.   These assumptions are set by the Trustee in agreement with the Bank at each   actuarial valuation based on advice from the Scheme Actuary and taking   account of scheme experience, where appropriate. 

    

 

Covenant risk   The Trustee recognises that if the Bank were to become insolvent, or if it   were otherwise no longer able to meet its funding obligations to the Main   Fund Section, it could have a significant impact on members’ benefits.    If the Bank were to become insolvent then   the Main Fund Section would have to be discontinued in accordance with the   Group Fund’s Trust Deed. The Technical Provisions at that time may need to be   revised and the assets held may prove to be insufficient to secure all   liabilities without further contributions from the Bank.    The Trustee also recognises that the   affordability of the Bank to pay future contributions into the Main Fund   Section is a key risk.  This statement   has been agreed by the Bank  Signed on   behalf of the Bank  Signature:   Name:   Capacity: Date:   This statement was agreed by the Trustee   at their meeting on 28 June 2018.    Signed on behalf of the Trustee    Signature: Name:   Capacity:   Date:   Date of Statement of Funding   Principles: October 2018  

    

 

Appendix:   Method and financial assumptions for determining the Technical Provisions and   employer contributions for future service rate accrual  1. Calculation method  Actuarial method: Projected Unit Method   with a control period of 10 years  2.   Financial assumptions  Discount   rate:  Technical Provisions:  Hedging Discount Curve (HDC) plus a fixed   spread of 0.58% p.a.. This was derived by solving for the fixed spread over   the HDC curve, in conjunction with the Hedging Inflation Curve (HIC), on the   left hand side of the following equation of value using market conditions as   at 31 December 2017:  Technical   Provisions (Discount rate: HDC plus a fixed spread, Inflation assumption:   HIC) = Technical Provisions (Discount rate: swaps + 0.8% p.a., Inflation: RPI   swaps curve)  The fixed spread above   the HDC curve is determined to the nearest 0.01% p.a.  Employer contributions:  Hedging Discount Curve (HDC) plus a fixed   spread of 0.48% p.a..  To derive the   HDC, the yield at each yearly tenor is the arithmetic weighted average   of:  a) Spot yield at each tenor on the   nominal gilt yield curve, and  b) Spot   yield at each tenor on the nominal Libor swap yield curve.  The following weightings apply as at 31   December 2017 when calculating the HDC:    Tenor point band HDC gilt proportion HDC swap proportion 0-5 years 11%   89% 5+-10 years 15% 85% 10+-15 years 14% 86% 15+-20 years 27% 73% 20+-25   years 60% 40% 25+-30 years 67% 33% 30+-40 years 72% 28% 40+ years 77%   23%  The HDC gilt and swap proportion   shall be updated as at 31 December 2018 and annually thereafter based on the   gilts (and any other bonds used in the liability hedging portfolio) in the   Trustee’s liability hedging portfolio as a proportion of total hedging at   each tenor. 

    

 

The fixed   spreads shall remain unchanged between actuarial valuations regardless of any   update to the HDC curve except where the Trustee and the Bank agree   otherwise.  In the event the proportion   of gilts at any tenor exceeds 100% of the total hedging at that tenor the HDC   gilt proportion shall be set as 100%. In the event the proportion of gilts at   any tenor is below 0% of the total hedging at that tenor the HDC gilt   proportion shall be set as 0%.  RPI   inflation:  Hedging Inflation Curve   (HIC). To derive the HIC, the yield at each yearly tenor is the arithmetic   weighted average of:  a) Spot inflation   at each tenor on the gilt breakeven RPI inflation curve, and  b) Spot inflation at each tenor on the RPI   swap inflation curve.  The following   weightings apply as at 31 December 2017 when calculating the HIC:  Tenor point band HIC gilt proportion HIC   swap proportion 0-5 years 11% 89% 5+-10 years 17% 83% 10+-15 years 19% 81%   15+-20 years 43% 57% 20+-25 years 96% 4% 25+-30 years 100% 0% 30+-40 years   100% 0% 40+ years 100% 0%  The HIC gilt   and swap proportion shall be updated as at 31 December 2018 and annually   thereafter based on the gilts (and any other bonds used in the liability   hedging portfolio) in the Trustee’s liability hedging portfolio as a   proportion of total hedging at each tenor.    In the event the proportion of gilts at any tenor exceeds 100% of the   total hedging at that tenor the HIC gilt proportion shall be set as 100%. In   the event the proportion of gilts at any tenor is below 0% of the total   hedging at that tenor the HIC gilt proportion shall be set as 0%.  CPI inflation: RPI inflation minus   1.1%  LPI pension increases: Higher   of  (a) LPI derived using a Black   Scholes model with 1.5% implied volatility (symmetric), and  (b) CPI or RPI inflation as applicable for   each pension tranche  subject in all   cases to the cap/floor applicable for each pension tranche 

    

 

Salary and   pension increases:  Salary increases   (pensionable/basic) 1.8% p.a. Increases to the earnings cap 1.8% p.a.   Revaluations to deferred pensions in excess of GMP The RPI price inflation   assumption Rate of GMP increases in active service before GMP age The RPI   price inflation assumption plus 1.0% p.a. at all durations Fixed rate   revaluation on GMPs GMP fixed rate revaluation according to date of leaving.   For active members assumed to withdraw from service in future, a fixed   revaluation rate of 3.5% p.a. is assumed to apply after the assumed date of   withdrawal. Increases to pensions in payment The LPI pension increase assumption   for the relevant tranche Promotional salary increases Nil Discretionary   increases Nil  3. Demographic   assumptions  Pre-retirement   mortality:  Males: 40% of AM92   Ultimate  Females: 50% AF92   Ultimate  Post-retirement mortality —   Base tables:  Males: standard table   S2PMA Light  Females: standard table   S2PFA Light  The base tables and   corresponding scaling factors have been derived from an analysis of the Main   Fund Section’s own mortality experience over the period from 1 April 2006 to   31 March 2017.  Combined average   scaling factors have been determined using the Aon Hewitt Longevity Model   (version 3.03) based on the member’s date of birth, sex and socio-economic   information inferred from their postcode and membership category.  Current Member sex Member base Member   Member’s Member’s membership  table   equivalent dependant dependant group     single scaling factor base table equivalent  single    scaling factor Actives M S2PMA Light 113% S2PFA Light 102%  F S2PFA Light 100% S2PMA Light 124%   Deferreds M S2PMA Light 113% S2PFA Light 102%    F S2PFA Light 98% S2PMA Light 120% Pensioners M S2PMA Light 104% S2PFA   Light 96%  F S2PFA Light 96% S2PMA   Light 117% Dependants M S2PMA Light 104% - -    F S2PFA Light 98% - -    Ill-health retirees: A scaling factor adjustment is applied to the   standard tables shown above equal to 150% for males and 151% for females 

    

 

Post-retirement   mortality — Future improvements:  CMI   2017 Core Projections Model with smoothing parameter Sê = 8.0.  Long term rate to the improvements of 1.5%   p.a. for males and females  Early   retirements:  Allowance is made for   members to retire before or after their Normal Retirement Age. Where  pensions are assumed to be payable before   or after Normal Retirement Age for a particular tranche of benefits, they are   adjusted for early or late payment using the Main Fund Section’s early and   late retirement factors applicable from 1 February 2018, which are assumed to   remain unchanged in future.  The tables   below illustrate the percentage of members retiring each year.  Active members:  Age Current schedule  Non-NPA65 Schedule NPA65 Schedule  From active    service Post-withdrawal From active    service Post-withdrawal 55 10% 10% 10% 10% 56 10% 5% 10% 5% 57 10% 5%   10% 5% 58 20% 5% 10% 5% 59 25% 5% 10% 5% 60 100% 100% 25% 40% 61 100% 100%   20% 20% 62 100% 100% 20% 20% 63 100% 100% 20% 20% 64 100% 100% 20% 20% 65+   100% 100% 100% 100%  Deferred members   with a Normal Retirement Age (for service outside the Retiring Age 65 Schedule)   of 60, and not on special redundancy packages:  Age Current schedule  NPA60 Schedule NPA65 Schedule 55 10% 10% 56   5% 5% 57 5% 5% 58 5% 5% 59 5% 5% 60 100% 40% 61 100% 20% 62 100% 20% 63 100%   20% 64 100% 20% 65+ 100% 100% 

    

 

 

Deferred   members with a Normal Retirement Age (for service outside the Retiring Age 65   Schedule) other than 60, and not on special redundancy packages, are assumed   to retire at their Normal Retirement Age.    Members on special redundancy packages are assumed to retire at age   55, with the appropriate reduction applied in each case.  Withdrawals:  Allowance made.  Family Details:  A man is assumed to be three years older   than his wife.  90% of male and 65% of   female members are assumed to be married at retirement or earlier death.  A children’s loading of 5% is applied to   benefits payable on death before retirement.    Cash Equivalent Transfer Values (CETVs):  Allowance made for transfers equivalent to   £630M per annum over the period to 31 December 2021, based on the same   demographic profile as those members transferring out of the Main Fund   Section over the three years to 31 December 2017. CETV assumptions are   assumed to be as follows for this purpose:    • Discount rate: swaps +2.2% p.a.    • Post-retirement mortality: As above except with 1.25% p.a long term   rate of improvement  • RPI/CPI   inflation and LPI pension increases: As derived above, except RPI inflation   equal to the breakeven RPI swap yield curve    • Commutation: No allowance made    Notwithstanding the use of the above CETV assumptions for the purpose   of the actuarial valuation, the Trustee shall review and amend the CETV   assumptions from time to time in accordance with the Rules and legislation,   as appropriate.  Commutation:  Allowance for members to commute 18% of   their pension at retirement based on factors which are assumed to remain   unchanged in future.  Expenses:  An addition of £2.667M per month increasing   annually with RPI inflation, payable by the Bank in addition to the future   service rate. The allowance for expenses excludes investment-related expenses   (which are paid from the Main Fund Section) and excludes PPF levies in excess   of £2M in any year which are paid from the Main Fund Section. 

    

 

Decrements for   withdrawal, death before retirement and ill-health retirement:  Age Withdrawal from  service Death  before    retirement -  Males Death  before    retirement -  Females Ill   health  retirement -  Males Ill health retirement - Females 25   8.75 0.02 0.01 0.03 0.03 26 8.75 0.02 0.01 0.03 0.03 27 8.75 0.02 0.01 0.03   0.03 28 8.75 0.02 0.01 0.03 0.03 29 8.75 0.02 0.02 0.03 0.03 30 8.75 0.02   0.02 0.03 0.04 31 8.75 0.02 0.02 0.03 0.04 32 8.75 0.02 0.02 0.03 0.04 33   8.75 0.03 0.02 0.03 0.04 34 8.75 0.03 0.02 0.03 0.05 35 8.75 0.03 0.02 0.03 0.05   36 8.75 0.03 0.03 0.03 0.06 37 8.75 0.03 0.03 0.03 0.07 38 8.75 0.03 0.03   0.04 0.07 39 8.75 0.03 0.03 0.04 0.08 40 8.75 0.04 0.04 0.05 0.09 41 8.75   0.04 0.04 0.05 0.09 42 8.75 0.04 0.04 0.06 0.10 43 8.75 0.05 0.05 0.07 0.11   44 8.75 0.05 0.05 0.07 0.12 45 8.75 0.06 0.06 0.08 0.13 46 8.75 0.06 0.06   0.09 0.14 47 8.75 0.07 0.07 0.11 0.15 48 8.75 0.08 0.08 0.12 0.17 49 8.75   0.09 0.09 0.14 0.19 50 8.75 0.10 0.09 0.15 0.20 51 8.75 0.11 0.10 0.17 0.22   52 8.75 0.13 0.11 0.19 0.25 53 8.75 0.14 0.13 0.22 0.27 54 8.75 0.16 0.14   0.24 0.30 55 5 0.18 0.15 0.27 0.33 56 5 0.20 0.17 0.31 0.37 57 5 0.23 0.19   0.34 0.40 58 5 0.25 0.21 0.38 0.44 59 5 0.29 0.23 0.43 0.48 60 2 0.32 0.25   0.47 0.54 61 2 0.36 0.28 0.53 0.59 62 2 0.40 0.31 0.58 0.65 63 2 0.45 0.34   0.65 0.71 64 2 0.51 0.38 0.72 0.78 65 2 0.57 0.42 0.80 0.87

    

 

Factors:  Early and late retirement —  Years retiring  early/late Early retirement * Late   retirement 0 1.000 1.000 1 0.962 1.027 2 0.925 1.055 3 0.890 1.084 4 0.856   1.116 5 0.824 1.150 6 0.793 1.187 7 0.762 1.227 8 0.734 1.269 9 0.706 1.314   10 0.679 1.362  * for revaluing pension   in excess of GMP  Commutation —  Age Unisex 55 23.37 56 22.86 57 22.35 58   21.83 59 21.30 60 20.76 61 20.22 62 19.68 63 19.12 64 18.56 65 18.00  

    

 

Yield   curves:  The tables below shows the   annual forward rates for the financial assumptions used as at 31 December   2017 between time t-1 and time t.  Key  Technical Provisions (TP) Employer   contributions for future service rate accrual (FSR)  Discount rate  Term HDC forward  rates % TP Discount rate % FSR    Discount rate % 1 0.63% 1.21% 1.11% 2   0.85% 1.43% 1.33% 3 1.06% 1.64% 1.54% 4 1.20% 1.78% 1.68% 5 1.29% 1.87% 1.77%   6 1.33% 1.91% 1.81% 7 1.49% 2.07% 1.97% 8 1.59% 2.17% 2.07% 9 1.68% 2.26%   2.16% 10 1.74% 2.32% 2.22% 11 1.78% 2.36% 2.26% 12 1.81% 2.39% 2.29% 13 1.82%   2.40% 2.30% 14 1.82% 2.40% 2.30% 15 1.82% 2.40% 2.30% 16 2.32% 2.90% 2.80% 17   1.89% 2.47% 2.37% 18 1.85% 2.43% 2.33% 19 1.81% 2.39% 2.29% 20 1.77% 2.35%   2.25% 21 4.43% 5.01% 4.91% 22 1.91% 2.49% 2.39% 23 1.83% 2.41% 2.31% 24 1.75%   2.33% 2.23% 25 1.66% 2.24% 2.14% 26 2.34% 2.92% 2.82% 27 1.50% 2.08% 1.98% 28   1.40% 1.98% 1.88% 29 1.30% 1.88% 1.78% 30 1.21% 1.79% 1.69% 31 1.71% 2.29%   2.19% 32 1.06% 1.64% 1.54% 33 1.00% 1.58% 1.48% 34 0.95% 1.53% 1.43% 35 0.92%   1.50% 1.40% 36 0.90% 1.48% 1.38% 37 0.89% 1.47% 1.37% 38 0.89% 1.47% 1.37% 39   0.90% 1.48% 1.38% 40 0.92% 1.50% 1.40% 41 1.25% 1.83% 1.73% 42 0.75% 1.33%   1.23% 43 1.29% 1.87% 1.77% 44 1.32% 1.90% 1.80% 45 1.32% 1.90% 1.80% 46 1.32%   1.90% 1.80% 47 1.32% 1.90% 1.80% 48 1.24% 1.82% 1.72% 49 1.15% 1.73% 1.63% 50   1.15% 1.73% 1.63% 

    

 

Term HDC   forward  rates % TP Discount rate %   FSR    Discount rate % 51 1.15% 1.73%   1.63% 52 1.15% 1.73% 1.63% 53 1.15% 1.73% 1.63% 54 1.15% 1.73% 1.63% 55 1.15%   1.73% 1.63% 56 1.15% 1.73% 1.63% 57 1.15% 1.73% 1.63% 58 1.15% 1.73% 1.63% 59   1.15% 1.73% 1.63% 60 1.15% 1.73% 1.63% 61 1.15% 1.73% 1.63% 62 1.15% 1.73%   1.63% 63 1.15% 1.73% 1.63% 64 1.15% 1.73% 1.63% 65 1.15% 1.73% 1.63% 66 1.15%   1.73% 1.63% 67 1.15% 1.73% 1.63% 68 1.15% 1.73% 1.63% 69 1.15% 1.73% 1.63% 70   1.15% 1.73% 1.63% 71 1.15% 1.73% 1.63% 72 1.15% 1.73% 1.63% 73 1.15% 1.73%   1.63% 74 1.15% 1.73% 1.63% 75 1.15% 1.73% 1.63% 76 1.15% 1.73% 1.63% 77 1.15%   1.73% 1.63% 78 1.15% 1.73% 1.63% 79 1.15% 1.73% 1.63% 80 1.15% 1.73% 1.63% 81   1.15% 1.73% 1.63% 82 1.15% 1.73% 1.63% 83 1.15% 1.73% 1.63% 84 1.15% 1.73%   1.63% 85 1.15% 1.73% 1.63% 86 1.15% 1.73% 1.63% 87 1.15% 1.73% 1.63% 88 1.15%   1.73% 1.63% 89 1.15% 1.73% 1.63% 90 1.15% 1.73% 1.63% 91 1.15% 1.73% 1.63% 92   1.15% 1.73% 1.63% 93 1.15% 1.73% 1.63% 94 1.15% 1.73% 1.63% 95 1.15% 1.73%   1.63% 96 1.15% 1.73% 1.63% 97 1.15% 1.73% 1.63% 98 1.15% 1.73% 1.63% 99 1.15%   1.73% 1.63% 100 1.15% 1.73% 1.63%  

    

 

Inflation and   pension increases  Term RPI   inflation  (HIC forward  rates) CPI inflation LPI (0,5)  pension    increases LPI (0,3)  pension  increases LPI (0,2.5)  pension    increases LPI (3,5)    pension  increases LPI   (2.5,7)  pension  increases CPI (0,3)  pension    increases 1 3.22% 2.12% 3.22% 3.00% 2.50% 3.64% 3.54% 2.12% 2 3.26%   2.16% 3.26% 3.00% 2.50% 3.65% 3.56% 2.16% 3 3.17% 2.07% 3.17% 3.00% 2.50%   3.61% 3.50% 2.07% 4 3.26% 2.16% 3.26% 3.00% 2.50% 3.65% 3.56% 2.16% 5 3.33%   2.23% 3.33% 3.00% 2.50% 3.68% 3.61% 2.23% 6 3.26% 2.16% 3.26% 3.00% 2.50%   3.65% 3.57% 2.16% 7 3.44% 2.34% 3.44% 3.00% 2.50% 3.73% 3.69% 2.34% 8 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.73% 2.40% 9 3.56% 2.46% 3.56% 3.00% 2.50%   3.78% 3.77% 2.46% 10 3.61% 2.51% 3.61% 3.00% 2.50% 3.81% 3.81% 2.51% 11 3.62%   2.52% 3.62% 3.00% 2.50% 3.81% 3.82% 2.52% 12 3.70% 2.60% 3.70% 3.00% 2.50%   3.85% 3.89% 2.60% 13 3.74% 2.64% 3.74% 3.00% 2.50% 3.87% 3.92% 2.64% 14 3.77%   2.67% 3.77% 3.00% 2.50% 3.89% 3.94% 2.67% 15 3.79% 2.69% 3.79% 3.00% 2.50%   3.90% 3.96% 2.69% 16 3.80% 2.70% 3.80% 3.00% 2.50% 3.90% 3.96% 2.70% 17 3.90%   2.80% 3.90% 3.00% 2.50% 3.95% 4.04% 2.80% 18 3.89% 2.79% 3.89% 3.00% 2.50%   3.94% 4.03% 2.79% 19 3.86% 2.76% 3.86% 3.00% 2.50% 3.93% 4.01% 2.76% 20 3.82%   2.72% 3.82% 3.00% 2.50% 3.91% 3.98% 2.72% 21 4.40% 3.30% 4.40% 3.00% 2.50%   4.40% 4.45% 3.00% 22 3.73% 2.63% 3.73% 3.00% 2.50% 3.87% 3.90% 2.63% 23 3.61%   2.51% 3.61% 3.00% 2.50% 3.81% 3.82% 2.51% 24 3.48% 2.38% 3.48% 3.00% 2.50%   3.75% 3.72% 2.38% 25 3.35% 2.25% 3.35% 3.00% 2.50% 3.69% 3.63% 2.25% 26 3.25%   2.15% 3.25% 3.00% 2.50% 3.65% 3.56% 2.15% 27 3.07% 1.97% 3.07% 3.00% 2.50%   3.57% 3.44% 1.97% 28 2.93% 1.83% 2.93% 2.93% 2.50% 3.52% 3.35% 1.83% 29 2.81%   1.71% 2.81% 2.81% 2.50% 3.47% 3.28% 1.71% 30 2.69% 1.59% 2.69% 2.69% 2.50%   3.43% 3.21% 1.59% 31 2.60% 1.50% 2.60% 2.60% 2.50% 3.39% 3.16% 1.50% 32 2.52%   1.42% 2.52% 2.52% 2.50% 3.37% 3.12% 1.44% 33 2.46% 1.36% 2.46% 2.46% 2.46% 3.35%   3.09% 1.40% 34 2.43% 1.33% 2.43% 2.43% 2.43% 3.34% 3.08% 1.38% 35 2.41% 1.31%   2.41% 2.41% 2.41% 3.33% 3.07% 1.37% 36 2.41% 1.31% 2.42% 2.41% 2.41% 3.33%   3.07% 1.37% 37 2.43% 1.33% 2.44% 2.43% 2.43% 3.34% 3.08% 1.38% 38 2.47% 1.37%   2.47% 2.47% 2.47% 3.35% 3.10% 1.41% 39 2.53% 1.43% 2.53% 2.53% 2.50% 3.37%   3.13% 1.44% 40 2.59% 1.49% 2.59% 2.59% 2.50% 3.39% 3.16% 1.49% 41 2.90% 1.80%   2.90% 2.90% 2.50% 3.50% 3.33% 1.80% 42 2.93% 1.83% 2.93% 2.93% 2.50% 3.51%   3.35% 1.83% 43 2.94% 1.84% 2.94% 2.94% 2.50% 3.52% 3.35% 1.84% 44 2.93% 1.83%   2.93% 2.93% 2.50% 3.51% 3.35% 1.83% 45 3.14% 2.04% 3.14% 3.00% 2.50% 3.60%   3.48% 2.04% 46 3.18% 2.08% 3.18% 3.00% 2.50% 3.62% 3.51% 2.08% 47 3.19% 2.09%   3.19% 3.00% 2.50% 3.62% 3.52% 2.09% 48 3.23% 2.13% 3.23% 3.00% 2.50% 3.64%   3.55% 2.13% 49 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 50 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39%

    

 

Term RPI   inflation  (HIC forward  rates) CPI inflation LPI (0,5)  pension    increases LPI (0,3)    pension  increases LPI   (0,2.5)  pension  increases LPI (3,5)  pension    increases LPI (2.5,7)    pension  increases CPI   (0,3)  pension  increases 51 3.50% 2.40% 3.50% 3.00% 2.50%   3.76% 3.74% 2.40% 52 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 53 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 54 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 55 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 56 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 57 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 58 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 59 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 60 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 61 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 62 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 63 3.50% 2.40% 3.50% 3.00% 2.50% 3.76%   3.74% 2.40% 64 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 65 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 66 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 67 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 68 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 69 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 70 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 71 3.50% 2.40%   3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 72 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 73 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 74 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 75 3.50% 2.40% 3.50% 3.00% 2.50% 3.76%   3.74% 2.40% 76 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 77 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 78 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 79 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 80 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 81 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 82 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 83 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 84 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 85 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 86 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 87 3.50% 2.40% 3.50% 3.00% 2.50% 3.76%   3.74% 2.40% 88 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 89 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 90 3.49% 2.39% 3.49% 3.00% 2.50% 3.76%   3.73% 2.39% 91 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 92 3.49% 2.39%   3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 93 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73%   2.39% 94 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 95 3.50% 2.40% 3.50%   3.00% 2.50% 3.76% 3.74% 2.40% 96 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73%   2.39% 97 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 98 3.49% 2.39% 3.49%   3.00% 2.50% 3.76% 3.73% 2.39% 99 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74%   2.40% 100 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39%

    

 

 The Royal Bank of Scotland Group Pension   Fund Main Fund Section  Actuarial   valuation as at 31 December 2017    Prepared for RBS Pension Trustee Limited   Prepared by David Eteen FIA   Date October 2018   Signed      David Eteen FIA  Scheme   Actuary    Copyright © 2018 Aon Hewitt   Limited. All rights reserved. aon.com Aon Hewitt Limited is authorised and   regulated by the Financial Conduct Authority. Registered in England &   Wales No. 4396810 Registered office: The Aon Centre | The Leadenhall Building   | 122 Leadenhall Street | London | EC3V 4AN This report and any enclosures or   attachments are prepared on the understanding that it is solely for the   benefit of the addressee(s). Unless the Scheme Actuary or Aon Hewitt provide   express prior written consent no part of this report should be reproduced,   distributed or communicated to anyone else and, in providing this report, the   Scheme Actuary and Aon Hewitt do not accept or assume any responsibility for   any other purpose or to anyone other than the addressee(s) of this report.

    

 

Executive   Summary  There was a deficit of £1,798M   relative to the technical provisions    (i.e. the level of assets agreed by the Trustee and the Bank as being   appropriate to meet member benefits, assuming the Main Fund Section continues   as a going concern)  There was a   deficit of £19,512M relative to the solvency liabilities  (i.e. the estimated level of assets needed   to buy insurance policies for benefits earned to the actuarial valuation   date)     As agreed with the Trustee,   the Bank will pay deficit contributions of £2,000M into the Main Fund Section   by 31 December 2018. If the actuarial assumptions are borne out in practice,   these contributions are expected to correct the shortfall relative to the   technical provisions by  31 December   2018.  In addition, from 1 October 2018   the Bank will pay the following:  •   100% of any amounts to be distributed to Royal Bank of Scotland Group plc   shareholders from 1 January 2020 (ordinary or special dividends or share   buy-backs), subject to an annual cap in each calendar year of £500M and an   overall aggregate amount of £1,500M  •   Contributions to meet the cost of future final salary benefits  — At least 41.5% of Contribution Salary for   employees who are active members of the Retiring Age 65 Schedule (less any   member contributions)  — At least 48.5%   of Contribution Salary for other active members (less any member   contributions)  • 12% of Contribution   Salary for active members of the NatWest Defined Contribution Schedule  • RBSelect contributions in respect of   members’ pensions elections  • Expense   contributions of £2.667M per month, increased each subsequent 1 July by RPI   in the 12 months to the previous 31 March, subject to a minimum increase each   year of 0%  • Reimbursement of Pension   Protection Fund levies above £2M in a levy year (nil otherwise)  A comparison of the results from this   actuarial valuation with the previous actuarial valuation as at 31 December   2015 is provided in Appendix 2.  7639 Main   Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension   Fund  Main Fund Section 

    

 

The Royal Bank   of Scotland Group Pension Fund  Main   Fund Section  Actuarial valuation as at   31 December 2017  Table of Contents  Introduction 1   Recap of 2015 actuarial valuation 2   Data - members 4   Data - assets 5   Benefits valued 7   Funding objective 8   Technical provisions - method and   assumptions 9   Technical provisions -   calculations 10   Technical provisions   - reasons for change in past service position 11   Technical provisions - recovery plan   12   Cost to the Bank of future benefit   accrual 13   Statutory Estimate of   Solvency 14   Risks and uncertainties   15   Agreed contributions 17   Next steps 18   Appendix 1: Legal framework and   alternative presentation 19   Appendix   2: Comparison of 2015 and 2017 funding 20     Appendix 3: Membership data 21     Appendix 4: Benefit summary 22     Appendix 5: Assumptions for technical provisions 29   Appendix 6: Assumptions for solvency   estimate 40   Appendix 7: Certificate   of technical provisions 42   Appendix   8: Glossary 43   Report Framework   46  7639 Main Fund Section actuarial   valuation report 31.12.2017 The Royal Bank of Scotland Group Pension Fund   Main Fund Section

    

 

Introduction  This report has been commissioned by and prepared   for the Trustee. It sets out the results and conclusions of the actuarial   valuation of the Main Fund Section of the Royal Bank of Scotland Group   Pension Fund as at 31 December 2017  •   This is a scheme funding report. Appendix 1 sets out the legal framework   within which the actuarial valuation has been completed  • Throughout the body of this report,   defined contribution (DC) benefits (including DC AVCs) have been excluded   from the actuarial valuation results because in my view this provides a   clearer picture. An alternative presentation of the actuarial valuation   results is shown in Appendix 1 which includes DC benefits in both the asset   and liability measures  Some shorthand   used in this report is explained opposite. Some technical pensions terms are   explained in the glossary in Appendix 8.    Main Fund Section  The Main Fund   Section of the Royal Bank of Scotland Group Pension Fund  Trustee    The Directors of RBS Pension Trustee Limited  Bank    The Royal Bank of Scotland Group plc and all Participating Employers   who participate in the Main Fund Section from time to time  Rules    The Trust Deed and Rules dated    5 April 2006, and amending legal documents  Contribution Salary  The salary element of a member’s   ValueAccount (i.e. an amount which is equivalent to basic salary), or basic   salary if the member does not have a ValueAccount  Pensionable Salary  As defined in the Rules   Pensionable Service  As defined in the Rules   Actuarial Valuation Date  31 December 2017   Snapshot view  The report concentrates on the Main Fund   Section’s financial position at the actuarial valuation date. As time moves   on, the Main Fund Section’s finances will fluctuate. If you are reading this   report some time after it was produced, the Main Fund Section’s financial   position could have changed significantly.    7639 Main Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension   Fund Main Fund Section

    

 

Recap of 2015   actuarial valuation   The key results   from the previous actuarial valuation at 31 December 2015 were:  • The assets were £30,793M  • The technical provisions were £36,654M,   which corresponded to a deficit of £5,861M and a funding level of 84%  • The Statutory Estimate of Solvency   liabilities were £60,350M, which corresponded to a deficit of £29,557M, and a   funding level of 51%  The Trustee and   the Bank agreed a recovery plan that was designed to restore the technical   provisions funding level to 100% by  31   December 2025 through a combination of:    • Deficit repair contributions of £4,200M, payable in March 2016  • Investment returns on the Main Fund   Section’s assets during the recovery period equal to the fixed interest   swap-yield curve plus 3.1% p.a. for growth assets and equal to the fixed   interest swap-yield curve plus 0.2% p.a. for matching assets, on both   existing assets and future contributions held in respect of final salary   liabilities  It was also agreed that   the Bank would pay the  following   contributions with effect from  1 July   2016:  • Contributions to meet the cost   of future final salary benefits and administration expenses  — At least 32.9% of basic salary for active   members of the Retiring Age 65 Schedule (less any member contributions)  — At least 38.6% of basic salary for other   active members (less any member contributions)  • The Pension Protection Fund and other   levies collected by the Pensioner Regulator    • RBSelect contributions in respect of members’ pensions elections and   contributions for DC members as required under the Rules  My formal report on the 2015 actuarial   valuation, dated 21 June 2016, contains further information.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

Key   developments since the 2015 actuarial valuation  As well as the contributions paid to the   Main Fund Section since the previous actuarial valuation and the returns   achieved on the Main Fund Section’s assets, there have been the following   main developments since the previous actuarial valuation  • Restructuring of the Bank  Under UK ring-fencing legislation, from 1   January 2026 it will not be possible for Bank entities outside of the ring   fence to participate in the same defined benefit scheme as ring-fenced   entities or their wholly-owned subsidiaries.    In order to comply with this legislation, the Bank intends that by the   end of March 2019, the Royal Bank of Scotland plc (to be renamed NatWest   Markets plc) and the Royal Bank of Scotland International Limited will have   ceased to be participating employers in the Main Fund Section and their   liabilities will have been apportioned to National Westminster Bank Plc.   Employees within these entities will be transferred outside the Main Fund   Section.  • Acceleration of 2017   actuarial valuation  In April 2018 the   Bank and Trustee entered into a Memorandum of Understanding facilitating both   the necessary changes to the Main Fund Section to align the employing entity   structure with the requirements of the UK ring-fencing legislation and the   acceleration of a settlement framework for the 31 December 2017 actuarial   valuation (brought forward from 31 December 2018).  The funding outcome of this accelerated   actuarial valuation as at 31 December 2017 is documented in this report.  • Cessation of contracting out  The Main Fund Section ceased to be   contracted-out of the State’s second tier pension arrangements with effect   from 6 April 2016, when the ability of schemes to remain contracted-out   terminated.  • Active member   contributions  The cessation of contracting   out in 2016 generated additional national insurance contributions for the   Bank and its employees. To offset these cost increases for the Bank, with   effect from 1 June 2017 the contribution rates payable by active members,   measured as a percentage of Contribution Salary, were increased.  The resulting active member contributions   are as follows:  - From 1 June 2017 to   30 November 2017: 0.5% of Contribution Salary    - From 1 December 2017 to 31 May 2018: 1.0% of Contribution   Salary  - From 1 June 2018 to 30   November 2018: 1.5% of Contribution Salary    - From 1 December 2018:  2.0% of   Contribution Salary  In addition to the   above amounts, active members of the Adam & Company Schedule of the Main   Fund Section continue to pay 2.5% of pensionable salary.  These contributions are documented in an   updated schedule of contributions, dated 29 June 2017.  • Bulk transfer from AA Section  On 30 April 2018 the past service benefits   for 11 active members of the AA Section were transferred into the Main Fund   Section, without member consent. The corresponding DB bulk transfer payment   has been calculated to be £16.4M. Because this is small relative to the size   of the Main Fund Section, I have made no allowance for this bulk transfer in   the 31 December 2017 actuarial valuation.    7639 Main Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension   Fund Main Fund Section 

    

 

 Data - members  This actuarial valuation is based on   membership data as at 31 December 2017 supplied to us by Willis Towers   Watson  Overview  A summary of the membership data is   included in Appendix 3, alongside the membership data used for the previous actuarial   valuation as at 31 December 2015.  The   charts below show how the membership profile of the Main Fund Section has   changed over the last three actuarial valuations. The Main Fund Section   closed to new entrants on 1 October 2006 and the effect of this can be seen   by looking at the decline in the active membership.  Note that the pensioner numbers below   include dependants and children.    Reliability of information  For   this actuarial valuation, I have carried out some general checks to satisfy   myself that:  • The information used   for this actuarial valuation is sensible compared with the information used   for the previous actuarial valuation and also with that shown in the   Trustee’s report and accounts as at 31 December 2017  • The results of this actuarial valuation   can be traced from the results of the previous actuarial valuation  However, the results in my report rely   entirely on the accuracy of the information supplied. If you believe the   membership data I have used may be incomplete or inaccurate, please let me   know.     7639 Main Fund Section   actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section

    

 

Data -   assets  The audited accounts for the   Main Fund Section for the year ended 31 December 2017 show that the value of   the assets was £45,030M, of which £279M related to DC AVC assets  I have used the balance of the assets,   £44,751M, for the purposes of this actuarial valuation  The asset portfolio is invested as follows,   as taken from the Trustee’s report and accounts as at 31 December 2017:     7639 Main Fund Section actuarial   valuation report 31.12.2017  The Royal   Bank of Scotland Group Pension Fund Main Fund Section  

    

 

As part of the   Memorandum of Understanding agreed by the Trustee and the Bank in April 2018,   the Trustee agreed to de-risk the investment strategy of the Main Fund   Section by reducing its exposure to quoted equity (phase 1) and increasing   its exposure to assets that give a greater certainty over cash flows (phase   2), whilst continuing to develop its liability hedging strategy with the   purchase of further interest rate and inflation hedging. Implementation of   the phase 1 changes began in Q1 2018.    The strategic benchmark for the Main Fund Section as at 31 December   2017 is set out in the table below, shown both before and after phase 1 of   the de-risking for ease of comparison (figures are shown rounded to the   nearest £100M).  Asset class Sub asset   class Strategic Benchmark  exposure at   31 December  2017 — before de-risking   Strategic Benchmark  exposure at 31   December  2017 — after phase 1 de-  risking Equity Quoted equity £10,200M   £4,300M  Private equity    Regulated utilities    Infrastructure equity    Shipping    Timber and forestry    Hedge funds - momentum   Credit Global credit £8,500M £8,500M  Emerging markets debt    Syndicated loans    Distressed debt    Real estate debt    Infrastructure debt    Settled annuities   Property UK £2,100M £2,100M  Europe      US residential    Global   Insurance Non-life risks £1,000M   £1,000M  Life risks (inc. life  settlements)    Litigation finance   Liability hedging Liability hedging   £22,900M  £28,800M  Cash & liquidity 100% of liability   interest  rate risk  (including 4% via  swaptions)    Collateral management 100% of liability   inflation risk   The phase 2 investment   strategy changes will be determined at a later date.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

Benefits   valued  Members are entitled to   benefits defined in the Rules  •   Pension revaluation and indexation Under the Rules:  — increases to pensions in deferment in   excess of GMPs are in line with RPI, subject to various caps and floors  — increases to pensions in payment in   excess of GMPs are in line with RPI, subject to various caps and floors  — increases to GMPs in payment which   accrued after 5 April 1988 are in line with CPI subject to a cap of 3% each   year  This has been allowed for in my   assessment of the technical provisions as at 31 December 2017.  At the time of writing, the Bank and   Trustee are investigating the legal provisions for pensions indexation in   relation to certain categories of members/service in the Rules. However,   because these investigations are still ongoing the Trustee and the Bank have   agreed for me to value the technical provisions based on the benefit   structure which is currently being administered. This is summarised in   Appendix 4.  • Discretionary   benefits  No allowance has been made   for any increases to pensions in excess of those provided for in the Rules,   in particular for increases to pensions in payment.  • GMP equalisation  In July 2014 the Government stated an   intention to develop fully considered proposals and to publish guidance on   equalising Guaranteed Minimum Pensions (GMPs) between men and women. No   target date was given for publication.    Throughout 2018 there has been an ongoing Court case being heard in   relation to Lloyds Banking Group, to consider whether schemes need to   equalise for GMP and, if so, how.  At   this stage, I have made no allowance for the equalisation of GMPs in the   actuarial valuation.  • Insured   benefits  I understand that the Main   Fund Section holds around 65 individual annuity policies. However, because   this only affects a very small proportion of the overall membership, the   value of these policies is immaterial and is not separated out in the   Trustee’s report and accounts as at 31 December 2017. I have made no   adjustment for these annuity policies in this actuarial valuation.  Death in service lump sum benefits are   self-insured. I have included these benefits in my calculations of the future   cost of accrual.  7639 Main Fund   Section actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section 

    

 

Funding   objective  Terminology  Technical provisions  The value of liabilities accrued in the   scheme based on assumptions agreed as part of the actuarial valuation  Statutory funding objective  The scheme is required to hold sufficient   and appropriate assets to meet the technical provisions  Statement of funding principles  Sets out the Trustee’s policy for meeting   the statutory funding objective    A   key funding objective set by the Trustee is to hold assets which are at least   equal to the technical provisions, i.e. to meet the statutory funding   objective.  In order to calculate the   technical provisions and the cost to the Bank of future benefit accrual, the   benefits paid out by the Main Fund Section are estimated for each year into   the future. The estimated benefit payments are then ‘discounted back’ to the   actuarial valuation date using an agreed rate of interest known as the   discount rate.  The benefit payments   are expected to be made for a very long period. The chart below shows the   projected benefit payment pattern for the Main Fund Section in nominal   terms.      7639 Main Fund Section   actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section

    

 

Technical   provisions - method and assumptions    The Trustee and the Bank have agreed the assumptions to calculate the   technical provisions and the cost of future benefit accrual which are, in my   opinion, appropriate for the purposes for which they are used. The table   below summarises the key assumptions    Assumption This actuarial valuation Previous actuarial valuation   Rationale for change Discount rate    Hedging Discount Curve (HDC) plus 0.58% p.a. at all durations Fixed   interest swap-yield curve plus 1.5% p.a. at all durations Updated to reflect   de-risking of the investment strategy, as agreed by the Trustee in discussion   with the Bank  See Appendix 5 for   further details of the HDC curve.    Underlying curves updated to be consistent with the hedging strategy   in place for the Main Fund Section RPI inflation Hedging Inflation Curve   (HIC)  RPI swap-yield curve Underlying   curves updated to be consistent with the hedging strategy in place for the   Main Fund Section   See Appendix 5 for   further details of the HIC curve.      Post-retirement mortality assumption — base table S2PA Light   tables  S2PA Light tables  Updated to reflect Main Fund Section’s   pensioner mortality experience and postcode analysis since the last actuarial   valuation   Average scaling factors   applied to base tables in line with 2017 experience and postcode   analysis  Average scaling factors   applied to base tables in line with 2015 experience and postcode   analysis   Post-retirement mortality   assumption — future improvements  CMI   2017 Projections Model with smoothing parameter SÊ = 8.0 CMI 2014 Core   Projections Model Updated to allow for the CMI 2017 Projections Model, with   parameter based on the socioeconomic profile of members in the Main Fund   Section   A long term rate to the   improvements of 1.5% p.a. A long term rate to the improvements of 1.5%   p.a.  Transfers out Allowance for   aggregate transfer values of £630M p.a. until 31 December 2021, and nil   thereafter  No allowance Updated to   reflect recent experience Actuarial method    Projected unit method with a ten year control period  Projected unit method with a ten year   control period  No change    7639 Main Fund Section actuarial   valuation report 31.12.2017  The Royal   Bank of Scotland Group Pension Fund Main Fund Section 

    

 

Technical   provisions - calculations  The Main   Fund Section’s technical provisions are shown below. They have been   calculated using the assumptions in the previous section   £M Value of past service benefits for  Actives 6,653 Deferreds 22,537 Pensioners   17,359 Total (i.e. technical provisions) 46,549 Value of assets 44,751 Past   service surplus /(deficit) (1,798) Funding ratio 96%  My statutory certification of the Main Fund   Section’s technical provisions is attached as Appendix 7.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section

    

 

 

Technical   provisions - reasons for change in past service position  The technical provisions funding position   has improved by £4,063M over the period from 31 December 2015 to 31 December   2017, from a deficit of £5,861M to a deficit of £1,798M. This change can be   explained approximately by the graphs below, with items shown rounded to the   nearest £10M  1. Expected experience in   line with 2015 Recovery Plan — Deficit reduced from £5,861M to £1,479M     2. Impact of actual versus expected   experience, and changes to swap and inflation yield curves due to changes in   market conditions - Deficit of £1,479M to a surplus of £2,514M      3. Impact of changing the actuarial   assumptions - Surplus of £2,514M to a deficit of £1,798M      The analysis shows that the main factors   affecting the funding position since the previous actuarial valuation have   been:  • The payment of £4,200M deficit   repair contributions in March 2016  •   The positive investment returns on growth and matching assets relative to the   partially offsetting impact of changes to swap and inflation curves  • The changes to the actuarial assumptions,   in particular the discount rate and inflation curves, which have placed a   higher value on the technical provisions    7639 Main Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension   Fund Main Fund Section 

    

 

 Technical provisions - recovery plan  The Trustee and the Bank have agreed a   recovery plan. The recovery plan is designed to eliminate the deficit at the   actuarial valuation date relative to the technical provisions by the end of   the recovery period  The Bank has   agreed to pay deficit contributions of £2,000M into the Main Fund Section by   31 December 2018. No further deficit contributions are payable in the   recovery plan.  If the assumptions are   borne out in practice, these contributions are expected to correct the   shortfall relative to the technical provisions by 31 December 2018.  Terminology    Recovery plan  A plan for making   good any deficit relative to the technical provisions.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

 Cost to the Bank of future benefit   accrual  The table below shows the cost   at the actuarial valuation date of benefits that final salary members will   earn in the Main Fund Section in future    This cost has been calculated using the same assumptions as for the   technical provisions. However, the Bank has agreed to pay contributions in   respect of future final salary benefits at a higher rate than this, using the   same assumptions as for the technical provisions except for the discount rate   which is 0.1% p.a. lower at all durations.    The actuarial method used to calculate the cost is the Projected Unit   Method with a ten year Control Period.     Retiring Age  65 Schedule %   Contribution  salaries  All other    members % Contribution  salaries   Overall % Contribution  salaries   Notional cost of accrual    — Technical   provisions  assumptions 40.41 47.21   43.1 1 Actual level at which the Bank will fund accrual — Technical   provisions assumptions less a further 0.1% p.a. in the discount rate 41.51   48.51 44.3 1  1 (less any member   contributions payable)  Augmentations   and undiscounted early retirements  The   Trustee has agreed that augmentations and unreduced early retirements can be   granted up to an annual allowance of £10M without requiring additional   contributions from the Bank. Any costs of augmentations or unreduced   retirement pensions above £10M in any year are met by the Bank.  No allowance for augmentations or unreduced   early retirements has been included in the actuarial valuation and this will   therefore lead to an experience strain at the next actuarial valuation in   respect of any augmentations or unreduced early retirements granted up to   £10M a year.  7639 Main Fund Section   actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section

    

 

Statutory   Estimate of Solvency  The Statutory   Estimate of Solvency below represents the estimated cost of purchasing   annuities at the actuarial valuation date from an insurance company to meet   the Main Fund Section’s benefits  £M   Value of past service benefits for    Actives 10,673 Deferreds 33,800 Pensioners 18,157 Expenses 1,633 Value   of liabilities (solvency estimate) 64,263 Value of assets 44,751   Surplus/(deficit) (19,512) Solvency ratio 70%    In practice, if the Main Fund Section were to be discontinued with no   solvent employer and if at the point this occurred the assets were not   sufficient to provide the benefits in full then, absent any other solution   which guarantees the benefits, the Fund may go into the Pension Protection   Fund (PPF) in which case:  • Benefits   corresponding to those covered by the PPF would be met first (either through   the PPF or, if there were sufficient funds, by securing these benefits with   an insurance company)  • Any remaining   assets would be used to secure part of the remaining benefits with an   insurance company  Under the rules of   the PPF, the proportion of full benefits provided will vary from member to   member and may be higher or lower than the statutory estimate of solvency   ratio quoted above.  7639 Main Fund   Section actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section

    

 

Risks and   uncertainties  The Main Fund Section   faces a number of key risks which could affect its funding position  These risks include:  • Funding risk — the risk that the   technical provisions are set too low and prove insufficient to meet the   liabilities (e.g. in the event of discontinuance)  • Sponsor covenant risk — the risk that the   Bank is no longer able to support the Main Fund Section  • Investment risks — the risk that investment   returns are lower than assumed in the actuarial valuation, and also that the   assets are volatile and move out of line with the liabilities, so the funding   position is not stable  • Longevity   risk — the risk that Main Fund Section members live for longer than assumed   and that pensions would therefore need to be paid for longer  • Inflation risk — the risk that inflation   is higher than assumed, increasing the pensions that need to be paid  • Options for members — the risk that   members exercise options resulting in unanticipated extra costs. For example,   members could commute less of their pension for cash at retirement than   assumed or fewer members than assumed decide to transfer their benefits to   another arrangement  To quantify some   of these risks, the chart on the following page shows the approximate impact   on the technical provisions as at the actuarial valuation date of the   following one-off step changes on the technical provisions assumptions:  • Life expectancies are one year greater   than currently assumed in the technical provisions  • Yields on swaps, gilts and corporate   bonds decrease by 1% p.a. (with no change in equity markets)  • Real yields on swaps, index-linked gilts   and index-linked corporate bonds decrease by 1% p.a. (with fixed-interest bonds,   interest rate swaps and equity markets unchanged)—this is equivalent to a 1%   p.a. increase in the assumed rate of inflation  • Members do not commute any pension for a   cash lump sum on retirement  • No   members decide to transfer their benefits to another arrangement  Figures are rounded to the nearest £10M.   The chart illustrates the downside position, i.e. where the technical   provisions are assumed to increase, but these risks can also work in the   opposite direction where the technical provisions are assumed to   decrease.  7639 Main Fund Section   actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section

    

 

Risks and   uncertainties (continued)    The   scenarios above are modelled using a number of underlying assumptions and the   results are approximate in nature only. As stated on the previous page, it   should be noted that these sensitivities could also act in the opposite   direction.  The scenarios considered   are not ‘worst case’ scenarios, and could occur in combination (rather than   in isolation).  The analysis shows the   impact on the technical provisions only. However the exposure of the Main   Fund Section to the key risks of interest rate and inflation movements has   been mitigated through the liability hedging strategy which is in place and   reflects the Trustee’s strategic investment benchmark shown on page 6.  Longevity risk has not been hedged.  Risks in relation to member behaviours for   commuting pension at retirement or taking a transfer value to another   arrangement are monitored by the Trustee. From time to time the Trustee   reviews the terms available to members for these options in consideration of   the impact this has on the funding position of the Main Fund Section.  The Solvency measure is also highly   sensitive to these factors.  7639 Main   Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension   Fund Main Fund Section 

    

 

Agreed   contributions  The Bank will pay the   following from 1 October 2018:  •   Deficit contributions of £2,000M by 31 December 2018  • 100% of any amounts to be distributed to   Royal Bank of Scotland Group plc shareholders from 1 January 2020 (ordinary   or special dividends or share buy-backs), subject to an annual cap in each   calendar year of £500M and an overall aggregate amount of £1,500M  • Contributions to meet the cost of future   final salary benefits  — At least 41.5%   of Contribution Salary for employees who are active members of the Retiring   Age 65 Schedule (less any member contributions)  — At least 48.5% of Contribution Salary   for  other active members (less any   member contributions)  • 12% of   Contribution Salary for active members of the NatWest Defined Contribution   Schedule  • RBSelect contributions in   respect of members’ pensions elections    • Expense contributions of £2.667M per month, increased each   subsequent 1 July by RPI in the 12 months to the previous 31 March, subject   to a minimum increase each year of 0%    • Reimbursement of Pension Protection Fund levies above £2M in a levy   year (nil otherwise)  If the actuarial   assumptions are borne out in practice, these contributions are expected to   correct the shortfall relative to the technical provisions by 31 December   2018.  Terminology  Schedule of contributions  Specifies the amounts and dates of   contributions payable by the Bank and the members over the next five years or   the recovery period, if longer. I am required to certify that the   contributions in the schedule are expected to remove the deficit over the   period stated based on the agreed assumptions.  The contributions are set out in the   schedule of contributions. As agreed, my certification of the schedule of   contributions will be based on the position at the actuarial valuation   date.  A full review of the employer   contribution rate will be completed no later than following the next   actuarial valuation, which is due to take place as at 31 December 2020.  I estimate that, by the next actuarial   valuation due as at 31 December 2020 the technical provisions funding ratio   will increase to about 102%, and the Statutory Estimate of Solvency ratio   will increase to about 74%.  These   estimates assume that:  • The   experience of the Main Fund Section is in line with the assumptions   underlying the technical provisions and the recovery plan  • The Bank will pay dividend-linked   contributions of £500M into the Main Fund Section in 2020  • The assumptions underlying the technical   provisions and Statutory Estimate of Solvency measures remain unchanged  Due to the risks and uncertainties inherent   in the assumptions it is normally the case that actual experience varies from   the assumptions.  7639 Main Fund   Section actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section

    

 

Next steps  As part of the actuarial valuation, the   Trustee and the Bank have agreed a statement of funding principles  The next steps are:  • For the Trustee to provide a copy of this   report to the Bank within 7 days  • For   the Trustee and Bank to agree the recovery plan and schedule of   contributions  • To submit the   actuarial valuation summary and supporting documentation to the recovery plan   to the Pensions Regulator via Exchange    • To provide a summary funding statement to members by 30 June 2019,   i.e. 18 months from the actuarial valuation date  Checklist The actuarial valuation process   is complete when all of the following have been agreed and are in place: •   Statement of funding principles • This scheme funding report • Recovery plan   • Schedule of contributions • Actuarial certification of the schedule of   contributions The statutory deadline for completing the actuarial valuation   process is 31 March 2019, i.e. 15 months after the actuarial valuation   date.  7639 Main Fund Section actuarial   valuation report 31.12.2017  The Royal   Bank of Scotland Group Pension Fund Main Fund Section 

    

 

Appendix 1:   Legal frafl)ework and alternative presentation It is a legal requirement to   carry out a full actuarial valuation at least once every three years This   report is produced in compliance with: Alternative presentation including •   Clause 6.6 and 6.9 of the Rules • Section 224 of .the Pensions Act 2004 • The   terms of the Scheme Actuary appointment from 1 July 2015 7639 Main Fund   Section actuarial valuation report 31.12.2017 The Royal Bank of Scotland   Group Pension Fund Main Fund Section 19 defined contribution benefits Defined   contribution benefits (including DC AVCs) amounted to £279M at the actuarial   valuation date. If these benefits are included in the aCtuarial valuation:   •The value of the assets is £45,030M • The technical provisions are £46,828M (funding   ratio 96%) •The value of the solvency liabilities is £64,542M (solvency ratio   70%) 

    

 

Appendix 2:   Comparison of 2015 and 2017 funding The key results of the actuarial   valuation for the Main Fund Section as at 31 December 2017 are set out below,   in comparison to the results of the previous actuarial valuation as at 31   December 2015 ec2015 e al Solvency Solvency s 1 EM 7,131 13,904 6,653 10,673   15,932 28,900 22,537 33,800 13,591 16,085 17,359 18,157 1,461 1,633 36,654   60,350 46,549 64,263 30,793 30,793 I 51% 84% e 31 Dec 2017 31 December 2018   31 December 2025 • Swaps+3.1%p.a. on growth assets • Swaps + 0.2% p.a. on   matching assets £4,200M deficit contributions paid in March 2016 32.9% (paid   from 1 July 2016, incl1.6% expenses) 38.6% (paid from 1 July 2016, incl1.6%   expenses) In line with the assumptions underlying the technical provisions   £2,000M defiCit contributions payable by 31December 2018 41.5% (paid from 1   Oct 2018, exclexpenses) 48.5% (paid from 1 Oct 2018, exclexpenses) Up to   £1,500M further contingent contributions linked to dividends £2.667M per   month, with RPI increases applied annually Costs over £2M p.a.met by the Bank   Costs over £10M p.a. met by the Bank ' ' I 1.6% of basic salaries (incl in   the contribution rates above) Met in full by the Bank Costs over£10M p.a. met   by the Bank 7639 Main Fund Section actuarialvaluation report 31.12.2017 The   RoyalBank of Scotland Group Pension Fund Main Fund Section 20 Benefit   augmentations Pension Protection Fund Levies Administration expenses   Additionalcontingent contributions All other active members Retiring age 65   Schedule Recovery Plan Contributions Investment returns End date c 2015 31 D   Funding ratio Past service sur lus/(deficit) Value of assets Value of   liabilities Expenses Pensioners Deferreds Actives Value of past service: (E M   31 D e c2017 31 D c2017 Techni ca l Prov is io ns ( E M ) 31 D e c2015 31 D T   ec hni c Provisio n (E M ) 

    

 

Appendix 3:   Membership Active members data -------·-39,864 .24,673 30,396 41,032 24,670   31,072 266 273 539 419 392 811 11,052 17,732 21.7 21.9 17.7 19.3 · 10,214   15,892 26,106 45.6 46.0 Total I • Salary figures are full-time equivalent   pensionable salary (before applying any loadings or allowing for the Main   Fund Section's notional earnings c p).. Average service figures are full-time   equivalent, they include transferred-in service and full service credits   granted to replace Profit Related Pay • Deferred pensioners ' 47.9 • The   deferred pension amounts shown above are at date of leaving Pensioners   -----·· ==;('-·-···----.. ------·---24,943 37,162 8,719 . 70,824 24,307   33,008 ; ·· 70.9 67.7 73.9 69.6 70.4 67.3 .73.0 '480 189 80 749 465 19,245   5,087 9,151 162 77 I 8,705 8,809 66,080 69.2 704 '10,647   --------------L--------lL-----------• Pensions are members' total pension in   payment as at the actuarial valuation date excluding any part of pension   funded directly by the Bank Dependants' and childrens' pensions are included   in the figures above • 7639 Main Fund Seciion actuarial valuation report   31.12.2017 The Royal Bank of Scotland Group Pension Fund Main Fund Section 21   Average pension (£ pa) Total pension (£M pa .6 207 ' 4,776 :Men I :Women   Total 76,135 119,572 212 419 2,779 . 3,504 Men Women Total 44,325 77,979   122,304 46.1 46.8 I 211 205 416 I 4,762 2,633 '3,404 Average pension (£ pa   Total pension (£M pa) Average age 22.2 i 21.4 Average service (years) Average   pensionable salaries (£pa) Total pensionable salaries (£M pa) 

    

 

Appendix 4,:   Benefit summary The benefits are set out in the Rules. For illustration only,   this section provides an overview of the benefits of the Main Fund Section   based on the provisions in force at the actuarial valuation date Certain   categories of current and former members of the.Main Fund Section are   entitled to different benefits from those summarised below MEMBERS WHO HAVE   JOINED THE RETIRING AGE 65 SCHEDULE (FOR PENSIONABLE SERVICE ACCRUED WHILST   IN THE_RETIRING AGE 65 SCHEDULE) Normal Pension Age Members' contributions   Age 65. From 1 June 2017 to 30 November 2017:0.5% of Contribution Salary From   1 December 2017 to31 May 2018: 1.0% of Contribution Salary From 1 June 2018   to 30 Noyember 2018: 1.5% of Contribution Salary From 1 December 2018: 2.0% of   Contribution Salary n/60 x Final PensionablSalary at Normal Pension Date   where: n =period of pensionable service in complete years and months Normal   retirement pension (maximum of 45 years in aggregate across all schedules) .   . . Final Pensionable Salary isdefined as the 12 best consecutive months of   Pensionable Salary in the last five years of membership of the Main Fund   Section. Pensionable Salary is defined as the annual rate of basic salary (or   the salary element of a member's Value Account) subject, where applicable, to   the Main Fund Section's Earnings Cap. From 25 August 2009, where the Bank   offers to increase an Active Member's basic salary or salary element of his   Value Account with RBSelect on the basis that part of the increase will not   be pensionable, and the Active Member agrees, the annual increase in the   Pensionable Salary shall be limited to the restricted pensionable increases   as agreed with subsequent pensionable increases being based upon the   Pensionable Salary immediately prior to the date of increase as adjusted for   previously agreed restrictions since 25 August 2009. A pension is provided on   retirement after the age of 55. This is calculated using completed service   and is reduced to allow for early payment. No reduction is applied if early   retirement is at the request of the employer (other than for reasons of   misconduct). In the event of premature retirement due to serious ill-health   or incapacity, an immediate pension may be paid based on prospective   pensionable service to Normal Pension Age and with no reduction being applied   due to early payment. This is contingent upon the member having been   receiving long term disability benefits for a period of five years and six   months, and also being prevented from taking up employment with any employer.   If the member retires without waiting until the end of the long term   disability period or is able to take up employment with an employer the   pension is based on service up to the date of leaving only. In both Early   retirement pension Ill-health pension 7639 Main Fund Section actuarial   valuation report 31.12.2017 The Royal Bank of Scotland Group Pension Fund   Main Fund Section 22 

    

 

cases the   Trustee must be satisfied that the member's condition meets the definition of   incapacity. Guaranteed LPI increases are provided to pensions in payment in   excess of any GMP. For members who joined the Group Fund on or after 1 July   2005 guaranteed pension increases are limited to 2.5% per annum. Part of the   member's pension may be commuted for a tax-free lump sum. If the member dies   within five years of retiring, a lump sum equal to t1e balance of five years'   pension payments; plus A spouse's/partner's pension of one-half of the   member's pension (before any commutation for lump sum). Children's pensions   may also bpayable, with the percentage of member's pension depending on   marital status and the number of children. A lump slim of four times basic   salary plus a refund of any member contributions paid in respect of   Pensionable Service prior to joining the Retiring Age 65 Schedule; plus A   spouse's/partner's pension of one-half of the member's pension th3t would be   payable based on prospective service to Normal Pension Age. Children's   pensions may also be payable, with the percentage of member's pension   depending on marital status and the number of children. A deferred pension   payable from Normal Pension Age; or A transfer payment to either a new   empJoyer's scheme or a suitable insurance policy, equivalent in value to the   deferred pension. Pension increases Tax-free lump sum Death after retirement   Death in service Leaving service options MEMBERS WHO HAVE JOINED THE GROUP   FUND SINCE 1 JANUARY 2002 (FOR PENSIONABLE SERVICE ACCRUED OUTSIDE THE   RETIRING AGE 65 SCHEDULE) Normal Pension Age Members' contributions Age 60.   From 1 June 2017 to 30 November 2017: 0.5% of Contribution Salary From 1   December 2017 to 31 May 2018: 1.0% of Contribution Salary From 1 June 2018 to   30 November 2018: 1.5% of Contribution Salary From 1 December 2018: 2.0% of   Contribution Salary n/60 x Final Pensionable Salary at Normal Pension Date   where: n = period of pensionable service in complete years and months   (maximum of 40 years, or 45 years if member works beyond Normal Pension Age)   Final Pensionable Salary is defined as the 12 best consecutive months of   Pensionable Salary in the last five years of membership of the Main Fund   Section. Pensionable Salary is defined as the annual rate of basic salary (or   the salary element of a member's Value Account) subject, where applicable, to   the Main Fund Section's Earnings Cap. From 25 August 2009, where the Bank   offers to increase an Active Member's basic Normal retirement pension 7639   Main Fund Section actuarial valuation report 31.12.2017 The Royal Bank of   Scotland Group Pension Fund Main Fund Section 23 

    

 

salary or   salary element of his Value Account with RBSelect on the basis that part of   the increase will not be pensionable, and the Active Member agrees, the   annual increase in the Pensionable Salary shall be limited to the restricted   pensionable increases as agreed with subsequent pensionable increases being   ba ed upon the Pensionable Salary immediately prior to the date of increase   as adjusted for previously agreed restrictions since 25 August 2009. A   pension is provided on retirement after the age of 55. This is calculated   using completed service and is reduced to allow for early payment. No   reduction is applied if early retirement is at the request of the employer   (other than for reasons of misconduct). Early retirement pension Ill-health   pension In the event of premature retirement due to serious ill-health or   incapacity; an immediate pension may be paid based on prospective pensionable   service to Normal Pension Age and with no reduction being applied due to   early payment. This is contingent upon the m mber having completed:five years   of service and having been receiving long term disability benefits for a   period of five years and six months, and also being prevented from taking up   employment with any employer. If the member retires without waiting until the   end of the long term disability period or is able to.take up employment with   an employer the pension is based.on service up to the date of leaving only.   In both cases the trusteE;! must be satisfied that the member's condition   meets the definition of incapacity. Pension increases Guaranteed LPI   increases are provided to pensions in payment in excess of any GMP. For   members who joined the Group Fund on or after 1 July 2005 guaranteed pension   increases are limited to 2.5% per annum. ·· Tax-free lump sum Part of the   member's·pension may be commuted for a tax-free lump sum. If the member dies   within five years of retiring, a lump sum equal to the balance of five years'   pension payments; plus A spouse's/partner's pension of one-half of the   member's pension (before any commutation for lump sum). Children's pensions   may also be payable, with the percentage of member's. pension depending on   marital status and the number of children.· A lump sum of four times basic   salary; plus A spouse's/partner's pension of one-half of the member's pension   that would be payable based on prospective service to Normal Pension Age.   Children's pensions may also be payable, with the percentage of member's   pension depending on marital status and the number of children. A deferred   pension payable from Normal Pension Age; or A transfer payment to either a   new employer's scheme or a suitable insurance policy, equivalent in value to   the deferred pension. Death after retirement Death in service Leaving service   options 7639 Main Fund Section actuarial valuation report 31.12.2017 The   Royal Bank of Scotland Group'Pension Fund Main Fund Section · 24 

    

 

FORMER MEMBERS   OF THE NATIONAL WESTMINSTER BANK PENSION FUND (FOR PENSIONABLE SERVICE   ACCRUED OUTSIDE THE RETIRING AGE 65 SCHEDULE) Normal Pension Age Age 60 for   most members, although some members have other Normal Pension Ages between 55   and 65. From 1 June 2017 to 30 November 2017: 0.5% of Contribution Salary   From 1 December 2017 to 31 May 2018: 1.0% of Contribution Salary From 1 June   2018 to 30 November 2018: 1.5% of Contribution Salary From 1 December 2018:   2.0% of Contribution Salary Members' contributions Normal retirement pension   n/60 x Final Pensionable Salary at Normal Pension Date where: n = period of   pensionable service in complete years and months (maximum of 40 years, or 45   years if member works beyond Normal Pension Age). Pensionable service   includes individual service credits granted to members between 2001 and 2004   to compensate for the removal of Profit Related Pay from the definition of   Pensionable Salary. A different formula applies for some former members of   the NatWest Markets Pension Fund. Final Pensionable Salary is defined as the   12 best consecutive month 5 of Pensionable Salary in the last five years of   membership of the Main Fund Section. This definition was phased in between 1   January 2002 and 1 January 2007, so for members leaving or retiring before 1   January 2007 Final Pensionable Salary was defined as the 12 best consecutive   months of Pensionable Salary since 1 January 2002. For members who joined the   Main Fund Section before 1 November 1992, benefits earned prior to 1 April   1977 are calculated using Pensionable Salary at date of leaving, rather than   Final Pensionable Salary as defined above. This also applies to benefits   earned before 1 April 1978 for former members of the Coutts Staff Pension   Scheme. Pensionable Salary is defined as the annual rate of basic salary (or   th salary element of a member's Value Account) subject, where applicable, to   the MC!in Fund Section's Earnings Cap. From 25 Augus1 2009, where the Bank   offers to increase an Active Member's basic . salary or salary element of his   Value Account with RBSelect on the basis that part of the increase will not be   pensionable, and the Active Member agrees, the annual increase in the   Pensionable Salary shall be limited to the restricted pensionable increases   as agreed with subsequent pensionable increases being based upon the   Pensionable Salary immediately prior to the date of increase as adjusted for   · previously agreed restrictions since 25 August 2009. Some members have an   offset applied to their Pensionable Salary for service prior to a certain   date, particularly former members of the Coutts Staff Pension Scheme for   service before 1 July 1997. Early retirement pension A pension is provided on   retirement after the age of 55. This is calculated using completed service   and is reduced to allow for early 7639 Main Fund Section actuarial valuation   report 31.12.2017 The Royal Bank of Scotland Group Pension Fund Main Fund   Section 25- 

    

 

payment. No   reduction is applied if early retirement is at the request of the employer   (other than for reasons of misconduct). ( Ill-health pension In the event of   premature retiref!1ent due to serious ill-health or incapacity, an immediate   pension may be paid based on prospective pensionable service to NormaiPension   Age and with no reduction being applied due to early payment. This is   contingent upon the member having been receiving long term disability   benefits for a specified period. If the member retires withoutwaiting until   the end of the long term disability period the pension may be based on   service up to the date of leaving only, with an allowance to award   prospective service subject to Trustee discretion. In both cases the Trustee   must be satisfied that the member's condition meets the definition of   incapacity. Pension increases Guaranteed LPI increases are provided to   pensions in payment in excess of the GMP. Some deferreds and pensioners who   were formerly members of the . Centre-File Group of Companies Pension Scheme   receive annual increases of the greater of LPI and 3% p.a. Tax-free lump sum   Part of the member's pension may be commuted for a tax-free lump sum. Death   after retirement · If the member dies within five years of retiring, a lump   sum equal to the balance of five years' pension payments; plus A   spouse's/partner's pension of one-half of the member's pension (before any   commutation for lump sum). Children's pensions may also be payable, with the   percentage of member's pension depending on marital status and the number of   children. For most female members, dependants' pensions only apply in respect   of service after 1 April1988. · . Death in service A lump sum of four times   Pensionable Salary; plus A spouse's/partner's pension of one-half of the   member's pension that would be payable based in prospective service to Normal   Pension Age. Children's pensions may also be payable, with the percentage of   member's pension depending bri marital status and the number of children. For   most female members, dependants' pensions only apply in respect of service   after 1 April 1988. Leaving service options A deferred pension payable from   Normal Pension Age; or A transfer payment to either a new employer's scheme   or a suitable insurance policy, equivalent in value to the deferred pension.   7639 Main Fund Section actuarial valuation report 31.12.2017 The Royal Bank   of Scotland Group Pension Fund Main Fund Section · ' 26 

    

 

FORMER MEMBERS   OF THE ROYAL BANK OF SCOTLAND STAFF PENSION SCHEME (FOR PENSIONABLE SERVICE   ACCRUED OUTSIDE THE RETIRING AGE 65 SCHEDULE) Normal Pension Age Age 60 for   most members, although some members have other Normal Pension Ages between 55   and 65. From 1 June 2017 to 30 November 2017: 0.5% of Contribution Salary   From 1 December 2017 to 31 May 2018: 1.0% of Contribution Salary From 1 June   2018 to 30 November 2018: 1.5% of Contribution Salary From 1 December 2018:   2.0% of Contribution Salary n/60 x Final Pensionable Salary at Normal Pension   Date where: n =period of pensionable service in complete years and months   (maximum of 40 years) Members' contributions Normal retirement pension Final   Pensionable Salary is defined as the 12 best consecutive months of   Pensionable Salary in the last ten years of membership of the Main Fund Section.   For s6me members, benefits earned prior to 1 February 1977 are calculated   using Pensionable Salary at date of leaving, rather than Final Pensionable   Salary as defined above. Pensionable Salary is defined as the annual rate of   basic salary (or the salary element of a member's Value Account) subject,   where applicable, to the Main Fund Section's Earnings Cap. From 25 August ' '   2009, where the Bank offers to increase an Active Member's basic salary or   salary element of his Value Account with RBSelect on the · basis that part of   the increase will not be pensionable, and the Active Member agrees, the   annual increase in the Pensionable Salary shall be limited to the restricted   pensionable increases as agreed with subsequent pensionable increases being   based upon the Pensionable Salary immediately prior to the date of increase   as adjusted for previously agreed restrictions since 25 August 2009. For some   members (broadly those who joined before 1 October 1985), benefits are   calculated with reference to a notional "loaded" salary. The   loading applied is approximately 5%. State Pension Deduction From State   Pension Age, a State Pension Deduction is applied, calculated as m/40 x 30%   of Basic State Pension where: m = period of pensionable service prior to 1   January 2002 in complete years and months For some members the percentage in   the above formula is 50% rather than 30%. Early retirement pension A pension   is provided on retirement after the age of 55. This is calculated using   completed service and is reduced to allow for early payment. No reduction is   applied if early retirement is at the request of the employer (other than for   reasons of misconduct). 7639 Main Fund Section actuarial valuation report   31.12.2017 The Royal Bank of Scotland Group Pension Fund Main Fund Section 27   

    

 

Ill-health   pension In the event of premature retirement due to serious ill-health or   incapacity, an immediate pensio_n may be paid based on prospective   pensionable service to Normal P nsion Age and with no reduction being applied   due to early payment. This is generally contingent upon the member having   completed five_years of service and having been receiving long term   disability benefits for a period of five years and six l " months, and   also being prevented from taking up employment with any employer. If the   member retires without waiting until the end of the long term disability   period or is able to take up employment with an employer the pension is based   on service up to the date of leaving only. In both cases the Trustee must be   satisfied that the member's condition meets the definition of incapaCity.   Pension increases Pensions in excess of the GMP that were accrued before 6   April 1997 increase in payment in line with price inflation up to a maximum   of 3% p.a. Guaranteed LPI increases are provided to pensions in payment   accrued after 5 April1997. Tax-free lump sum Part of the member's pension may   be commuted for a tax-free lump sum. Death after retirement If the member   dies within five years of retiring, a lump sum equal to the balance of five   years' pension payments; plus A spoqse's/partner's pension of one-half of the   member's pension (before any deduction or commutation for lump sum) less   one-half of the member's State Pension Deduction (only applied from when the   spouse/partner reaches State Pension Age). Children's pensions may also be   payable, with the percentage of member's pension depending on marital status   and the number of children. Death in service A lump sum of four times   Pensionable Salary (including the "loading" where appropriate);   plus A spouse's/partner's pension of one-half of the member's pension that   would be payable based in prospective service to Normal Pension Age less   one-half of the member's State Pension Deduction (only applied from when the   spouse/partner reaches State Pension Age). Children's pensions may also be   payable, with the percentage of member's pension depending on marital status   and the number of children. A deferred pension payable from Normal Pension   Age; or Leaving service options A transfer payment to either a new employer's   scheme or a suitable insurance policy, equivalent in value to the deferred   pension. 7639 Main Fund Section actuarial valuation report 31.12.2017 The   Royal Bank of Scotland Group Pensio11 Fund Main Fund Section :. - 28 

    

 

Appendix 5:   Assumptions for technical provisions    The assumptions used for calculating the technical provisions are   summarised below. Different assumptions are used for the solvency estimate,   as set out in Appendix 6.  Financial   Assumptions  Discount rate:  Technical Provisions:  Hedging Discount Curve (HDC) plus a fixed   spread of 0.58% p.a.. This was derived by solving for the fixed spread over   the HDC curve on the left hand side of the following equation of value using   market conditions as at 31 December 2017:    Technical Provisions (Discount rate: HDC plus a fixed spread,   Inflation assumption: HIC) = Technical Provisions (Discount rate: swaps +   0.8% p.a., Inflation: RPI swap curve)    Employer contributions:  Hedging   Discount Curve (HDC) plus a fixed spread of 0.48% p.a..  To derive the HDC, the yield at each yearly   tenor is the arithmetic weighted average of:    a) Spot yield at each tenor on the nominal gilt yield curve, and  b) Spot yield at each tenor on the nominal   Libor swap yield curve.  The following   weightings apply as at 31 December 2017 when calculating the HDC:  Tenor point band HDC gilt proportion HDC   swap proportion 0-5 years 11% 89% 5+-10 years 15% 85% 10+-15 years 14% 86%   15+-20 years 27% 73% 20+-25 years 60% 40% 25+-30 years 67% 33% 30+-40 years   72% 28% 40+ years 77% 23%  The HDC gilt   and swap proportion shall be updated as at 31 December 2018 and annually   thereafter based on the gilts (and any other bonds used in the liability   hedging portfolio) in the Trustee’s liability hedging portfolio as a   proportion of total hedging at each tenor.    The fixed spreads shall remain unchanged between actuarial valuations   regardless of any update to the HDC curve except where the Trustee and the   Bank agree otherwise.  In the event the   proportion of gilts at any tenor exceeds 100% of the total hedging at that   tenor the HDC gilt proportion shall be set as 100%. In the event the   proportion of gilts at any tenor is below 0% of the total hedging at that   tenor the HDC gilt proportion shall be set as 0%.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

RPI   inflation:  Hedging Inflation Curve   (HIC). To derive the HIC, the yield at each yearly tenor is the arithmetic   weighted average of:  a) Spot inflation   at each tenor on the gilt breakeven RPI inflation curve, and  b) Spot inflation at each tenor on the RPI   swap inflation curve.  The following   weightings apply as at 31 December 2017 when calculating the HIC:  Tenor point band HIC gilt proportion HIC   swap proportion 0-5 years 11% 89% 5+-10 years 17% 83% 10+-15 years 19% 81%   15+-20 years 43% 57% 20+-25 years 96% 4% 25+-30 years 100% 0% 30+-40 years   100% 0% 40+ years 100% 0%  The HIC gilt   and swap proportion shall be updated as at 31 December 2018 and annually   thereafter based on the gilts (and any other bonds used in the liability   hedging portfolio) in the Trustee’s liability hedging portfolio as a   proportion of total hedging at each tenor.    In the event the proportion of gilts at any tenor exceeds 100% of the   total hedging at that tenor the HIC gilt proportion shall be set as 100%. In   the event the proportion of gilts at any tenor is below 0% of the total   hedging at that tenor the HIC gilt proportion shall be set as 0%.  CPI inflation: RPI inflation minus   1.1%   LPI pension increases: Higher   of  (a) LPI derived using a Black   Scholes model with 1.5% implied volatility (symmetric), and  (b) CPI or RPI inflation as applicable for   each pension tranche  subject in all   cases to the cap/floor applicable for each pension tranche  Salary and pension increases:  Salary increases (pensionable/basic) 1.8%   p.a. Increases to the earnings cap 1.8% p.a. Revaluations to deferred   pensions in excess of GMP The RPI price inflation assumption Rate of GMP   increases in active service before GMP age The RPI price inflation assumption   plus 1.0% p.a. at all durations Fixed rate revaluation on GMPs GMP fixed rate   revaluation according to date of leaving. For active members assumed to   withdraw from service in future, a fixed revaluation rate of 3.5% p.a. is   assumed to apply after the assumed date of withdrawal. Increases to pensions   in payment The LPI pension increase assumption for the relevant tranche   Promotional salary increases Nil Discretionary increases Nil  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

 

Yield   curves:  The tables below shows the   annual forward rates for the financial assumptions used as at 31 December   2017 between time t-1 and time t.  Key  Technical Provisions (TP) Bank   contributions for future service rate accrual (FSR)  Discount rate  Term HDC forward  rates % TP Discount rate % FSR    Discount rate % 1 0.63% 1.21% 1.11% 2   0.85% 1.43% 1.33% 3 1.06% 1.64% 1.54% 4 1.20% 1.78% 1.68% 5 1.29% 1.87% 1.77%   6 1.33% 1.91% 1.81% 7 1.49% 2.07% 1.97% 8 1.59% 2.17% 2.07% 9 1.68% 2.26%   2.16% 10 1.74% 2.32% 2.22% 11 1.78% 2.36% 2.26% 12 1.81% 2.39% 2.29% 13 1.82%   2.40% 2.30% 14 1.82% 2.40% 2.30% 15 1.82% 2.40% 2.30% 16 2.32% 2.90% 2.80% 17   1.89% 2.47% 2.37% 18 1.85% 2.43% 2.33% 19 1.81% 2.39% 2.29% 20 1.77% 2.35%   2.25% 21 4.43% 5.01% 4.91% 22 1.91% 2.49% 2.39% 23 1.83% 2.41% 2.31% 24 1.75%   2.33% 2.23% 25 1.66% 2.24% 2.14% 26 2.34% 2.92% 2.82% 27 1.50% 2.08% 1.98% 28   1.40% 1.98% 1.88% 29 1.30% 1.88% 1.78% 30 1.21% 1.79% 1.69% 31 1.71% 2.29%   2.19% 32 1.06% 1.64% 1.54% 33 1.00% 1.58% 1.48% 34 0.95% 1.53% 1.43% 35 0.92%   1.50% 1.40% 36 0.90% 1.48% 1.38% 37 0.89% 1.47% 1.37% 38 0.89% 1.47% 1.37% 39   0.90% 1.48% 1.38% 40 0.92% 1.50% 1.40% 41 1.25% 1.83% 1.73% 42 0.75% 1.33%   1.23% 43 1.29% 1.87% 1.77% 44 1.32% 1.90% 1.80% 45 1.32% 1.90% 1.80% 46 1.32%   1.90% 1.80% 47 1.32% 1.90% 1.80% 48 1.24% 1.82% 1.72% 49 1.15% 1.73% 1.63% 50   1.15% 1.73% 1.63%  7639 Main Fund   Section actuarial valuation report 31.12.2017    The Royal Bank of Scotland Group Pension Fund Main Fund Section 

    

 

 Term HDC forward  rates % TP Discount rate % FSR    Discount rate % 51 1.15% 1.73% 1.63% 52   1.15% 1.73% 1.63% 53 1.15% 1.73% 1.63% 54 1.15% 1.73% 1.63% 55 1.15% 1.73%   1.63% 56 1.15% 1.73% 1.63% 57 1.15% 1.73% 1.63% 58 1.15% 1.73% 1.63% 59 1.15%   1.73% 1.63% 60 1.15% 1.73% 1.63% 61 1.15% 1.73% 1.63% 62 1.15% 1.73% 1.63% 63   1.15% 1.73% 1.63% 64 1.15% 1.73% 1.63% 65 1.15% 1.73% 1.63% 66 1.15% 1.73%   1.63% 67 1.15% 1.73% 1.63% 68 1.15% 1.73% 1.63% 69 1.15% 1.73% 1.63% 70 1.15%   1.73% 1.63% 71 1.15% 1.73% 1.63% 72 1.15% 1.73% 1.63% 73 1.15% 1.73% 1.63% 74   1.15% 1.73% 1.63% 75 1.15% 1.73% 1.63% 76 1.15% 1.73% 1.63% 77 1.15% 1.73%   1.63% 78 1.15% 1.73% 1.63% 79 1.15% 1.73% 1.63% 80 1.15% 1.73% 1.63% 81 1.15%   1.73% 1.63% 82 1.15% 1.73% 1.63% 83 1.15% 1.73% 1.63% 84 1.15% 1.73% 1.63% 85   1.15% 1.73% 1.63% 86 1.15% 1.73% 1.63% 87 1.15% 1.73% 1.63% 88 1.15% 1.73%   1.63% 89 1.15% 1.73% 1.63% 90 1.15% 1.73% 1.63% 91 1.15% 1.73% 1.63% 92 1.15%   1.73% 1.63% 93 1.15% 1.73% 1.63% 94 1.15% 1.73% 1.63% 95 1.15% 1.73% 1.63% 96   1.15% 1.73% 1.63% 97 1.15% 1.73% 1.63% 98 1.15% 1.73% 1.63% 99 1.15% 1.73%   1.63% 100 1.15% 1.73% 1.63%  7639 Main   Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension Fund   Main Fund Section 

    

 

Inflation and   pension increases  Term RPI   inflation  (HIC forward  rates) CPI inflation LPI (0,5)  pension    increases LPI (0,3)    pension  increases LPI   (0,2.5)  pension  increases LPI (3,5)  pension    increases LPI (2.5,7)    pension  increases CPI (0,3)  pension    increases 1 3.22% 2.12% 3.22% 3.00% 2.50% 3.64% 3.54% 2.12% 2 3.26%   2.16% 3.26% 3.00% 2.50% 3.65% 3.56% 2.16% 3 3.17% 2.07% 3.17% 3.00% 2.50%   3.61% 3.50% 2.07% 4 3.26% 2.16% 3.26% 3.00% 2.50% 3.65% 3.56% 2.16% 5 3.33%   2.23% 3.33% 3.00% 2.50% 3.68% 3.61% 2.23% 6 3.26% 2.16% 3.26% 3.00% 2.50%   3.65% 3.57% 2.16% 7 3.44% 2.34% 3.44% 3.00% 2.50% 3.73% 3.69% 2.34% 8 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.73% 2.40% 9 3.56% 2.46% 3.56% 3.00% 2.50%   3.78% 3.77% 2.46% 10 3.61% 2.51% 3.61% 3.00% 2.50% 3.81% 3.81% 2.51% 11 3.62%   2.52% 3.62% 3.00% 2.50% 3.81% 3.82% 2.52% 12 3.70% 2.60% 3.70% 3.00% 2.50%   3.85% 3.89% 2.60% 13 3.74% 2.64% 3.74% 3.00% 2.50% 3.87% 3.92% 2.64% 14 3.77%   2.67% 3.77% 3.00% 2.50% 3.89% 3.94% 2.67% 15 3.79% 2.69% 3.79% 3.00% 2.50%   3.90% 3.96% 2.69% 16 3.80% 2.70% 3.80% 3.00% 2.50% 3.90% 3.96% 2.70% 17 3.90%   2.80% 3.90% 3.00% 2.50% 3.95% 4.04% 2.80% 18 3.89% 2.79% 3.89% 3.00% 2.50%   3.94% 4.03% 2.79% 19 3.86% 2.76% 3.86% 3.00% 2.50% 3.93% 4.01% 2.76% 20 3.82%   2.72% 3.82% 3.00% 2.50% 3.91% 3.98% 2.72% 21 4.40% 3.30% 4.40% 3.00% 2.50%   4.40% 4.45% 3.00% 22 3.73% 2.63% 3.73% 3.00% 2.50% 3.87% 3.90% 2.63% 23 3.61%   2.51% 3.61% 3.00% 2.50% 3.81% 3.82% 2.51% 24 3.48% 2.38% 3.48% 3.00% 2.50%   3.75% 3.72% 2.38% 25 3.35% 2.25% 3.35% 3.00% 2.50% 3.69% 3.63% 2.25% 26 3.25%   2.15% 3.25% 3.00% 2.50% 3.65% 3.56% 2.15% 27 3.07% 1.97% 3.07% 3.00% 2.50%   3.57% 3.44% 1.97% 28 2.93% 1.83% 2.93% 2.93% 2.50% 3.52% 3.35% 1.83% 29 2.81%   1.71% 2.81% 2.81% 2.50% 3.47% 3.28% 1.71% 30 2.69% 1.59% 2.69% 2.69% 2.50%   3.43% 3.21% 1.59% 31 2.60% 1.50% 2.60% 2.60% 2.50% 3.39% 3.16% 1.50% 32 2.52%   1.42% 2.52% 2.52% 2.50% 3.37% 3.12% 1.44% 33 2.46% 1.36% 2.46% 2.46% 2.46%   3.35% 3.09% 1.40% 34 2.43% 1.33% 2.43% 2.43% 2.43% 3.34% 3.08% 1.38% 35 2.41%   1.31% 2.41% 2.41% 2.41% 3.33% 3.07% 1.37% 36 2.41% 1.31% 2.42% 2.41% 2.41%   3.33% 3.07% 1.37% 37 2.43% 1.33% 2.44% 2.43% 2.43% 3.34% 3.08% 1.38% 38 2.47%   1.37% 2.47% 2.47% 2.47% 3.35% 3.10% 1.41% 39 2.53% 1.43% 2.53% 2.53% 2.50%   3.37% 3.13% 1.44% 40 2.59% 1.49% 2.59% 2.59% 2.50% 3.39% 3.16% 1.49% 41 2.90%   1.80% 2.90% 2.90% 2.50% 3.50% 3.33% 1.80% 42 2.93% 1.83% 2.93% 2.93% 2.50%   3.51% 3.35% 1.83% 43 2.94% 1.84% 2.94% 2.94% 2.50% 3.52% 3.35% 1.84% 44 2.93%   1.83% 2.93% 2.93% 2.50% 3.51% 3.35% 1.83% 45 3.14% 2.04% 3.14% 3.00% 2.50%   3.60% 3.48% 2.04% 46 3.18% 2.08% 3.18% 3.00% 2.50% 3.62% 3.51% 2.08% 47 3.19%   2.09% 3.19% 3.00% 2.50% 3.62% 3.52% 2.09% 48 3.23% 2.13% 3.23% 3.00% 2.50%   3.64% 3.55% 2.13% 49 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 50 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39%    7639 Main Fund Section actuarial valuation report 31.12.2017  The Royal Bank of Scotland Group Pension   Fund Main Fund Section

    

 

 Term RPI inflation  (HIC forward  rates) CPI inflation LPI (0,5)  pension    increases LPI (0,3)    pension  increases LPI   (0,2.5)  pension  increases LPI (3,5)  pension    increases LPI (2.5,7)    pension  increases CPI (0,3)  pension    increases 51 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 52 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 53 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 54 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 55 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 56 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 57 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 58 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 59 3.50% 2.40% 3.50% 3.00% 2.50%   3.76% 3.74% 2.40% 60 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 61 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 62 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 63 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 64 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 65 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 66 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 67 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 68 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 69 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 70 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 71 3.50% 2.40% 3.50% 3.00% 2.50%   3.76% 3.74% 2.40% 72 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 73 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 74 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 75 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 76 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 77 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 78 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 79 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 80 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 81 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 82 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 83 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 84 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 85 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 86 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 87 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 88 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 89 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 90 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 91 3.50%   2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 92 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 93 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 94 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 95 3.50% 2.40% 3.50% 3.00% 2.50%   3.76% 3.74% 2.40% 96 3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 97 3.49%   2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39% 98 3.49% 2.39% 3.49% 3.00% 2.50%   3.76% 3.73% 2.39% 99 3.50% 2.40% 3.50% 3.00% 2.50% 3.76% 3.74% 2.40% 100   3.49% 2.39% 3.49% 3.00% 2.50% 3.76% 3.73% 2.39%  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

Demographic   assumptions  Pre-retirement   mortality:  Males: 40% of AM92   Ultimate  Females: 50% AF92   Ultimate  Post-retirement mortality —   Base tables:  Males: standard table   S2PMA Light  Females: standard table   S2PFA Light  The base tables and   corresponding scaling factors have been derived from an analysis of the Main   Fund Section’s own mortality experience over the period from 1 April 2006 to   31 March 2017.  Combined average   scaling factors have been determined using the Aon Hewitt Longevity Model   (version 3.03) based on the member’s date of birth, sex and socio-economic   information inferred from their postcode and membership category.  Current Member sex Member base Member   Member’s Member’s membership  table   equivalent dependant dependant group     single scaling  factor base   table equivalent  single  scaling factor Actives M S2PMA Light 113%   S2PFA Light 102%  F S2PFA Light 100%   S2PMA Light 124% Deferreds M S2PMA Light 113% S2PFA Light 102%  F S2PFA Light 98% S2PMA Light 120%   Pensioners M S2PMA Light 104% S2PFA Light 96%    F S2PFA Light 96% S2PMA Light 117% Dependants M S2PMA Light 104% -   -  F S2PFA Light 98% - -  Ill-health retirees: A scaling factor   adjustment is applied to the standard tables shown above equal to 150% for   males and 151% for females  Post-retirement   mortality — Future improvements:  CMI   2017 Core Projections Model with smoothing parameter Sê = 8.0.  Long term rate to the improvements of 1.5%   p.a. for males and females  Early   retirements:  Allowance is made for   members to retire before or after their Normal Retirement Age. Where pensions   are assumed to be payable before or after Normal Retirement Age for a   particular tranche of benefits, they are adjusted for early or late payment   using the Main Fund Section’s early and late retirement factors applicable   from 1 February 2018, which are assumed to remain unchanged in future.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

The tables   below illustrate the percentage of members retiring each year.  Active members:  Age Current schedule  Non-NPA65 Schedule NPA65 Schedule  From active    service Post-withdrawal From active    service Post-withdrawal 55 10% 10% 10% 10% 56 10% 5% 10% 5% 57 10% 5%   10% 5% 58 20% 5% 10% 5% 59 25% 5% 10% 5% 60 100% 100% 25% 40% 61 100% 100%   20% 20% 62 100% 100% 20% 20% 63 100% 100% 20% 20% 64 100% 100% 20% 20% 65+   100% 100% 100% 100%  Deferred members   with a Normal Retirement Age (for service outside the Retiring Age 65   Schedule) of 60, and not on special redundancy packages:  Age Current schedule  NPA60 Schedule NPA65 Schedule 55 10% 10% 56   5% 5% 57 5% 5% 58 5% 5% 59 5% 5% 60 100% 40% 61 100% 20% 62 100% 20% 63 100%   20% 64 100% 20% 65+ 100% 100%  Deferred   members with a Normal Retirement Age (for service outside the Retiring Age 65   Schedule) other than 60, and not on special redundancy packages, are assumed   to retire at their Normal Retirement Age.    Members on special redundancy packages are assumed to retire at age   55, with the appropriate reduction applied in each case.  Withdrawals:  Allowance made.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section

    

 

Family   Details:  A man is assumed to be three   years older than his wife.  90% of male   and 65% of female members are assumed to be married at retirement or earlier   death.  A children’s loading of 5% is   applied to benefits payable on death before retirement.  Cash Equivalent Transfer Values (CETVs):  Allowance made for transfers equivalent to   £630M per annum over the period to 31 December 2021, based on the same   demographic profile as those members transferring out of the Main Fund   Section over the three years to 31 December 2017. CETV assumptions are   assumed to be as follows for this purpose:    • Discount rate: swaps +2.2% p.a.    • Post-retirement mortality: As above except with 1.25% p.a long term   rate of improvement  • RPI/CPI   inflation and LPI pension increases: As derived above, except RPI inflation   equal to the breakeven RPI swap yield curve    • Commutation: No allowance made    Notwithstanding the use of the above CETV assumptions for the purpose   of the actuarial valuation, the Trustee shall review and amend the CETV   assumptions from time to time in accordance with the Rules and legislation,   as appropriate.  Commutation:  Allowance for members to commute 18% of   their pension at retirement based on factors which are assumed to remain   unchanged in future.  Expenses:  An addition of £2.667M per month increasing   annually with RPI inflation, payable by the Bank in addition to the future   service rate. The allowance for expenses excludes investment-related expenses   (which are paid from the Main Fund Section) and excludes PPF levies in excess   of £2M in any year which are paid from the Main Fund Section.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section

    

 

Decrements for   withdrawal, death before retirement and ill-health retirement:  Age Withdrawal from  service Death  before    retirement -  Males Death  before    retirement -  Females Ill   health  retirement -  Males Ill health retirement - Females 25   8.75 0.02 0.01 0.03 0.03 26 8.75 0.02 0.01 0.03 0.03 27 8.75 0.02 0.01 0.03   0.03 28 8.75 0.02 0.01 0.03 0.03 29 8.75 0.02 0.02 0.03 0.03 30 8.75 0.02   0.02 0.03 0.04 31 8.75 0.02 0.02 0.03 0.04 32 8.75 0.02 0.02 0.03 0.04 33   8.75 0.03 0.02 0.03 0.04 34 8.75 0.03 0.02 0.03 0.05 35 8.75 0.03 0.02 0.03   0.05 36 8.75 0.03 0.03 0.03 0.06 37 8.75 0.03 0.03 0.03 0.07 38 8.75 0.03   0.03 0.04 0.07 39 8.75 0.03 0.03 0.04 0.08 40 8.75 0.04 0.04 0.05 0.09 41   8.75 0.04 0.04 0.05 0.09 42 8.75 0.04 0.04 0.06 0.10 43 8.75 0.05 0.05 0.07   0.11 44 8.75 0.05 0.05 0.07 0.12 45 8.75 0.06 0.06 0.08 0.13 46 8.75 0.06   0.06 0.09 0.14 47 8.75 0.07 0.07 0.11 0.15 48 8.75 0.08 0.08 0.12 0.17 49   8.75 0.09 0.09 0.14 0.19 50 8.75 0.10 0.09 0.15 0.20 51 8.75 0.11 0.10 0.17   0.22 52 8.75 0.13 0.11 0.19 0.25 53 8.75 0.14 0.13 0.22 0.27 54 8.75 0.16   0.14 0.24 0.30 55 5 0.18 0.15 0.27 0.33 56 5 0.20 0.17 0.31 0.37 57 5 0.23   0.19 0.34 0.40 58 5 0.25 0.21 0.38 0.44 59 5 0.29 0.23 0.43 0.48 60 2 0.32   0.25 0.47 0.54 61 2 0.36 0.28 0.53 0.59 62 2 0.40 0.31 0.58 0.65 63 2 0.45   0.34 0.65 0.71 64 2 0.51 0.38 0.72 0.78 65 2 0.57 0.42 0.80 0.87  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund Main Fund Section 

    

 

Factors:  Early and late retirement —  Years retiring  early/late Early retirement * Late   retirement 0 1.000 1.000 1 0.962 1.027 2 0.925 1.055 3 0.890 1.084 4 0.856   1.116 5 0.824 1.150 6 0.793 1.187 7 0.762 1.227 8 0.734 1.269 9 0.706 1.314   10 0.679 1.362  * for revaluing pension   in excess of GMP  Commutation —  Age Unisex 55 23.37 56 22.86 57 22.35 58   21.83 59 21.30 60 20.76 61 20.22 62 19.68 63 19.12 64 18.56 65 18.00  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of Scotland   Group Pension Fund Main Fund Section

    

 

Appendix 6:   Assumptions for solvency estimate  The   solvency estimate has been calculated in line with statutory requirements. I   have taken into account the investment strategies that a life assurance   company is likely to use to back its annuity business and the resulting   pricing we would expect to see under the market conditions at the actuarial   valuation date, taking into account the size of the Main Fund Section.  However, this estimate is only a guide. The   true position can only be established by conducting a competitive buy-out   auction and fully defining the scope and likely cost of a wind-up process for   the Main Fund Section.  The assumptions   used are described on the next page.    Solvency estimate  This   considers the position if:  • The Main   Fund Section was  discontinued on the   actuarial valuation date  • Member   benefits were crystallised and, for active members, were based on their   Pensionable Service and Pensionable Salary at the actuarial valuation date  • The assets were used to buy immediate and   deferred annuities from an insurance company, with an extra margin needed to   cover the expenses of shutting down the Main Fund Section  The solvency estimate is a regulatory   requirement and also provides a useful benchmark against which the Trustees   and others can assess the prudence of other funding measures.  7639 Main Fund Section actuarial valuation   report 31.12.2017  The Royal Bank of   Scotland Group Pension Fund 

    

 

Appendix 6:   Assumptions for solvency estimate (continued)    The table below shows the main assumptions used in calculating the   solvency estimate, where these are different from those used for the   technical provisions.   Pensioner   discount rate  Aon Hewitt Bulk Annuity   Market Monitor yield curve for pensioners, which is constructed from swap and   UK corporate bond market curves Non-pensioner discount rate (before and after   retirement)  Aon Hewitt Bulk Annuity   Market Monitor yield curve for non-pensioners, which is constructed from swap   and UK corporate bond market curves      Increase in RPI  Term-dependent   rates derived from the RPI swap markets Increase in CPI  Equal to the RPI assumption less 0.5%   pa    Pension increases  Derived from the price inflation   assumptions with allowance for caps and floors and with the aim of   approximately reflecting the cost of hedging these increases using LPI-linked   swaps Withdrawals  All members assumed   to immediately withdraw from service with entitlement to deferred pension   Commutation / Transfers Out  No   allowance Post-retirement mortality  As   for the technical provisions basis except future mortality improvements   assume CMI 2016 and are subject to a long-term rate of improvement of 1.75%   p.a. for both men and women. Expenses    A reserve for future expenses equal to:   • 3% of liabilities up to £50M; 2% of liabilities   between £50M and £100M; and 1% of liabilities in excess of £100M • £50,000   plus per member expenses as set out below and two years’ worth of estimated   PPF levies • Pensioners:   Age Expense   allowance per member < 60 £900 60 — 70 £800 70 — 80 £600 > 80 £500    Non-pensioners:  An allowance of £1,000 per member.  The reserve for expenses also includes an   allowance for the cost of forced sales of the Main Fund Section’s   holdings.  All of these allowances for   expenses are presented as additions to the liabilities as the regulations   require the assets to be shown at audited market value.

    

 

Appendix 7:   Certificate of technical provisions    Actuarial certificate given for the purposes of Regulation 7(4)(a) of   the Occupational Pension Schemes (Scheme Funding) Regulations 2005  The Royal Bank of Scotland Group Pension   Fund — Main Fund Section  Calculation   of technical provisions  I certify   that, in my opinion, the calculation of the Main Fund Section’s technical   provisions as at 31 December 2017 is made in accordance with regulations   under section 222 of the Pensions Act 2004. The calculation uses a method and   assumptions determined by the Trustee of the Royal Bank of Scotland and set   out in the Statement of Funding Principles dated     October 2018.      Signature:  Date:    David Eteen Fellow of the Institute and Faculty of Actuaries Aon   Hewitt Limited Verulam Point Station ay St Albans AH1 5HE   

    

 

Appendix 8:   Glossary  Attained age method  This is one of the methods used by   actuaries to calculate a contribution rate to the scheme. This method   calculates the present value of the benefits expected to accrue to members   over their expected remaining membership of the scheme expressed as a   percentage of their expected future pensionable pay. It allows for projected   future increases to pay through to retirement or date of leaving service. The   method is based on the current membership and takes no account of the   possibility of further members joining the scheme. If there are no new   members, this method would be expected to result in a stable contribution   rate, once surpluses or shortfalls are taken into account, and if all the   other assumptions are borne out. However, if more members join the scheme to   replace older leavers, the contribution rate can be expected to fall.  Cash transfer sum  This is a benefit available to early   leavers who have between three months and two years of pensionable service. It   is calculated in the same way as the cash equivalent transfer value payable to   longer serving early leavers, and is calculated at the date of leaving   pensionable service.  Deficit  This is the funding target less the value   of assets. If the value of assets is greater than the funding target, then   the difference is called the surplus.    Discount rate  This is used to   place a present value on a future payment. A ‘risk-free’ discount rate is   usually derived from the investment return achievable by investing in   government gilt-edged stock. A discount rate higher than the ‘risk-free’ rate   is often used to allow for some of the extra investment return that is   expected by investing in assets other than gilts.  Funding ratio  This is the ratio of the value of assets to   the funding target.  Funding   target  An assessment of the present   value of the benefits that will be paid from the scheme in the future,   normally based on pensionable service prior to the valuation date. Often, the   funding target is equal to the technical provisions.  Guaranteed Minimum Pensions (GMPs)  Most schemes that were contracted out of   the State Earnings Related Pension Scheme (SERPS) before April 1997 have to   provide a pension for service before that date at least equal to the   Guaranteed Minimum Pension (GMP). This is approximately equal to the SERPS   pension that the member would have earned had the scheme not been contracted   out. GMPs ceased to build up on 6 April 1997 when the legislation   changed.  Limited Price Indexation   (LPI)  The Pensions Act 1995 required   schemes to provide a minimum level of annual increase to pensions in payment.   The minimum level is the smaller of 5% and the increase in inflation* and   applies to the pension earned from 6 April 1997 to 5 April 2005. With effect   from 6 April 2005, the cap for statutorily required LPI for future service   was reduced from 5% to 2.5%.  *Until   2010, inflation for the purpose of this minimum was defined with reference to   changes in the Retail Prices Index. From 2011, inflation was defined with   reference to changes in the Consumer Prices Index.

    

 

Appendix 8:   Glossary (continued)  Pension   Protection Fund (PPF)  The PPF was   established with effect from 6 April 2005. The PPF will normally take over   the assets of a pension scheme in the event of its employer becoming   insolvent and the scheme having insufficient assets to provide the PPF   benefits. The PPF will not provide the scheme benefits in full. The PPF is   financed by a levy on most defined benefit pension schemes.  The PPF benefits are broadly 100% of   benefits for pensioners over normal retirement age and 90% of benefits up to   a cap for all other members. Pension increases granted on benefits are at   lower levels than apply in many schemes, in particular, benefits earned   before 6 April 1997 would not be given any pension increases within the PPF.  Present value  Actuarial valuations involve projections of   pay, pensions and other benefits into the future. To express the value of the   projected benefits in terms of a cash amount at the valuation date, the   projected amounts are discounted back to the valuation date by a discount   rate. This value is known as the present value. For example, if the discount   rate was 6% a year and if we had to pay a lump sum of £1,060 in one year’s   time the present value would be £1,000.    Projected Unit Method  One of   the common methods used by actuaries to calculate a contribution rate to a   scheme.  This method calculates the   present value of the benefits expected to accrue to members over a control   period (often one year) following the valuation date. The present value is   usually expressed as a percentage of the members’ pensionable pay. It allows   for projected future increases to pay through to retirement or date of   leaving service. Provided that the distribution of members remains stable   with new members joining to take the place of older leavers, the contribution   rate calculated can be expected to remain stable, if all the other   assumptions are borne out. If there are no new members however, the average   age will increase and the contribution rate can be expected to rise.  Protected Rights  Prior to April 2012, schemes could contract   out of SERPS/S2P on a protected rights basis. The accumulated National   Insurance rebates in respect of each member as a result of being contracted   out (known as protected rights) must be applied as an underpin to the   member’s benefits. Schemes that were contracted out on this basis before 6   April 1997 provided this underpin instead of GMPs.  Prudent    Prudent assumptions are assumptions that, if a scheme continues on an   ongoing basis, are more likely to overstate than understate the amount of   money actually required to meet the cost of the benefits.  Recovery plan  Where a valuation shows a funding shortfall   against the technical provisions, trustees must prepare a recovery plan   setting out how they plan to meet the statutory funding objective. 

    

 

Appendix 8:   Glossary (continued)  Schedule of   contributions  Trustees of pension   schemes must prepare and maintain a schedule of contributions. This shows the   dates and amounts of contributions due from the employer and members. Under   the Pensions Act 2004 the schedule must be put in place within 15 months of   the valuation date.  Solvency   ratio  This is the ratio of the market   value of a scheme’s assets to the estimated cost of securing a scheme’s   liabilities in the event of the discontinuance of the scheme.  Statement of Funding Principles  The Pensions Act 2004 requires trustees to   prepare (and from time to time review and if necessary revise) a written   statement of their policy for securing that the statutory funding objective   is met. This is referred to as a statement of funding principles.  Statutory estimate of solvency  This is the difference between the market   value of a scheme’s assets and the estimated cost of securing a scheme’s liabilities   in the event of the discontinuance of the scheme.  Statutory funding objective  Under the Pensions Act 2004, every scheme   is subject to the statutory funding objective, which is to have sufficient   and appropriate assets to cover its technical provisions.  Surplus    This is the value of assets less the funding target. If the funding   target is greater than the value of assets, then the difference is called a   deficit.  Technical provisions  This is the present value of the benefits   members are entitled to based on pensionable service to the valuation date,   assessed using the assumptions agreed between a scheme’s trustees and the   company. It generally allows for projected future increases to pay through to   retirement or date of leaving service.    Transfer value  Members   generally have a legal right to transfer their benefits to another pension   arrangement before they retire. In taking a transfer, members give up their   benefits in a scheme, and a sum of money (called the transfer value) is paid   into another approved pension scheme; this is used to provide pension   benefits on the terms offered in that scheme.    

    

 

Report   Framework  This report has been   prepared in accordance with the framework below  TAS compliant  This report, and the work relating to it,   complies  with ‘Technical Actuarial   Standard 100:  Principles for Technical   Actuarial Work’ (‘TAS  100’) and   ‘Technical Actuarial Standard 300:    Pensions’ (‘TAS 300’). 

    

 

THE ROYAL BANK   OF SCOTLAND GROUP PENSION FUND — MAIN FUND SECTION  ACTUARIAL VALUATION AS AT 31 DECEMBER   2017  SCHEDULE OF CONTRIBUTIONS  Introduction  This Schedule of Contributions is required   by Section 227 of the Pensions Act 2004, and updates the previous Schedule of   Contributions dated 29 June 2017. It comes into effect on the date of   certification of this schedule by the Scheme Actuary and covers the period   from 1 October 2018 to the fifth anniversary of the date of certification of   this schedule by the Scheme Actuary. The Directors of RBS Pension Trustee   Limited (the “Trustee”) are responsible for preparing a revised schedule no   later than 31 March 2022.    Participating Employers  This   schedule covers contributions payable to the Main Fund Section by the   employers which participate in the Main Fund Section from time to time (the   “Employers”). The contributions due to the Main Fund Section under this   schedule shall be paid by the Employers in such amounts or  proportions as the Principal Employer shall   determine. If any contributions are not paid within the time limits specified   in this schedule the Trustee may demand payment of them by one or more of the   Employers as the Trustee shall decide.    Member Contributions  All employees   who are active members of the Main Fund Section and accruing DB benefits in   the Main Fund Section will contribute to the Main Fund Section as   follows:  From 1 October 2018 to 30   November 2018 (inclusive): 1.5% of Contribution Salary From 1 December 2018:   2% of Contribution Salary  In addition   to the above amounts, further contributions are also payable to the Main Fund   Section by employees who are active members of the Adam & Company   Schedule of the Main Fund Section as follows:    Period Amount From 1 October 2018 2.5% of pensionable salary at 1   January of the calendar year  Employees   who are active members of the NatWest Defined Contribution Schedule of the   Main Fund Section are not required to contribute to the Main Fund   Section.  These amounts do not include   members’ Additional Voluntary Contributions.    The Employers will ensure that the Trustee receives the contributions   payable by their employees within 19 days of the end of the calendar month in   which the contributions were deducted from the employees’ salaries.  The Royal Bank of Scotland Group Pension   Fund Main Fund Section - Schedule of Contributions  

    

 

Normal Employer   Contributions  The Employers will pay   contributions to the Main Fund Section as follows:  Period Amount Payable by From 1 October   2018 12% of Contribution Salary for employees who Normal Employer  are active members of the NatWest Defined   Contributions will be  Contribution   Schedule of the Main Fund Section. calculated and paid on a monthly basis.  At least 41.5% of Contribution Salary   for   employees who are active members   of the Contributions will be paid    Retiring Age 65 Schedule of the Main Fund within three months of   the  Section, less any member   contributions payable. end of the calendar month to which they relate.  At least 48.5% of Contribution Salary for   employees who are active members of all other schedules of the Main Fund   Section, less any member contributions payable.   Plus contributions in respect of pension   elections made through RBSelect.     Deficit repair contributions  In   respect of the shortfall in funding in accordance with the Recovery Plan   dated October 2018, the Employers will pay additional lump sum cash   contributions to the Main Fund Section as follows:  Period Amount Payable by From 1 October   2018 £2,000 million 31 December 2018    Administration expenses and Pension Protection Fund levies  The Employers will pay contributions to the   Main Fund Section to meet estimated administration expenses, Pension   Protection Fund levies and other levies collected by the Pensions Regulator.  Period Amount Payable by From 1 October   2018 Expense Contributions - £2,667,000 per Expense Contributions will  month, increased each subsequent 1 July by   be paid monthly and by no  the increase   in the Retail Prices Index in the later than 90 days following  12 months to the previous 31 March, subject   to the period to which they  a minimum   increase each year of 0%. The total payments for each monthly period from   relate.  1 July will be rounded up to   the next £1,000. Levy Contributions will be paid annually and by no  Levy Contributions - Reimbursement of PPF   later than 90 days following  levies in   excess of £2,000,000 in a levy year the payment of such levies  (nil otherwise). from the Main Fund Section   or, if later, 30 days following the Trustee notifying the Employers of such   amounts which are due.  These   contributions exclude investment-related expenses which are paid from the   Main Fund Section.  The Royal Bank of   Scotland Group Pension Fund Main Fund Section - Schedule of Contributions

    

 

Additional   Employer Contributions  In addition to   the payments above, the Employers will pay to the Main Fund Section (or   procure payment of) a proportion of any amounts to be distributed to Royal   Bank of Scotland Group Plc shareholders (ordinary or special dividends or   share buy-backs). Such amounts shall constitute additional Employer   contributions and are potentially payable for a period of up to 20 years from   1 January 2020. These additional Employer contributions are subject to an   annual cap in each calendar year of £500 million and an overall aggregate   amount of £1,500 million.  The agreed   amount payable as additional Employer contributions is as follows:  Period Amount Payable by From 1 January   2020 100% of distributions to shareholders paid after 1 January 2020, subject   to the annual cap. No later than 90 days following the payments to   shareholders  The Employers may, from   time to time, pay additional contributions to the Main Fund Section as   advised to the Trustee in writing. Where the Employers pay any amount to the   Main Fund Section at their discretion in excess of the contributions due as   set out above, that amount shall count towards the overall aggregate amount   of £1,500 million set out above.    Payments to cover Augmentations    Augmentations and the payment of unreduced pensions on retirements at   the request of the  Employers with a   capital cost of up to £10M a year can be made without additional   contributions being paid to the Main Fund Section by the Employers. The   Trustee will monitor the position on an ongoing basis and any augmentations   over this limit will not be granted without agreement from the Employers to   provide additional contributions to meet the cost of such augmentations.  Any augmentations which are funded by   additional contributions to the Main Fund Section by the Employers will not   count towards the £10M annual limit.    Date of Schedule of Contributions: October 2018    Signed on behalf of the Employers    Signature: Name:   Capacity: Date:   Signed on behalf of RBS Pension Trustee   Limited    Signature: Name:   Capacity: Date:   Note: This schedule comes into effect on   the date it is certified by the Scheme Actuary, not on the date shown   above.  The Royal Bank of Scotland   Group Pension Fund Main Fund Section - Schedule of Contributions

    

 

THE ROYAL BANK   OF SCOTLAND GROUP PENSION FUND  MAIN   FUND SECTION  ACTUARIAL VALUATION AS AT   31 DECEMBER 2017  RECOVERY PLAN  Introduction  This Recovery Plan has been prepared by the   Directors of RBS Pension Trustee Limited (the “Trustee”) to satisfy the   requirements of Section 226 of the Pensions Act 2004, after obtaining the   advice of David Eteen, the Scheme Actuary and after obtaining the agreement   of the Principal Employer and the Participating Employers of the Main Fund   Section (collectively the “Employers”).    It follows the actuarial valuation of the Main Fund Section as at 31   December 2017, which revealed a funding shortfall (Technical Provisions minus   value of assets) of £1,798M.  Steps to   be taken to ensure that the Statutory Funding Objective is met  To eliminate the funding shortfall, the   Trustee and the Employers have agreed that additional contributions (i.e.   contributions over and above those needed to cover expenses and the cost of   benefits being earned in the future) will be paid by the Employers as lump   sum cash contributions into the Main Fund Section as follows:  Year Amount £M Payment Due Date 2018 2,000   no later than 31 December   Period in   which the Statutory Funding Objective should be met  Under this Recovery Plan, if the   assumptions made are borne out in practice the funding shortfall will be  eliminated in one year from the actuarial   valuation date as at 31 December 2017, which is by  31 December 2018. The assumptions are:  • Technical Provisions will continue to be   calculated according to the method and assumptions set out in the Statement   of Funding Principles dated October 2018, with financial conditions  unchanged from those as at 31 December   2017  • Experience will be in line with   the assumptions underlying the Technical Provisions Signed on behalf of the   Employers  Signature: Name:   Capacity: Date:   Signed on behalf of RBS Pension Trustee   Limited    Signature: Name:   Capacity: Date:  ( October 2018 is the date the Recovery   Plan was “prepared” for the purposes of Scheme Funding  Regulation 8(6)).  The Royal Bank of Scotland Group Pension   Fund Main Fund Section — Recovery Plan

    

 

 

SCHEDULE 5  AA SECTION MOU

    

 

MEMORANDUM OF   UNDERSTANDING  2018  Between    National Westminster Bank plc    Royal Bank of Scotland plc (to be known as NatWest Markets plc)  RBS Pension Trustee Limited  In relation to various matters including   the future funding of the  Royal Bank   of Scotland Group Pension Fund (AA Section) and a bulk transfer of members   from the  Main Section to another   section of the Group Fund     Allen   & Overy LLP  0011398-0004743   CO:32103010.14  

    

 

This MEMORANDUM   OF UNDERSTANDING is made on 2018   BETWEEN:  (1) NATIONAL WESTMINSTER BANK PLC   registered in England with company number 929027 whose registered office is   at 135 Bishopsgate, London, EC2M 3UR (the Principal Employer);  (2) ROYAL BANK OF SCOTLAND PLC (to be known   as NatWest Markets plc) registered in Scotland with company number SC090312   whose registered office is at 36 St Andrew Square, Edinburgh, EH2 2YB (RBS   plc); and  (3) RBS PENSION TRUSTEE   LIMITED registered in England with company number 2726164 whose registered   office as at 1 Princes Street, London, EC2R 8PB (Trustee).  BACKGROUND:    (A) The Trustee is the trustee of the Royal Bank of Scotland Group   Pension Fund (the Group Fund) as governed by a definitive deed dated 5 April   2006 as amended from time to time.  (B)   The Principal Employer is the principal employer of the Group Fund.  (C) The Principal Employer and the Trustee   entered into a Memorandum of Understanding dated 26 January 2016 (the 2016   MoU) under which, among other things:    (i) The Trustee acknowledged that the Royal Bank of Scotland Group   must comply with the reforms proposed by the Independent Commission on   Banking, including the changes made to the Financial Services and Markets Act   2000 (by the Banking Act 2013) and the Financial Services and Markets Act   2000 (Banking Reform) (Pensions) Regulation 2015 (the Ring Fencing   Requirements); and  (ii) The Principal   Employer agreed to act reasonably and in good faith (and procure that each   participating employer also act reasonably and in good faith) towards the   Group Fund in the implementation of these changes and the Trustee agreed to   act reasonably and in good faith towards each participating employer when   considering any proposal.  (D) RBS plc   is currently the sole participating employer in the RBS AA Section of the   Group Fund (the AA Section) and a participating employer in the Main Section   of the Group Fund (the Main Section).    (E) The Principal Employer and RBS plc (together the Bank) and the   Trustee wish to enter into this memorandum of understanding relating to the   AA Section (the AA MoU).  (F) To comply   with the Ring Fencing Requirements the current intention is for RBS plc to   cease to participate in the Main Section in 2020. Accordingly, RBS plc   employees who are members of the Main Section will cease accrual in that   section and accrue future benefits in a pension arrangement relating to RBS   plc, such as the AA Section or a new segregated section of the Group Fund.

    

 

1. THE STATUS   OF THIS MOU  1.1 The Trustee and the   Bank enter into this AA MoU in good faith to document their current intention   in relation to the matters hereunder but acknowledge that no provision of   this AA MoU is legally binding or enforceable on either party.  2. TRUSTEE FIDUCIARY DUTIES AND PENSIONS   REGULATOR  2.1 The Bank acknowledges that   the Trustee cannot fetter the exercise of its powers and discretions in a way   which would be inconsistent with its fiduciary duties and so the   understanding of the Trustee recorded in this AA MoU must be read subject to   that principle. The Bank also recognises that the Trustee’s fiduciary duties   may include taking into account the views of the Pensions Regulator   (including Pensions Regulator guidance and codes of practice) and so the   understanding of the Trustee recorded in this AA MoU must be read subject to   this.  2.2 The Trustee confirms that as   at the date of this AA MoU (i) it is satisfied that entry into this AA MoU is   consistent with its fiduciary duties and Pensions Regulator guidance and   codes of practice and (ii) it is not aware of any views of the Pensions   Regulator which would conflict with the terms of this AA MoU.  3. BANK AND TRUSTEE TO ACT REASONABLY AND   IN GOOD FAITH  By entering into this AA   MoU and in carrying out their non-binding intentions hereunder the Principal   Employer, RBS plc and the Trustee shall act reasonably and in good   faith.  4. ACTUARIAL VALUATION  4.1 The Bank and the Trustee intend to   complete a statutory actuarial valuation of the AA Section as at 31 December   2017 as soon as practicable with a view to entering into formal valuation   documents by 30 June 2018.  4.2 The   Bank and the Trustee intend that the assumptions for the statutory actuarial   valuation will be the Financial Assumptions (Technical Provisions) and the   Demographic Assumptions (Technical Provisions) as set out in the appendix to   this AA MoU.  4.3 The Bank and the   Trustee also intend to complete a statutory actuarial valuation of the AA   Section as at 31 December 2018 (but only if the Main Section statutory   actuarial valuation will also be as at 31 December 2018). That valuation, if   required, will be carried out in a manner consistent with the Statement of   Funding Principles agreed following the 31 December 2017 valuation, unless   the Trustee and the Bank agree otherwise.    5. 2020 BULK TRANSFER TO THE AA SECTION  5.1 The parties acknowledge that the Bank’s   current intention for compliance with the Ring Fencing Requirements in   respect of the Main Section is for RBS plc to cease to participate in the   Main Section in 2020. Accordingly, RBS plc employees who are members of the   Main Section (Transfer Employees) will cease accrual in that section. The   Bank intends for Transfer Employees to accrue future benefits which are the   same as the current benefits of such Transfer Employees but in a pension   arrangement relating to RBS plc, such as the AA Section or a new segregated   section of the Group Fund (the Transferred Employees Section). The   appropriate pension arrangement for Transfer Employees will be agreed with   the Trustee on or before 31 March 2020. The Principal   

    

 

Employer and   the Trustee agree to act reasonably and in good faith to establish the   Transferred Employees Section for Transfer Employees.  5.2 The initial future service contribution   rate for the Transfer Employees in the Transferred Employees Section will be   calculated to reflect (i) the demographic assumptions for active members in   relation to early retirement and ill-health retirement under the Main   Section, absent any advice of the actuary to the contrary and (ii) shall   otherwise be calculated on actuarial assumptions consistent with those   contained in the Statement of Funding Principles for the latest actuarial   valuation of the AA Section (or if the Transferred Employees Section is not   the AA Section, the actuarial valuation assumptions agreed between the   Trustee and RBS plc).  5.3 The   Principal Employer intends to either: (i) transfer the past service benefits   of Transfer Employees in the Main Section to the Transferred Employees   Section (whether that is the AA Section or a new segregated section); or (ii)   leave past service benefits of Transfer Employees in the Main Section. The   Bank and the Trustee agree to act reasonably and in good faith to facilitate   any transfer of past service benefits of Transfer Employees in the Main   Section to the Transferred Employees Section, including by entering into any   documentation (including any deed of amendment) which may be required to give   effect to that transfer.  5.4 In   respect of any transfer of past service benefits of Transfer Employees in the   Main Section to the Transferred Employees Section, the Bank and the Trustee   intend for the following principles to apply:    (a) the bulk transfer will be made without the consent of the Transfer   Employees and will provide those Transfer Employees with the same past   service benefits in the Transferred Employees Section as they had accrued   under the Main Section, including through the adoption of the same   discretionary practices;  (b) the   actuarial factors applicable to Transfer Employees in the Transferred   Employees Section will be the same as applied (or would have applied) to the   Transfer Employees under the Main Section except where:  (i) if the transfer is to the AA Section,   the equivalent factor under the AA Section, adjusted to reflect any relevant   benefit differences, is more favourable to the Transfer Employee;  (ii) the Trustee is obliged to adopt more   favourable factors; or  (iii) in   consultation with the Bank, the Trustee considers it appropriate to adopt   different factors;  (c) the methodology   used for the calculation of the bulk transfer payment in respect of the past   service benefits of Transfer Employees will be a proportionate share of the   assets in the Main Section calculated in accordance with the technical   provision assumptions stated in the Statement of Funding Principles   applicable to the Main Section in relation to the actuarial valuation as at   31 December 2017 or 2018 (depending on when the next Main Section valuation   is carried out) or any subsequent valuation. The parties acknowledge that the   Principal Employer intends to make a one-off contribution of £2bn to the Main   Section before or about the date of the calculation of the bulk transfer   payment. For the purpose of the calculation of the bulk transfer payment   under this sub-clause, the assets of the Main Section shall be deemed to   include the £2bn contribution (or any proportion of it which has 

    

 

been paid),   provided that such contribution is paid to the Main Section at least two   weeks before the bulk transfer payment is made;  (d) the form of the indemnity from the   Principal Employer to the Trustee will be the same as that provided under the   bulk transfer agreement dated 29 March 2018 relating to the transfer of past   service benefits from the AA Section to the Main Section;  (e) the transfer will be carried out as if   it is made between two separate pension schemes; and  (f) if the transfer is to the AA Section,   the Statement of Funding Principles for future actuarial valuations of the AA   Section will reflect the active member early retirement and ill-health   retirement demographic assumptions which, absent any advice of the actuary to   the contrary, may be set in line with those set out in the Statement of   Funding Principles for the Main Section from time to time.  5.5 In the event that the Transferred   Employees Section is the AA Section, RBS plc intends to provide a one-off   additional contribution, or series of contributions, to the AA Section by no   later than three months after the calculation of the contribution due under   this paragraph. The contribution shall be equal to the lower of:  (a) the amount required to fund the   liabilities of the Transfer Employees to the same percentage level of funding   as applies under the AA Section immediately before the transfer using the   Trustee’s self-sufficiency basis as stated in part 3 of the appendix to this   MoU, subject to this amount being no less than the amount required to fund   liabilities of the Transfer Employees to 100% on the technical provisions   basis as stated in the appendix; and    (b) the amount required to fund the liabilities of the Transfer   Employees to the level of 100% funding on that self-sufficiency basis.  5.6 In the event that the Transferred   Employees Section is not the AA Section, RBS plc intends to provide a one-off   contribution, or series of contributions, to the Transferred Employees   Section by no later than three months after the calculation of the   contribution due under this paragraph. The contribution shall be equal to the   amount required to bring the Transferred Employees Section up to full funding   as at the date of the transfer on the Trustee’s self-sufficiency funding   basis as applies at that time under the AA Section.  6. ROYAL BANK OF SCOTLAND INTERNATIONAL   LIMITED SEGREGATED SECTION  The parties   acknowledge that the Bank’s current intention for compliance with the Ring   Fencing Requirements in respect of the Main Section is for the Royal Bank of   Scotland International Limited (RBSI) to cease to participate in the Main   Section on or before 31 March 2020. Accordingly, RBSI employees who are   members of the Main Section (RBSI Transfer Employees) will cease accrual in   that section. The Bank intends for RBSI Transfer Employees to accrue future   benefits which are the same as the current benefits of such RBSI Transfer   Employees but in a new segregated section of the Group Fund (the RBSI   Transferred Employees Section). The Principal Employer and the Trustee agree   to act reasonably and in good faith to establish the RBSI Transferred   Employees Section for RBSI Transfer Employees.

    

 

7.   COUNTERPARTS  This AA MoU may be   executed in any number of counterparts, all of which taken together will   constitute one and the same document and any party may enter into this AA MoU   by executing a counterpart.

    

 

Signed on   behalf of  NATIONAL WESTMINSTER BANK   PLC  by    Signed on behalf of  ROYAL BANK OF SCOTLAND PLC  by      Signed on behalf of  RBS PENSION   TRUSTEE LIMITED  by  (Director)     and  (Director/Secretary)

    

 

APPENDIX  ACTUARIAL ASSUMPTIONS  

    

 

AA Section  1. Financial assumptions (Technical   Provisions)  Discount rate: The   liabilities shall be discounted using the spot gilt yield curve plus a spread   of 0.4%.  RPI inflation: In line with   the gilt breakeven RPI inflation curve.    CPI inflation: RPI inflation minus 1.1%  LPI pension increases: Higher of  (a) LPI derived using a Black Scholes model   with 1.5% implied volatility (symmetric), and    (b) CPI or RPI inflation as applicable for each pension tranche  subject in all cases to the cap/floor   applicable for each pension tranche    Salary and pension increases    Salary increases (pensionable/basic) 1.8% p.a. Increases to the   earnings cap 1.8% p.a. Revaluations to deferred pensions in excess of GMP The   CPI price inflation assumption Rate of GMP increases in active service before   GMP age The RPI price inflation assumption plus 1.0% p.a. at all durations   Fixed rate revaluation on GMPs GMP fixed rate revaluation according to date   of leaving. For active members assumed to withdraw from service in future, a   fixed revaluation rate of 3.5% p.a. is assumed to apply after the assumed   date of withdrawal. Increases to pensions in payment The LPI pension increase   assumption for the relevant tranche Promotional salary increases Nil   Discretionary increases Nil 

    

 

3. Demographic   assumptions (Technical Provisions)    Calculation method  Actuarial   method: Projected Unit Method  Control   Period: 10 years  Pre-retirement   mortality  Males: 40% of AM92 Ultimate  Females: 50% AF92 Ultimate  Post-retirement mortality — Base   tables  Males: standard table S2PMA   Light  Females: standard table S2PFA   Light  Current membership group Member   sex  Member base  table Member  equivalent    single  scaling factor   Member’s  dependant  base table Member’s  dependant    equivalent  single  scaling factor Actives M  F S2PMA Light  S2PFA Light 97% 88% S2PFA Light  S2PMA Light 85% 101% Deferreds M S2PMA   Light 97% S2PFA Light 85%  F S2PFA   Light 88% S2PMA Light 101% Pensioners M S2PMA Light 95% S2PFA Light 86%  F S2PFA Light 90% S2PMA Light 107%   Dependants M S2PMA Light 95% - -  F   S2PFA Light 90% - -  Post-retirement   mortality — Future improvements  CMI   2017 Core Projections Model with smoothing parameter Sê = 8.0.  Long term rate to the improvements of 1.5%   p.a. for males and females  Early   retirements  Allowance is made for   active members to retire from service prior to age 60 (see table below) or   otherwise retire at age 60. Pensions are assumed to be payable with an   actuarial reduction for early payment of 3% p.a. simple in line with the AA   Section’s current practice.  Age   Percentage of active members retiring each year

    

 

Under 55 0% 55   30% 56 20% 57 20% 58 20% 59 20% 60 100%    After future withdrawal, members are assumed to retire at 60. Pensions   are assumed to be payable unreduced at age 60, except for pensions accrued   under the Retiring Age 65 Schedule which are assumed to be payable with an   actuarial reduction for early payment using the AA Section’s early retirement   factors.  All current deferred members   are assumed to retire at their Normal Retirement Age which is applicable to   pension accrued outside the Retiring Age 65 Schedule. Pensions are assumed to   be payable unreduced at this age, except for pensions accrued under the   Retiring Age 65 Schedule which are assumed to be payable with an actuarial   reduction for early payment using the RBS AA Section’s early retirement   factors.  Ill-health retirements  No allowance.  Family Details  A man is assumed to be three years older   than his wife.  90% of male and 65% of   female members are assumed to be married at retirement or earlier death.  A children’s loading of 5% is applied to   benefits payable on death before retirement.    Transfer values  Allowance made   for transfers equivalent to £20M per annum over the period to 31 December   2021, based on the same demographic profile as those members transferring out   of the AA Section over the three years to 31 December 2017. CETV assumptions   are assumed to be as follows for this purpose:  • Discount rate: gilts +0.9% p.a.  • Post-retirement mortality: As above   except with 1.25% p.a. long term rate of improvement  • RPI/CPI inflation and LPI pension   increases: As above  • Commutation: No   allowance made  Notwithstanding the use   of the above CETV assumptions for the purpose of the valuation, the Trustee   shall review and amend CETVs from time to time in accordance with the Rules   and legislation, as appropriate. 

    

 

Expenses  An addition of £1.2M pa increasing with RPI   inflation, payable by the Bank in addition to the future service rate. The   allowance for expenses excludes investment-related expenses (which are paid   from the AA Section) and excludes PPF levies in excess of £0.2M in any year   which are paid from the AA Section and reimbursed by the Bank.  Decrements for withdrawal and death before   retirement  As well as death before   retirement and allowance made for withdrawals from service  Age Withdrawal from service Death   before  retirement - Males Death before   retirement  - Females 35 8.75 0.03 0.02   36 8.75 0.03 0.03 37 8.75 0.03 0.03 38 8.75 0.03 0.03 39 8.75 0.03 0.03 40   8.75 0.04 0.04 41 8.75 0.04 0.04 42 8.75 0.04 0.04 43 8.75 0.05 0.05 44 8.75   0.05 0.05 45 8.75 0.06 0.06 46 8.75 0.06 0.06 47 8.75 0.07 0.07 48 8.75 0.08   0.08 49 8.75 0.09 0.09 50 8.75 0.10 0.09 51 8.75 0.11 0.10 52 8.75 0.13 0.11   53 8.75 0.14 0.13 54 8.75 0.16 0.14 55 5 0.18 0.15 56 5 0.20 0.17 57 5 0.23   0.19 58 5 0.25 0.21 59 5 0.29 0.23 60 2 0.32 0.25 61 2 0.36 0.28

    

 

62 2 0.40 0.31   63 2 0.45 0.34 64 2 0.51 0.38 65 2 0.57 0.42    Factors  Early and late   retirement — Where pensions are assumed to be payable before or after Normal   Retirement Age for a particular tranche of benefits, they are adjusted for   early or late payment using the AA Section’s early and late retirement   factors which came into force with effect from 1 February 2018, summarised   below:  Years retiring  early/late Early retirement — actives Early   retirement — deferreds * Late retirement 0 1.000 1.000 1.000 1 0.970 0.938   1.035 2 0.940 0.880 1.073 3 0.910 0.825 1.111 4 0.880 0.774 1.153 5 0.850   0.726 1.198 6 0.820 0.681 1.246 7 0.790 0.639 1.297 8 0.760 0.599 1.352 9   0.730 0.562 1.411 10 0.700 0.527 1.473    * applied to pension revalued to future Normal Retirement Age. An   assumption of 1.75% p.a. is used to revalue CPI-linked deferred pensions (in   excess of GMP) between date of early retirement and Normal Retirement   Date  Commutation — Allowance for   members to commute 15% of their pension under the following set of   commutation factors:  Age Unisex  LPI pension increases Fixed 5% pa pension   increases 55 24.55 31.67 56 24.02 30.84 57 23.49 30.01 58 22.95 29.18 59   22.40 28.35 60 21.85 27.51 61 21.29 26.67 62 20.73 25.83 

    

 

63 20.15 25.00   64 19.58 24.16 65 19.00 23.33  3.   Trustee’s self-sufficiency definition    All assumptions in line with Technical Provisions except as   follows.  Discount rate: The better   (higher) of spot gilt and swap yields at each yearly tenor plus a 0% spread.   Inflation: The better (lower) of spot gilt RPI breakeven and swap RPI at each   yearly tenor.  Expense reserve:  • 3% of liabilities up to £50M, 2% of   liabilities between £50M and £100M, and 1% of liabilities in excess of   £100M  • Pensioners  Age Expense allowance per member < 60   £900 60 — 70 £800 70 — 80 £600 > 80 £500    • Non-pensioners: An allowance of £1,000 per member.  (No ongoing contributions from the   employers for expenses.)  4. Future   service contributions  In line with the   Trustee’s self-sufficiency definition (as above) but with no allowance for   the expense reserve.

    

 

SCHEDULE 6  CLEARANCE STATEMENT  

    

 

The   Pensions  Regulator CLEARANCE STATEMENT   made under sections 42 and 46 of  the   Pensions Act 2004 in respect  of  The Royal Bank of Scotland Group  Pension Fund (Main Section)  on 23 August 2018 The Pensions  Regulator case  reference:    C81378310   1. DEFINITIONS  “Act” means the Pensions Act 2004.  “Applicants” means the following   persons:  The Royal Bank of Scotland   Group PLC (SC045551)  • NatWest Markets   plc (SC090312)  • National Westminster   Bank PLC (00929027)  • The Royal Bank   of Scotland plc (SC083026)  • Coutts   & Company (00036695)  • The Royal   Bank of Scotland International Limited    • Ulster Bank Limited (R0000733)    “Application” means the application dated 9 August 2018 made by the   Applicants for a clearance statement to be made by the Pensions Regulator   under sections 42(2)(b) 46(2)(c) of the Act in respect of the Main Section   and the circumstances described in the Application.  “Determination Notice” means the   determination notice issued by the Pensions Regulator in respect of the   Applicants and the Main Section on 23 August 2018.  “Main Section” means The Royal Bank of   Scotland Group Pension Fund (Main Section)    “Warning Notice” means the warning notice issued by the Pensions   Regulator in respect of the Applicants and the Main Section on 20 August   2018.  2. CLEARANCE STATEMENT  This Clearance Statement is issued in   respect of the Application and pursuant to the Warning Notice  and the Determination Notice issued by the   Pensions Regulator.  The Pensions   Regulator is of the opinion that in relation to the circumstances described   in the Application:  • it would not be   reasonable to impose any liability on the Applicants under a contribution   notice issued under section 38 of the Act; and  • it would not be reasonable to impose on   the Applicants the requirements of a financial support direction issued under   section 43 of the Act in relation to the Main Section.  3. IMPORTANT NOTICE  The Pensions Regulator reserves the right   to issue a contribution notice and/or a financial support direction under   section 38 and/or section 43 of the Act on the Applicants in respect of the   Main Section if:  

    

 

• the   circumstances in relation to which the exercise of the powers under these   sections arises are not the same as the circumstances described in the   Application; and • the difference in those circumstances is material to the   exercise of these powers.  4. SEAL  THE COMMON SEAL of the Pensions Regulator   was affixed in the presence of:      Name: Alice Hinton  Position:   Case Manager   Signature:     Date:

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