The bank, which is owned by NatWest, had contacted staff and pensioners over a period of two decades declaring that from April 1997 the individuals were guaranteed annual inflation protection increases from a defined benefit pension scheme. The protection meant that annual payments from the RBS Group Pension Scheme would remain in line with inflation but would be capped at 5%.

However, the bank has now revealed that the promise of inflation protection was an error, and the cap has been reduced from 5% to 3%.

Concerned staff have since sought legal advice from a King’s Counsel (KC), urging that the financial impact of the mistake is “significant”, The Herald reports.

The bank staff have stated that pensioners, for each £10,000 a year of pension benefit, would lose more than £70,000 over 20 years if inflation stays above 5%.

It has been reported that a senior executive in the pension and benefits section of NatWest said in response to one complaint that the “error” was “regrettable” but that the messaging was not of a “legally binding nature”.

Trustees of the scheme are known to have taken KC opinion and gained a court order empowering them to pay the reduced 3% benefits going forward.

A spokesperson for the NatWest Group Pension Fund, said: “In March 2020, we informed Royal Bank of Scotland Staff Pension Fund members of a correction we would make to their pension increases to bring them in line with the fund rules. We did not reduce any pensions or make any attempt to recover the overpayments that were made to members once we became aware of the issue.

“Members will not have been impacted by the rules being properly applied until this April, when the annual update to pension payments was made, as inflation has not been above the 3% limit when these reviews have taken place in previous years.

“We took this action so that the rules were properly applied to ensure all members were treated fairly and the sustainability of the scheme. We believe the fund continues to provide generous guaranteed benefits, with membership worth around 40% of salary a year across all remaining active members.”