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The Pensions Regulator has for some time made it clear that it wants to see equitable treatment of shareholders and deficit repair contributions made to the pension schemes by a sponsor. Although an acceptable ratio between repair contributions and dividends has never been defined by TPR, the ratio is one of its bugbears, and some in the industry have said the regulator is in favour of a literal approach to equitable treatment.
NatWest buyback triggers scheme payment
On 19 March this year, NatWest announced that it had completed a £1.1bn off-market purchase of shares from the Treasury, a so-called ‘directed share buyback'.
Treasury sells shares at loss to taxpayer
The NatWest scheme’s sponsor is a special case when it comes to shareholding, as owner Royal Bank of Scotland, now NatWest Group, was bailed out to the tune of £45.5bn during the last financial crisis. In 2018, the government still held 62% of the bank’s shares, which had lost 87% of their value.
NatWest is also recommencing dividend payments to shareholders in 2021. RBS had paid its first dividend since the bailout in 2018, but the Covid-19 pandemic meant it did not pay any quarterly or interim dividends to shareholders in 2020 and cancelled its 2019 final dividend, in line with a request by the Prudential Regulatory Authority.
The 2021 shareholder distributions will however not trigger any additional payments to the scheme in that year, as it has already maxed out its entitlement of £500m per year.