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NatWest Group, the banking giant bailed out to the tune of £45.5bn in the last financial crisis, will pay £427m to the main section of its pension scheme after a further buyback of shares from the Treasury that brings the taxpayer’s stake to 48%.
An ‘off-market’ purchase of shares from the Treasury worth £1.2bn was announced on Monday, triggering another multi-million pound payment to the NatWest Group Pension Fund's £51.4bn main section.
Scheme will have £500m outstanding
The fund is entitled to additional contributions of up to £1.5bn based on the fund receiving an amount equal to any shareholder distributions, capped at £500m in any one year. The payment is expected at the end of the month when the purchase settles, or shortly after that.
The scheme first received £500m in March 2021; the latest payment is less than £500m because the bank paid £73m to the pension scheme this year to reflect the 2022 purchases relating to an ongoing in-market buyback programme.
The scheme still has £500m outstanding after this last payment under a memorandum of understanding with the bank dating back to 2018.
At its last full valuation in December 2020, the main section had a funding level of 104%, up from 96% in 2017, with a surplus of more than £2bn. NatWest contributes more than 47% of members' contribution salary to the scheme.
'Value for money for the taxpayer'?
The share buyback also means that after about 15 years and for the first time since the financial crisis, the taxpayer’s stake in NatWest – which received the UK's biggest bailout under its former name Royal Bank of Scotland – is falling to below 50%. The Treasury started selling the shares, which had lost most of their value, at a loss to the taxpayer in 2015 and now has about 48% of the voting rights.
Source: House of Commons Library
Source: House of Commons Library
Economic secretary to the Treasury John Glen said: “This sale means that the government is no longer the majority owner of NatWest Group and is therefore an important landmark in our plan to return the bank to the private sector. We will continue to prioritise delivering value for money for the taxpayer as we take forward this plan.”
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