Regulatory announcement (RNS) · Annual Financial Report

Annual Report and Accounts 2025

Skipton Building Society · published 20 March 2026 10:16 UTC · Skipton Building Society credit rating and record

Rating moves in this announcement

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Skipton Group Annual Report & Accounts 2025 2

We help people have a home

We help people finance homes

through the Society and Skipton

International Limited (SIL); and

support people in buying, selling, and

renting homes through our property

services group, Connells.

We make money work harder

We are here to make members’

money work harder, with a range of

savings products, Financial Advice

products, and services through the

Society and SIL.

We are built on two core

member needs – Homes

and Money

Together, we are diverse

and resilient

Leveraging the Group’s structure, unique mix of businesses, and our proud

mutual status, we can give more to our members, being there in the

moments that matter most to them.

It provides us with a diversified range of capabilities and enhanced

financial strength; with our strong performance showing just how valuable

our diverse Group is in meeting customers’ financial needs.

Skipton Building Society (the Society) has come a long way since it was

founded in 1853, supporting members with their financial wellbeing.

We are here to help people have a home, save for life ahead, and

support long-term financial wellbeing.

Our mutual foundation of looking after members, and our overarching

purpose, have remained the same since the Society was first founded.

We are driven by our

mutual heritage

The Skipton Group model was developed in the 1980s. The aim was to

build on the Society’s mutual roots, by developing a diverse range of

businesses that help people with a variety of financial needs.

Across our businesses we offer products and services that make a

difference to millions of lives. We innovate, campaign on issues that

matter, and strive to do things that benefit our communities and bring

value to society as a whole. Our mutual backdrop gives us the opportunity

to do that.

In addition to our core businesses (the Society, SIL and Connells group

(Connells)) our diverse Group also includes our invoice finance and asset-

based lending business, Skipton Business Finance (SBF) and our

innovative New Zealand-based AI-software company, Jade.

We are a financially strong

and diverse Group,

providing a range of skills

and knowledge to our

members

We are harnessing the collective power of the Group to offer products and

services to meet the needs of our members and customers, providing

innovative and unique solutions to real-life problems.

We are also using our Group platform to be an advocate for change - we

recognise the opportunity we have as Skipton Group to become a powerful

voice campaigning on societal issues.

Building a better Society

Skipton Group Annual Report & Accounts 2025 3

Performance & Strategy Governance

Financial Statements

Other Information

By clicking on the tabs at the top of each page, you can quickly and easily navigate to the beginning of each

key section within this report.

This report contains lots of charts and tables. We appreciate sometimes these don’t work for everyone so if

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Independent Auditor’s Report 119

Income Statements 132

Statements of Comprehensive Income 133

Statements of Financial Position 134

Statements of Changes in Members’ Interests 136

Statements of Cashflows 139

Notes to the Accounts 141

Chair’s Statement 5

Group Chief Executive’s Report 8

Strategic Report 12

Board of Directors 57

Directors’ Report 63

Corporate Governance Report 69

Board Audit Committee Report 83

Board Change Committee Report 91

Board Risk Committee Report 95

Directors’ Remuneration Report 99

Country by Country Reporting 288

Annual Business Statement 290

Glossary 293

Performance & Strategy

Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 5

In the UK, inflation peaked at 3.8% before gradually

easing to 3.4% by the end of the year, offering some

respite for households after a prolonged period of

rising prices. Nevertheless, many families continue

to feel the effects of higher living costs, and our

commitment to supporting our members and

customers remains as strong as ever.

As we deliver the third year of our strategic plan, every

decision is guided by our mutual purpose and

anchored in our strategic priorities, enabling us to

support more first-time buyers, expand our advice

propositions, reward our members with competitive

products and maintain excellent service standards.

Our strategy is based on a solid framework that

allows us to continue to support our members in an

ever-changing world, despite the complexities of

market and geopolitical pressures that we more

regularly experience today, particularly across the

housing ecosystem.

We continue to invest in our Group businesses for the

future, ensuring that we remain well-positioned to

meet the evolving needs of our members and

communities. Our strategic priorities are detailed in

the Group Chief Executive’s Report.

Throughout 2025, we have continued to strengthen

our teams and enhance corporate governance across

the Skipton Group, and we remain well-placed to

continue to deliver on our strategy for the benefit of

our members.

Our Group is made up of diverse and resilient

businesses, each contributing to our purpose, and our

financial performance.

Skipton Building Society (the Society) holds

members at the heart of everything we do, supporting

them with their financial needs. Over the year, the

Society has remained resilient, delivering a profit

before tax (PBT) of £189.3m (2024: £209.9m), with

the reduction in profit compared to 2024 being

accountable in the main due to the strategic buy-back

of Permanent Interest-Bearing Shares (PIBS), costing

£28m (pre-tax) but leading to reduced future interest

payments, and increases in loan impairment amidst

an uncertain economic climate.

Connells group (Connells) our property services

group, continued to play a pivotal role within the

broader Skipton Group, having improved profitability

through the year, achieving a PBT of £73.1m (2024:

£61.3m). They have also continued to undertake

strategic acquisitions and investment in technology

to support colleagues and customers, and provide a

platform for further growth.

Skipton International (SIL) our Guernsey-based

savings and mortgage bank remained a valuable

contributor to its customers and to our Group. SIL has

delivered successive years of strong performance

and has since reached an inflection point, due in part

to an evolving regulatory environment in Guernsey

and the implications of that for the business. To

position the business for sustainable future success,

we took deliberate steps in 2025 to strengthen our

infrastructure – mainly in response to historic issues

with the book of business and of SIL's policies,

procedures and overall risk management

infrastructure – and enhance the management team

to set the business up for the next phase of its

journey. As a result, SIL PBT of £12.1m (2024:

£31.0m) reflects a reduction in new business

volumes.

“The past year has brought new

opportunities for the Skipton

Group in a challenging economic

environment.”

Gwyn Burr,

Chair, Skipton Group

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 6

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Business Finance (SBF) our invoice

financing and asset-based lending business

delivered another year of growth and innovation in

2025, building their new Asset Based Lending

proposition to broaden their product offering and

increase their market reach. SBF will continue to

invest in technology, processes, and journey

improvements, positioning themselves for continued

sustainable growth.

Jade our AI and software business completed the

acquisition of Contec Group International in

November 2025, significantly expanding its footprint

in global dairy supply-chain technology and driving

new recurring global SaaS income streams that

strengthen our Group and enable us to reinvest more

value back into products and services for members.

Our colleagues

This has been another year where the dedication and

enthusiasm of our colleagues have been

fundamental to our success. Their unwavering

commitment to going the extra mile for our

members and customers plays out daily.

In 2025, the Society made real steps in building an

engaged and valued workforce. We doubled down on

our diversity and inclusion efforts by leveraging our

colleague diversity data to ensure that we are

building a welcome environment for all. We achieved

gender parity for the second year running in our

senior leadership population and exceeded our

targets for diversity and inclusion. I would once

again like to thank our Employee Resource Groups

(ERGs) for the voluntary effort and passion they put

into fostering an inclusive culture.

We took a significant step forward in 2025 in respect

of actively listening to our colleagues, by

implementing a pulse format of colleague surveys

and measuring colleague engagement through

employee Net Promoter Score (eNPS). I’m delighted

to report that our colleague eNPS achieved 42, which

supports our 5-year ambition of being in the top 25%

of financial services in the UK. We will use this as a

baseline for further improvement in 2026.

We are committed to supporting all colleagues

wanting to advance in their careers across the

Skipton Group, ensuring that we maintain and

enhance an environment where all colleagues can

thrive.

Sustainability

This year, we have made great progress in delivering

on our sustainability ambitions. We have now set a

Group-wide 2030 target, supported by a clear plan

for how we will achieve this; marking an important

step on our journey to net zero by 2050. Our efforts

remain focused on reducing emissions and

supporting the decarbonisation of the UK housing

stock, including sharing our learnings from the

retrofit of a house we own in Skipton, which we have

also used to inform and support policy

recommendations to the government on this

important topic.

We have continued to strengthen how we manage

and oversee sustainability across the Group. The

Group Sustainability Committee, established in 2024

to coordinate and drive progress on our

environmental and social priorities, is now fully

embedded. This year, we expanded its remit and

integrated our climate risk governance into our wider

sustainability framework, creating a more centralised

and holistic view of how sustainability and climate

risk initiatives connect and align with our strategic

opportunities.

We recognise that the sustainability landscape

continues to evolve, with new regulation, shifting

expectations and emerging best practice. We will

continue to evaluate the best course of action for the

Group as we manage our targets and plans. Further

details of our progress can be found in our 2025

Skipton Group Sustainability Report.

Giving back to our communities continues to be a

cornerstone of who we are. We remain committed to

pledging 1% of our annual Group PBT to charitable

causes that align with our purpose.

At our 2025 Annual General Meeting (AGM),

members voted to select Refuge as our next

strategic charity partner, and we look forward to

supporting their vital work over a three-year period.

Board changes and Governance

During 2025, several changes were made to the

composition of the Society’s Board of Directors.

Philip Moore and Mark Lund stepped down at the

AGM in April as Non-Executive Director and Senior

Independent Director respectively, after many years

of valuable service. Despite stepping down from the

Society board, we are pleased that Mark has

continued to serve as Chair of Connells’ board.

Andrew Bottomley also retired as Executive Director

and CEO of our Money business in April, after more

than nine years with the Society.

We thank each of them for their immense

contributions and commitments they have made.

(2024: N/A)

Society employee

Net Promoter

Score (eNPS)

Skipton Group Annual Report & Accounts 2025 7

Performance & Strategy Governance

Financial Statements

Other Information

Graham Lindsay joined the Board in May as Senior

Independent Director, bringing more than 45 years of

wide-ranging Executive-level experience in retail,

wealth and commercial banking. He is already

making a significant impact, and I look forward to

working closely with him over the years to come.

Changes across the Skipton Group

In September we welcomed Susan Fouquier as CEO

of SIL. Susan has over two decades of experience in

institutional and offshore banking and a passion for

colleague engagement, diversity and inclusion.

These skills will be invaluable as we continue to

grow this business for the future.

At the same time, we saw the retirement of Jim

Coupe after more than 15 years as SIL CEO. Jim was

a driving force behind the impressive growth of SIL

and we acknowledge his enormous contribution.

We also continued to enhance our corporate

governance arrangements throughout the Group,

appointing, Peter Griffith OBE as chair of Connells

with effect from February 2026. Peter has had a

distinguished career spanning over four decades. He

served as CEO of Sainsbury’s Bank (2012–2019) and

CEO of Principality Building Society (2002–2012).

Peter’s exceptional leadership experience and

extensive experience in corporate governance and

risk management will be invaluable as Connells

continues to strengthen its position as the UK’s

leading estate agency and property services

provider.

Both SIL and Connells also recruited new Non-

Executive Directors during 2025, while SBF appointed

Cathy Lewis as independent Non-Executive Chair

with effect from January 2026. These appointments

collectively strengthen those individual boards and

the oversight of each business as they pursue their

own strategic objectives within the Skipton Group.

Looking ahead

As we look to the future, I am filled with optimism

and confidence in the strength and potential of the

Skipton Group. Our mutual values, talented teams

and commitment to innovation will, I believe, ensure

that we are well placed to seize new opportunities.

Together, we will continue to deliver real value for

our members – through competitive rates and

innovative services that support our communities

and build a more sustainable future.

G Burr

Gwyn Burr

Chair, Skipton Group

17 February 2026

Skipton Group Annual Report & Accounts 2025 8

“2025 was another successful year

of growth and transformation in

pursuit of our purpose; helping

people have a home, saving for life

ahead, and supporting long-term

financial wellbeing.”

Stuart Haire,

Group Chief Executive

Skipton are here to help more people have a home,

save for life ahead and support long-term financial

wellbeing. Our purpose, dating back to 1853 when

the Society was first founded, remains as relevant

now as it was then.

Our diversified Group is built on a solid foundation of

mutual ownership, placing members and customers

at the heart of everything we do. This shapes how we

govern and operate and underpins our products and

services. Our core businesses are committed to

helping people finance their homes (Homes business

and SIL), buying and selling their homes (Connells),

and making their money work harder (Money

business and SIL).

Delivering our Purpose

2025 was a year of resilience and agility. Despite

housing market pressures and economic uncertainty,

we delivered the third year of our strategy in line with

our purpose.

Our Homes business supported 26,000 first-time

buyers, equating to 50% (2024: 44%) of our new

lending - a goal we originally set for the end of 2028.

Our commitment to first-time buyers has resulted in

our market share increasing to 4.0% (2024: 3.8%) of

this segment (Source: UK Finance – Regulated

Mortgage Survey; as at November 2025 being latest

available).

Connells, our property services group, continued to

support around one in ten home movers across the

UK. Connells helped more people have a home by

facilitating 85,982 exchanges on properties for sale

(2024: 78,995). Facing into a difficult market in the

second half of the year, they continued to grow

income to £1,177m (2024: £1,069m) and grow their

lettings business to 128,396 properties under

management (2024: 126,590).

Our Money business continued to deliver on our

ambition to provide free advice to our members, and

in 2025 we delivered over 64,000 free advice

conversations, representing a 63% increase on last

year.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 51,763)

Total regulated and

non-regulated

advice

conversations

(2024: 20,071)

Keys for first-

time buyers

(2024: 9.8%*)

Connells Estate

Agency market

*restated based on share of new listings

Skipton Group Annual Report & Accounts 2025 9

As we execute on our purpose, our Group mortgage

and savings book growth has outpaced the market

by 5.4% and 3.5% respectively, with our Group

mortgage book surpassing £33bn, and our Society

savings book surpassing a £30bn milestone for the

first time.

Throughout 2025, our other Group business, SBF

(invoice finance and asset-based lending), had a

successful year, with profits increasing by 8%. While

Jade (AI and software) completed the strategic

acquisition of Contec Group International Limited,

which is expected to boost Jade’s annual revenue by

up to 25%. In addition to Jade providing core Group

IT systems, they contribute alongside SBF to our

overall Group profits, which we use to reinvest back

into the Society to create a sustainable, resilient and

future-ready business for our members.

Collectively, our Group businesses delivered another

year of strong financial performance, despite

external headwinds and a ‘stop start’ UK housing

market.

Making membership matter more

We are focused on making sure more members are

choosing Skipton to support their long-term financial

needs. As we provide more value back to them

through above market average rates, we continue to

demonstrate our commitment to fairness and

making their money work even harder.

We have delivered 0.68% (2024: 0.74%) above

average market rate to our savers, providing

£195.7m more interest into our members’ pockets

(Source: CACI Current Account & Savings Database,

Stock, 12-months December 2024 - November 2025).

We have continued to support our members by

developing new propositions, such as our free advice

Stocks and Shares ISA. Our members have also

benefited from exclusive savings rates, enabling

them to grow their savings over the long-term.

Standing up for members and society

Across our Group, we continued to campaign for

meaningful change on behalf of our members,

communities and wider society. We published two

further editions of our Skipton Group Home

Affordability Index, which highlights the continuing

affordability crisis for first-time buyers, particularly

the five million adults living with parents in the UK.

These insights informed our engagement with

policymakers, including the Treasury Select

Committee, as we advocated for reforms to the

Loan-to-Income cap, reduced Stamp Duty and

improvements to the Lifetime ISA.

Standing with our Building Society peers, we have

been active in opposing the proposed cuts to the

Cash ISA allowance which could impact both our

savers and borrowers.

Enhancing member and broker satisfaction

Through our commitment to enabling member

participation and member and colleague listening,

we have continued to improve the service standards

we deliver. This is reflected in maintaining high

satisfaction scores across our businesses amidst

the backdrop of increasing expectations.

adults living with parents

cannot afford the average first-time

buyer home in their area

Performance & Strategy Governance

Financial Statements

Other Information

(2024: £302.3m)

Group

underlying PBT

(2024: £197.1m)

Value returned through

above market average

savings rate

Home affordability is at its lowest in

Even if deposit hurdles were

removed, would spend

of their income

on essential housing costs

Skipton Group Annual Report & Accounts 2025 10

Listening to members has guided our investments in

technology, systems and colleague development so

that members have the flexibility to interact with our

businesses seamlessly in the channel of their choice.

Combining our colleagues’ expertise with technology

allows us to deliver a human-touch experience in a

digital world.

Investing for the future

Through our transformation activity, we are enabling

better service for our members, utilising our new

Customer Engagement Platform to support over

24,800 advice conversations this year, combined

with upskilling more than 1,000 colleagues.

For members engaging digitally, our new app and

enhanced Portal will offer a simpler, more intuitive

experience. During the second half of the year, we

deployed our new app to all borrowers, with 57% of

those downloading the app being regular users. We

will see full deployment across our member base in

2026 and build more features into it, enhancing their

experience further.

We have also improved journeys for brokers and

borrowers, streamlining processes and leveraging

technology, making it faster for members to get

the support they need.

We are strengthening our agile practices of change

delivery to return value to members quicker,

collaborating across our businesses to embed these

practices and leverage our collective insights to

solve for more societal challenges.

We have adopted automation and AI tools including

Microsoft Copilot so that our colleagues have

access to the information they need, when they need

it. Since April, over 1,270 colleagues have used our

AI tool, signalling growing confidence, curiosity, and

capability when using AI. This has supported

colleagues to unlock new ideas and champion

efficiency for our members.

Jade, our AI and software business, developed and

deployed new automation and AI tools to their Jade

Platform clients in 2025, continuing to be a leading

provider of industry-specific Software as a Service

(SaaS).

This year, we have made deliberate, value-based

choices in the Society to prioritise long-term member

value over short-term business gains. We are

investing in technology, service and innovation that

strengthens our sustainability and sets us apart –

creating enduring benefits for members and the

communities we serve.

Through Connells (via Legal Marketing Services

(LMS)), we continue to support the industry ambition

of transforming the home buying and selling journey

for all parties through cross-sector collaboration,

streamlining and digitising the process. This year,

our National Property Transaction Network (NPTN)

pilot reduced the time between Sold Subject to

Contract (SSTC) to exchange by 35% and reduced

the cancellation rate by 43%. We have taken the first

steps to scaling this to a whole-of-market solution –

a move that could transform property transactions

across the UK.

We have made targeted acquisitions of

complementary businesses across the Group, to

further support our growth ambitions so that we can

deliver even greater value for our members. These

acquisitions include additions to Jade, our Lambert

Smith Hampton commercial real estate advisory

business and our London estate agency portfolio

within Connells.

Growing our colleagues and talent

We are continuing to strengthen and diversify our

Group leadership, welcoming new Executive and

senior talent including Jasvinder Gakhal as Chief

Executive Officer of our Money business and Susan

Fouquier as Chief Executive Officer of SIL.

The recruitment of such accomplished leaders

enhances our ability to deliver more innovative,

customer-focused services.

We remain committed to investing in colleague

development, fostering a culture of curiosity, growth

and empowerment. In 2025, we enriched our leader

training and deployed enhancements to our Workday

platform, enabling Society colleagues to access

insight more efficiently. We have also shared skills

and expertise across our Group to facilitate

colleague growth.

Our colleagues are vital to our success and through

embedding our new Society colleague listening

survey, we have introduced better feedback avenues

to connect and address this feedback promptly. As a

result, our engagement levels have increased by nine

points, with 89% of colleagues participating in the

survey.

As we grow, we will continue to invest in the

development of our ability to deliver innovative,

customer-focused and member centric services.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 90%)

Society net

customer

satisfaction

Skipton Group Annual Report & Accounts 2025 11

Continuing with purpose into 2026

I am proud of the progress that our Group has made

towards achieving its strategy and purpose, and I

would like to thank all Skipton Group colleagues for

their commitment to continuously delivering for our

members, customers, and wider society.

At a time when more people are facing financial

challenges, whether that’s buying a first home,

saving and investing, or looking for trusted advice,

Skipton Group has been there to help. We have

remained focused on addressing these challenges,

supporting members with our innovative products

and advice, and influencing policy to drive purposeful

change.

Despite facing into continued economic uncertainty

in 2026, our strength as a mutual and as a Group

means we can keep putting members first –

investing in better experiences and supporting

financial wellbeing for generations to come. I am

confident that the power of our Group will continue

to make a meaningful difference, playing our part in

building a more financially resilient society.

S Haire

Stuart Haire

Group Chief Executive

17 February 2026

Performance & Strategy Governance

Financial Statements

Other Information

Our commitment to members and customers

through 2025 has been recognised externally by

the achievement of the following awards:

• What Mortgage Awards: Best Intermediary

Lender – highly commended (Society) and Best

National Building Society - winner (Society)

• Moneyfacts Awards: Best Service from a

Mortgage Provider – winner (Society)

• British Mortgage Awards: Business Leader:

Intermediary Lender – Charlotte Harrison -

winner (Society)

• Chartered Institute of PR Awards: Business

Communications Campaign - Skipton Group

Home Affordability Index: Redefining housing

affordability - shortlisted (Group)

• Property Management Awards: Regional

Property Management Company of the Year -

finalist (LSH Residential, Connells)

• Moneynet.co.uk Awards: Best Building Society

Savings Provider - winner (Society)

• YourMoney.com Personal Finance Awards:

Best Junior ISA Provider – winner (Society)

• Money Comms Awards: Best Regular Savings

Provider - winner (Society) and Best Building

Society Savings Provider - winner (Society)

• Moneyfacts Consumer Awards 2025: Offshore

Account Provider of the Year - winner (SIL)

(2024: N/A)

Society Diversity

& Inclusion Net

Promoter Score

Performance & Strategy Governance

Financial Statements

Other Information

Our Group Business Model

Focusing on Ensuring Long

-term Success 15

Helping People Have a Home

Making Money Work Harder

Making Membership Matter

Colleagues Enable our Strategy

Building a Sustainable Society

Financial Review

Risk Review

Other Information

Skipton Group Annual Report & Accounts 2025 13

Connells is the UK’s largest high street estate agency and property services group with a c.10% market share in

its estate agency arm. Across its 80+ brands and over 1,200+ branches nationwide, Connells combines

residential sales and lettings with a range of consumer and corporate services including land and new homes,

mortgage services, conveyancing, auctions, surveying and valuations, commercial property services, Energy

Performance Certificate (EPC) provision and asset management. Connells is authorised and regulated by the

Financial Conduct Authority (FCA) for activities relating to regulated mortgages and non-investment insurance

contracts.

The Society is the UK’s fourth largest building society, offering mortgages through our Homes business, and

savings and financial advice through our Money business, with a national presence represented by a network

of 82 branches. The Society is authorised by the Prudential Regulation Authority (PRA) and regulated by the

FCA and the PRA.

SIL carries out mortgage lending in the Channel Islands and buy-to-let lending in the UK and accepts deposits

in Guernsey from an international customer base. SIL is licensed under the Banking Supervision (Bailiwick of

Guernsey) Law 2020, as amended and regulated by the Guernsey Financial Services Commission.

Other business lines

We have other smaller business interests that are not separately reportable, primarily concerned with income

generation and enabling capability to support delivery of our collective Group purpose. These smaller

businesses are combined within the ‘Other’ category in our financial reporting, together with the impact of

Group consolidation adjustments.

• SBF provides invoice financing and bad debt protection to small and medium-sized enterprises, based at

our Head Office in Skipton.

• Jade is based in New Zealand, specialising in digital and large IT enterprise solutions globally, and provides

the Society’s core database and software development language.

Together, we are stronger than the sum of our individual parts, and all our business lines play an integral part in

delivering our purpose and making membership matter.

You can read more about how we segment our Group in Note 47 to the Accounts.

Performance & Strategy Governance

Financial Statements

Help People Have

a Home

Make Money Work

Harder

Homes

Money

Other Information

Key business lines

The Skipton Group primarily comprises mortgage lending and deposit taking by the Building Society and SIL,

and buying, selling and renting homes through Connells.

The Group’s operating results are reviewed regularly by our Group Board for the following key business lines -

these three key business lines support delivery of our strategic priorities.

Skipton Group Annual Report & Accounts 2025 14

Our Homes business within the Society provides

loans to borrowers to purchase and own their home,

whilst also supporting the private rental sector

through the provision of buy-to-let mortgages to

landlords. This is further strengthened through our

mortgage lending by SIL in the Channel Islands.

Our Money business within the Society brings

together a secure place for our members’ savings

with the provision of high-quality non-regulated free

education and advice to our customers to support

their long-term financial wellbeing. Combined with

the additional provision of Regulated Advice, our

offering sets us apart from our peers.

Connells, our property services group is focused on

delivering for customers and clients throughout the

process of buying, selling and renting homes.

Connells’ services include new homes, mortgage

services and conveyancing. Connells also supports

customers to have a home through its lettings

business and is one of the largest providers of

residential survey and valuation services in the UK.

To supplement our core activities, we also source

funding from the wholesale markets, which

diversifies our funding base and supports our long-

term financial stability.

Our mutual status means we don’t have

shareholders or dividends to pay out. We are

member-owned, and we have a responsibility to our

members to remain financially sustainable,

generating profit to invest back into our businesses

for the future benefit of members. This means we

reinvest our profits to support sustainable growth, to

modernise and remain relevant with new capabilities

and propositions, and to preserve a strong capital

position, supporting and protecting our members,

customers and creditors today and in the future.

Performance & Strategy Governance

Financial Statements

Other Information

The Skipton Group Business Model

• Savings deposits from members and customers

• Deposits from other banks, institutions and other financing e.g. covered bonds

• Retained earnings from previous profits and dividends from our Group

businesses

• Lend on mortgages to customers, through brokers and direct to customers

• Lend working capital to finance small and medium-sized businesses through

SBF

• Fees and commissions charged for regulated Financial Advice, mortgages,

buying, selling and renting homes and other financial products

• The difference between the interest we receive from mortgages and assets,

and the interest we pay on savings and deposits from other banks and

institutions

• Paying and developing our colleagues

• Distribution costs, e.g. our branches, offices and broker procuration fees

• Unpaid debts and other impairment losses

• Taxes

• Enhancing experiences and driving additional value for members and customers

• Providing multi-channel support to our members, customers and brokers

• Investing in the future of our Group, ensuring we maintain capital strength

• Committed to donating 1% of PBT to charity, to do good for society

Where the money

comes from

What we do with it

How we generate

income

Where we incur costs

What we use our

profits for

Skipton Group Annual Report & Accounts 2025 15

Economic and market background

2025 has continued to be shaped by global

complexity, with ongoing geopolitical tension and

climate-related challenges. In the UK, the new fiscal

policies announced by the Labour government

brought a period of adjustment as they begin to take

effect, creating both uncertainty and opportunity.

Economic performance has been mixed. After

modest recovery early in the year, growth slowed in

the latter half, reflecting cautious business

sentiment. Inflation peaked in September at 3.8% but

is now trending downwards, while the Bank of

England further reduced the base rate to 3.75%,

supporting affordability for borrowers.

Unemployment has begun to gradually increase and

there are signs the labour market is loosening.

As we enter 2026, we anticipate a continued period

of economic adjustment, with interest rates expected

to remain stable and inflation falling towards target

levels. While geopolitical and climate-related risks

persist, we see opportunities in digital innovation,

sustainable finance, and evolving customer needs.

The outlook for Skipton Group remains positive and

robust, with strong capital and liquidity ratios,

healthy and sustainable growth in both mortgage

and savings balances, good underlying profitability,

and a diversified business model.

Our focus will be on continuing our investment in

technology to enhance member experience and

supporting the UK housing market through

responsible lending. We remain committed to

delivering long-term value for our members and

communities, guided by our mutual principles and a

clear strategy for sustainable growth.

Decision-making

Achieving the right balance of risk and reward is

essential to ensuring the long-term sustainability of

the Group and enables us to deliver our strategy.

Through the Board Risk Committee approved Risk

Management Framework and governance structure,

the Group has a formal mechanism for identifying

and managing risks throughout the business, further

details of which can be found in the Board Risk

Committee Report.

The Group’s Corporate Plan, which is approved by

the Board, was developed in line with this framework.

The Board’s approach to Policies and Practices

The Board is responsible for approving the Group

strategy, managing risk, and overseeing its systems

of internal control. The ongoing effectiveness of

these controls is reviewed by the Board on a regular

basis (see below).

The Society maintains a high standard of corporate

governance for the benefit of its current and future

members, and to conduct its business in a prudent

and well organised manner. The Board’s terms of

reference clearly set out its responsibility for the

overall stewardship of the Group in line with the

Society’s ‘Principles of Governance’, as set out in the

Corporate Governance Report and available at

skipton.co.uk/about-us/our-people/our-board.

Our strategic priorities are monitored and reported to

the Board and senior management on an ongoing

basis. This enables the Board’s management of the

business and its decision-making processes.

Respect for our environment and the communities in

which we operate is also a key part (see Building a

Sustainable Society section).

Strategic priorities

Our three key strategic priorities keep us focused on

purposeful change:

• Helping People Have a Home - We will continue to

strive to make home-ownership a reality for more

people, with a keen focus on first-time buyers.

• Making Money Work Harder - We will invest more

to ensure our members receive above-market

average interest rates for their savings and have

access to free financial advice to help them plan

their financial futures.

• Making Membership Matter - Our members will

see and feel the value of Skipton membership,

being rewarded for their loyalty and tenure and

having more of a voice in the running of their

Society.

2026 is about building on our successes in 2025,

delivering core capabilities for our members and

customers and further enhancing our membership

proposition, giving back even more value when and

where it matters.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 16

Our ambition is to champion first-time buyers and be

a leading contributor to the debate on affordable

housing in the UK. To guide our provision of

enhanced and innovative products and propositions,

our Homes business has three strategic priorities:

Helping people have a home

The UK affordability crisis has worsened, with only

10% of renters aged 20-44 able to buy, dropping to

3% for single occupants (Source: Home Builders

Federation report). This is supported by our Skipton

Group Home Affordability Index which shows 49 out

of 50 adults living with parents in the UK are unable

to afford a first-time buyer home in their local area.

Through continuing to innovate, we have helped over

26,000 first-time buyers out of this challenge. We

enhanced our Track Record Mortgage (first-time

buyer, no deposit required product) and more than

doubled Track Record lending year-on-year since it

launched in 2023. In addition, our Delayed Start

Mortgage (first-time buyer and no repayments due

for the first three months, to help with the costs of

moving into a new home), helped a further 670 first-

time buyers since it launched earlier this year.

Leaning into the affordability challenge further, we

enhanced our affordability policy including loan-to-

income limits. Through collaborating with Phil

Spencer in the “First Home Focus” series, we

provided clear, practical guidance to first-time

buyers, helping them take confident steps towards

home ownership.

Our commitment to championing first-time buyers

was further acknowledged by the Treasury Select

Committee in a hearing we attended in September.

We will continue to engage with policymakers,

providing evidence-based recommendations to help

shape solutions for aspiring homeowners.

The measures designed to improve market

accessibility in the governments Autumn Budget,

notably the permanent introduction of the 95%

mortgage guarantee, aligns with our commitment to

support aspiring homeowners as we continue to

address the affordability crisis in 2026. However, we

remain mindful of the ongoing challenges for first-

time buyers, including punitive stamp duty and the

frozen Lifetime ISA limits which may constrain

deposit-saving ability.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 44%)

New lending to

first-time buyers

• Helping people have a home

We will support more first-time buyers to

take their first steps onto the property

ladder

• Creating outstanding experiences

We will empower our customers and

brokers to engage in their channel of

choice

• Championing the intermediary market

We will advocate for brokers and maintain

mutually beneficial relationships

Skipton Group Annual Report & Accounts 2025 17

In 2026, we will further seek to address the

affordability challenge by evolving our first-time

buyer products and propositions, partnering with

industry experts and pioneering new solutions.

Beyond first-time buyers, we continue to support

home-movers and re-mortgagers with affordable

solutions across our portfolio.

We will give them confidence in taking the next step

when their current deal comes to an end, equipping

them with the knowledge and information they need

to navigate the process seamlessly.

Creating outstanding experiences

Through 2025, we have focused on truly

understanding our members needs, improving their

experience by reviewing our processes, upskilling our

colleagues and streamlining our journeys so we

deliver what matters most to them. This includes

piloting a new process, unlocking the ability to

perform desktop valuations on new build properties -

reducing the time to offer to just 4 days on almost

one quarter of cases since launching in August.

In 2026, we will continue to empower colleagues to

deliver even greater value through tailored learning

and development and broadening roles, providing

colleagues with greater accountability so they can

own the full member journey.

As a modern mutual, we have also continued our

work migrating data to the Cloud Microsoft Azure

Platform. This year, our decisioning system was

migrated to the Cloud, enhancing the speed and

accuracy of our mortgage decision making.

Our Affordability Calculator, Online Decision in

Principle, and Webchat were also migrated, creating

the ability to enhance these tools further.

In the first three months of the year, we worked to

ensure every customer could complete their home

purchase ahead of the stamp duty deadline. By

prioritising speed and care, we made sure no one

was left behind, supporting almost £1.0bn of

completions in March.

Championing the intermediary market

Through our commitment to the intermediary

market, we are proud to consistently maintain

excellent broker feedback and satisfaction scores,

reinforcing our position as an intermediary-led

lender.

In 2025, we continued to invest in technology to

optimise broker journeys, making it easier for

brokers to interact with us. Brokers can now sign on

behalf of their customers when switching products,

speeding up application times. We also strengthened

relationships with distributors and firms and

collaborated with brokers to improve our offering.

Our ambition is to be the go-to lender for first-time

buyer insight. Our “Skip-to” marketing campaign

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 91%)

Net Homes

customer

satisfaction

“Skipton are helping the

next generation to become

homeowners”

(2024: 89%)

Net broker

satisfaction

Skipton Group Annual Report & Accounts 2025 18

increased broker awareness of Skipton’s first-time

buyer offerings, ranking Skipton sixth in broker

awareness. Our innovation continued to challenge

the status quo, growing broker advocacy and earning

recognition by winning Best Intermediary Lender at

the What Mortgage Awards for the fifth consecutive

year.

In 2026 we will build on this momentum, reducing

the time to offer on applications, making it easier to

do business with us.

SIL

Our lending spans into the Channel Islands, with SIL

(our Channel Islands bank) offering a UK mortgage

proposition specifically for buy-to-let investors

residing overseas.

Throughout 2025, SIL has focused on delivering

improved customer journeys, providing simplicity

and speed that result in a better experience for

customers and colleagues alike.

Mortgage lending performance

Our unwavering focus on first-time buyers, borrowers

and brokers within the Homes business has led to

another successful year of performance. In addition

to the Society achieving a £30bn mortgage balance

milestone, the Homes business has been recognised

as the sixth largest lender for first-time buyers by

eBenchmarkers.

Our Group mortgage portfolio grew by 7.9% (2024:

8.2%) whilst maintaining our prudent credit risk

appetite. The Group has increased its market share

of balances to 1.91% (2024: 1.81%) (Source: Bank of

England Statistics).

The Group’s UK residential mortgages in arrears by

three months or more remained low, representing

only 0.30% of mortgage accounts (2024: 0.29%)

which compares to the industry average of 0.78%

(Source: UK Finance - residential mortgages in

arrears by more than three months).

Skipton Group will continue to innovate, facing into

market challenges and delivering more value back to

our members, customers and brokers. We remain

dedicated to leading the way on driving purposeful

change, leveraging our collective Group voice and

unique insights to stand up for members and wider

society.

Home buying and selling performance

The UK housing market started strongly in the first

half of 2025, with exchanges up 19% on the same

period in 2024 ahead of the Stamp Duty changes in

March and the easing of base rate pressures on

affordability.

In the second half of the year, activity was subdued

by comparison, with the Autumn Budget uncertainty

surrounding property reform impacting supply and

demand. Despite market volatility throughout the

year, Connells delivered good performance and

reinforced its leadership position through strategic

growth and innovation.

Our mortgage services proposition continued to

provide whole-of-market advice and mortgage

lending, generating £33.3bn of lending (2024:

£31.7bn) across UK providers. Our lettings business

that manages properties on behalf of landlords also

grew, with properties under management increasing

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 8.2%)

Group mortgage

portfolio growth

“It’s always simple with

Skipton. Quick and easy”

Skipton Group Annual Report & Accounts 2025 19

by over 1,800 to 128,396 (2024: 126,590), driving

additional income for the group. Our average

tenancy length increased to 36 months with 73% of

properties re-let by Connells at the end of their

tenancy (December 2024: 79%). Rental properties in

arrears increased slightly in 2025, to 6.1% (December

2024: 5.0%).

With the Renter’s Rights Bill becoming law, we are

well placed to support landlords and tenants with the

changes coming into effect in 2026 which will

fundamentally reshape the private rental market

towards a more tenant favourable environment.

Through our Connells estate agency network, we

continue to support around one in ten home movers

across the UK. We have strengthened our position

through targeted acquisitions in the first six months

of the year, creating network expansion, and now

reaching 88% of UK postcodes.

This includes the addition of Aspire Estate Agents

Ltd, bringing six new branches to our 1,200+ strong

network and 745 managed properties into Connells,

supplying more customers with our property services

propositions.

This year, we built and launched Karri, our new

mortgage services brand, that provides a user

interface designed to help more customers secure

the right lending solutions and the right advice for

their homes. In early 2026, we will roll out our brand

to connect online property to customers, with our

service being available in over 1,000 UK locations.

This forms part of our ongoing commitment to

digitising the home buying and selling journey.

Our commitment to service excellence was

recognised with the Platinum Fee Service Award

from Feefo, building on our Gold status in 2024 and

maintaining a market-leading score of 4.8/5.0 (2024:

4.8/5.0). Connells was also named among the

Sunday Times Top 26 ‘Best Very Big Places to Work’.

Innovating home buying and selling

The breadth of Connells’ businesses provides us with

unique insights into some of the challenges that

have hindered the UK home buying and selling

process in recent years.

Our collaboration with Legal Marketing Services

(LMS) (the UK’s leading provider of conveyancing

platform services, of which Connells is a 50%

shareholder), has provided an opportunity to rapidly

test and evaluate new solutions that can overcome

challenges to deliver a faster, more seamless and

less stressful experience for all parties involved.

Following the success of our proof of funds pilot in

2024, and the roll out of National Property

Transaction Network (NPTN), we are further trialling

solutions that bring property information to the start

of the process, before the property is listed for sale.

This leverages trusted data that removes duplication

and speeds up overall process time.

In November, we also launched a new pilot with the

Society, to send valuation queries directly to the

valuer, aiming to reduce the response times for

valuation-related enquiries. By collaborating across

the Skipton Group, we can rapidly test specific

solutions that solve the pain points for our

customers within the end-to-end journey.

As we move into 2026, the clarity in the Autumn

Budget provides a stable environment for continued

demand across the housing eco-system and further

innovation as we leverage the strength of our group

to serve even more customers.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 54)

Average number of

properties for sale

per branch

(2024: 4.8/5)

Feefo review

score (out of 5.0)

(2024: 126,590)

Properties under

management

Skipton Group Annual Report & Accounts 2025 20

We remain committed to supporting financial

wellbeing, providing guidance and advice to more

members with propositions that make our members

money work harder. We recognise that we need to

continue to evolve member experiences, delivering

meaningful value to help them meet a broader range

of lifetime financial goals.

Our three strategic priorities within our Money

business will help us achieve this:

Providing advice for everyone

Many people in the UK are not getting the help they

need to make their money work harder and support

them across key life events. This is contributing to

an Advice Gap and a Transfer of Wealth challenge.

The UK is entering a new period of wealth transfers,

with an estimated £5-7trn expected to transfer from

older to younger generations over the next 20-30

years (source: Heligan Wealth Management Report).

In 2024 we took a deliberate step towards bridging

the Advice Gap by introducing free advice to

members, regardless of the amount they had

available to invest, through our ‘My Money Review’

and ‘My Money Enquiry’ services. Available through

branch and telephony channels, the uptake of this

free member benefit in 2025 has exceeded our

expectations, demonstrating a clear member need to

talk about financial wellbeing.

Having anticipated the need for advice, we will scale

our propositions to support even more members and

their families with the help that they need, regardless

of background, income or circumstance, supporting

the FCA’s Targeted Support and Financial Inclusion

policies further.

For those with more advanced or complex needs,

Skipton are proud to be the only Building Society to

offer a direct Regulated Advice proposition. In

October, we continued to refine the Regulated Advice

experience, launching our ‘Advisor First Appointment’

tool, which has already created smoother, more

intuitive first interactions for 775 customers.

Throughout 2025, we have supported 5,836

customers with our Regulated Advice (2024: 5,385).

Offering high quality products and services

With the base rate reducing during 2025, we remain

committed to paying competitive savings rates and

enhancing our offering with member exclusive

products.

Performance & Strategy Governance

Financial Statements

Other Information

(2024 £4.7bn)

Funds under

management

• Providing advice for everyone

We will offer more accessible advice to our

members to make more from their money

• Offering high quality products and

services

We will grow our members and customers,

helping more people with their money

• Making every interaction count

We will increase our digital journey options

to give members and customers more

choice

Skipton Group Annual Report & Accounts 2025 21

By December, our minimum variable savings rate

was 2.05% AER (2024: 2.80% AER).

Members benefitted from a choice of two

exclusive products (ISA and non-ISA easy access

products) alongside our fixed range. As a thank

you to members for continuing to trust us with

their savings, we also provided a £50 retail

voucher to reward their loyalty during ISA season.

Our proposition was further strengthened with the

launch of our ‘Save More’ member bond, and new

member regular saver accounts. In 2025, over

90,000 members took out an exclusive rate

savings account.

To complement our savings offering and the UK

Government’s desire to support more consumers

with investments, we introduced a free advice

Stocks & Shares ISA - exclusive to our members

and designed to help savers make informed

decisions between cash savings and investments.

Following the Governments Autumn Budget which

announced changes to the Cash ISA limit for

under 65’s, we are ready to support members with

our advice propositions to help more people

navigate the investment landscape.

Amongst the advice we provide, we are here to

help people save for their pension and help them

understand when the right time to retire is.

In 2025, our Money business delivered 7.8%

growth in our savings book and maintained our

high net customer satisfaction of 90% from 2024,

reinforcing the quality of service we strive to

provide.

Making every interaction count

We are innovating our technology, making

improvements across all channels (digital,

telephony and in-branch), to continue to deliver

against our ambition of enabling ‘any channel’

experiences so that members can interact with us

however they prefer. This year, we unlocked ‘any

channel’ service for 47% of savings journeys

(December 2024: 24%).

We have deployed an upgraded member portal,

and a Customer Engagement Platform which are

designed to make it easier for members and

colleagues to manage accounts and connect with

each other whenever required.

Following the transfer of borrowers to our new app

this year, we will scale this to our Money members

and customers in 2026. By listening to member

feedback, we will continue to build increased

functionality to allow our members to interact

digitally, whilst protecting them in an ever-

changing digital world.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 90%)

Net Money

customer

satisfaction

“Skipton give excellent service, their

colleagues are knowledgeable and

honest ensuring you get the right

product suited to your personal

needs”

(2024: 1,004k)

Number of savers

and investors

Skipton Group Annual Report & Accounts 2025 22

“We are members of

Skipton because our money

is safe, and we’re treated as

humans. Not a commodity.”

This year, we tested a new telephony analytics tool

which enabled our colleagues to better understand

what matters most to members. Having seen the

positive impact it can make, we will introduce this

across all telephony services in 2026.

We continue to hold the Consumer Duty principles at

the heart of our business practice, ensuring good

outcomes for all customers. Supporting vulnerable

members remains a priority, tailoring our services to

ensure that they remain accessible to meet individual

needs.

SIL

SIL provides offshore savings solutions, offering

Sterling and US Dollar accounts, fixed rate bonds and

easy access products. Savings balances remained

resilient at £2.4bn (2024: £2.4bn) despite not actively

pursuing growth during this period.

Our commitment to customers in the Channel

Islands is consistently recognised through award-

winning service and ‘excellent’ Feefo rating. Feefo,

the gold standard in customer reviews, requires a

minimum score of 4.5/5.0.

SIL are proud to be a five-time Feefo Platinum

Trusted Service Provider, following eight consecutive

years of Gold accreditation. In 2026 we will refocus

on growth and explore opportunities to broaden our

reach to more customers.

Savings performance

Our savings propositions delivered another year of

growth, driven by excellent retention and balance

increases.

For the Society, the Money business’ competitive

savings rates and excellent service increased total

balances by 7.8% (2024: 8.9%) to £30.5bn (2024:

£28.3bn), doubling our savings book since 2017 and

outperforming the UK savings market where net

savings grew by only 4.4% (2024: 5.1%) (Source:

Bank of England Statistics).

The Money business also achieved record ISA

transfer activity, contributing to 19.8% ISA growth

throughout the year. Our Regulated Advice balances

also grew, surpassing £5bn Funds Under

Management, reflecting the accessibility of our

propositions and the strong consumer desire for the

provision of savings and advice.

As the UK’s first provider of the cash Lifetime ISA

(LISA), we hold balances of £1.1bn (2024: £1.2bn)

for customers who are saving for their first home or

planning for retirement. These customers benefited

from government bonuses of £45.1m (2024:

£56.2m).

We will continue to test new propositions with our

members in 2026, acting on their feedback to ensure

the products, propositions and services we design

address their needs. Skipton will continue to support

members and customers, as together we face into

the Advice Gap and Wealth Transfer challenge.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 4.7/5.0)

Feefo review score

(out of 5.0)

Skipton Group Annual Report & Accounts 2025 23

Membership sits at the heart of our Group and

underpins everything we do. We remain committed

to Making Membership Matter.

Skipton will Make Membership Matter more through

three membership strategic priorities:

We will measure the success of these priorities

through our “Member Sentiment Score”, which gives

us direct member insight on how we are delivering

value, supporting communities and giving members

a say in how our Society operates.

We have brought the Society brand to life for our

current and future members, reflecting our mutual

roots as being Founded on Fairness. Communicating

fairness across a multi-channel campaign increased

our brand consideration to 26.5% (against a target of

20%).

Society membership continued to grow through the

year, increasing by 4% and taking our total

membership base to 1,317,047 (2024: 1,266,608).

Creating value exchange

We have continued to provide exclusive member

products and services, including 'always on' savings

products. We also reserved our best rates for our

members, recognising and rewarding their loyalty.

On average, we paid 0.68% higher interest (2024:

0.74%) than the market average for banks and

building societies (Source: CACI Current Account &

Savings Database, Stock, 12-month December 2024 -

November 2025).

Our colleagues are empowered to recognise

moments that matter to members, offering gestures

of goodwill and acts of kindness to surprise and

delight members. Over 2,000 of our members

received gifts from our colleagues to mark special

occasions or times of need, reinforcing our

commitment to making membership matter.

For first-time buyer members, we recognised them

getting the keys to their home by gifting over 20,377

Home Mover Boxes, containing essential household

items.

For borrowers, we also launched a member

mortgage range, recognising their loyalty through

providing £250 cashback on their new member

mortgage product. Our Home Insurance proposition

in partnership with Uinsure, delivered cheaper

premiums to c.95% of existing home insurance

customers, to ensure their homes are protected.

In partnership with Vibrant Energy (a Group

company) we continued to offer a free EPC Plus

report to 1,577 members (December 2024: 1,591),

providing recommendations for energy efficient

improvements to their homes.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 46.6%)

Society member

sentiment score

(2024: 0.74%)

Above market

average savings

rate

(2024: +10k)

Gestures of

goodwill

• Creating value exchange

We will give members exclusive benefits,

encouraging deeper engagement and

loyalty

• Encouraging meaningful participation

We will give members opportunities to

participate, listen and collaborate

• Supporting communities

We will support our wider society, making

a real difference in our local communities

Skipton Group Annual Report & Accounts 2025 24

Encouraging meaningful participation

In 2025, we are proud that 60,647 members

exercised their voting rights in the AGM, shaping the

way our Society is run and governed. This also gave

members the opportunity to select our charity

partner. Our members voted to partner with Refuge,

helping the organisation continue its vital work of

empowering survivors to regain control of their

finances and build confidence in managing their

money after abuse.

We recognise the importance of our members’

voices and continue to encourage participation

through a range of forums, including our member

panel and digital collaboration platform. This has

helped us better understand topics such as longer-

term mortgage products, life insurance, online

security and the ‘Great Wealth Transfer’.

Throughout the year, we have recruited new

members to our panel, continuing to expand

representation to include first-time buyers, to ensure

a diverse range of perspectives inform our decisions,

products, services and communications.

Supporting communities

Supporting wider society and making a real

difference in local communities remains a core

priority. Colleague volunteering continues to play a

vital role, with every Society colleague able to

dedicate up to three days annually to the causes that

matter most to them.

Skipton Group remains committed to donating 1% of

its PBT to charity each year. As part of this, in 2025

we allocated £164,000 across 82 branches to

support 246 local charities, empowering branches to

choose the causes most important to their local

members and communities.

We remain committed to our branch network,

investing in their refurbishment for our members and

broader society to utilise the space. Each branch has

been issued with toolkits to support the events they

hold and their broader community outreach.

Our branches have facilitated help and support to

their communities alongside our 2024 charity

partners Age UK and National Energy Action, most

recently rolling out a Winter Warmer campaign.

Looking ahead, our focus remains on raising

awareness of the value of membership, ensuring

more members enjoy its benefits. We will continue to

deliver more value through exclusive rates and

products, as well as create bespoke member

offerings for both new and existing members.

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 23.5k)

Members on our

Customer Panel

(2024: £3.3m)

Donated to good

causes

“We received a hamper on

our first wedding

anniversary, a lovely

personalised touch from

Skipton”.

Skipton Group Annual Report & Accounts 2025 25

We remain committed to fostering a culture across

our Group that enables colleagues to realise their

potential, deliver meaningful impact for our

members and customers, and feel a genuine sense

of belonging.

Our approach is underpinned by Society colleague

behaviours that define how we work:

Investing in our Group colleagues

We have continued to invest in our Group colleagues,

developing their knowledge, skills and capability so

they can continually grow at work.

This year, the Society, SBF and SIL provided new

learning tools designed to strengthen development

and unlock growth. 77% of SIL colleagues have

become active users of their ‘Thrive’ learning tools,

while 285 Society colleagues utilised ‘Cognassist’, a

digital platform designed to help colleagues identify

learning needs and gain access to personalised

insights.

Across Connells, we delivered over 2,100 training

and development classes, while the Society held

upskilling events on key topics throughout the year.

Our AI event, co-facilitated by Microsoft and industry

experts, demystified the use of AI and empowered

485 colleagues to utilise our AI tool in a safe and

sustainable way.

Contributing to our Group culture of enabling

colleagues to realise potential and feel like they

belong, the Society piloted ‘Stepping Up’, a

development programme to build confidence,

visibility and career progression. This delivered

significant improvements, increasing colleague self-

advocacy and career progression.

Our investment in learning and growth extends to the

development of the next generation of colleagues,

welcoming local students on six-month supported

work placements, collaborating with Right2Work to

increase confidence, independence, and practical

experience for young people in our community.

Rewarding our colleagues fairly for their great work

is central to our Group ethos, so SIL launched a new

internal recognition programme to celebrate

colleagues that went the extra mile, while the Society

made our approach to pay more visible and

accessible for colleagues.

To support our digital transformation activity, we

have strengthened our Group Technology,

Transformation and Resilience teams, including the

creation of a new Enterprise Architecture function

who specialise in aligning technology, processes,

and strategy to make our operations more efficient.

Further, recruitment of senior Technology and AI

roles is underway at Jade to strengthen our

engineering capability.

We will continue to develop Group-wide colleague

initiatives, leveraging collaboration to unlock further

growth opportunities so our people can continue to

thrive at Skipton.

Championing Diversity, Equity and Inclusion (DEI)

Our Group’s purpose is built on fairness, belonging

and opportunity for all. At Skipton, we know that

diverse perspectives and inclusive practices

strengthen our ability to serve members and

communities. We are committed to creating an

environment where every colleague feels valued,

respected and empowered to contribute their best.

Across the Society we have 43 accredited Diversity

Allies – with even more across the Group -

championing inclusivity and fostering a culture of

respect and understanding.

Through dedicated events, we brought our

colleagues together to spotlight inclusion, with a

dedicated month in June, and a fortnight in October.

This year we have delivered over 20 sessions to

colleagues on all areas of inclusion and wellbeing.

The sessions upskilled colleagues on a range of

diverse perspectives and provided them with

practical tools to support wellbeing.

Our Employee Resource Groups (ERG’s) remain a

cornerstone to our Group, providing colleagues with

a platform to connect, share experiences and

influence positive change.

Each of our Society ERGs donated £5,000 to a

charity of their choice, with the Gender Equity ERG

donating to PANDAS Foundation (Pre and Postnatal

Depression Advice and Support) and the Pride

Alliance ERG donating to Switchboard LGBT+.

Performance & Strategy Governance

Financial Statements

Other Information

We actively own our roles, commitments,

decisions and work

We draw on our courage to do the right thing

when it feels uncomfortable

We use our unique talents and diverse

backgrounds to reach the best outcome

We bring questions, critical thinking and

understanding to make things better

Skipton Group Annual Report & Accounts 2025 26

Performance & Strategy Governance

Financial Statements

Other Information

^ Gender voluntarily declared by colleagues

1. Society Board Directors only

2. Comprises the Society’s senior leaders (other than Executive

Directors) and Executive Directors of other Group businesses

Executive Directors

(2 colleagues)

Non-Executive Directors

(7 colleagues)

Senior Leaders

(83 colleagues)

Other Employees

(18,756 colleagues)

Executive Directors

(2 colleagues)

Non-Executive Directors

(7 colleagues)

Senior Leaders

(75 colleagues)

Other Employees

(2,539 colleagues)

Male^

Female

100%

57%

43%

49%

51%

52%

48%

47%

53%

56%

44%

Co-ordinated by the Armed Forces

Employee Resource Group, we marked

Armistice Day with a special service at our

Society Head Office, honouring the courage,

sacrifice, and service of the Armed Forces.

Through their donations, our ERGs have helped

make a meaningful impact beyond our

organisation.

In addition to charitable giving, our ERG’s have

been pivotal to progressing our Group DEI

ambitions with the Society’s Armed Forces ERG

leading the way in securing Skipton’s first Gold

Accreditation under the Armed Forces Covenant,

(elevating from our Silver status achieved last

year), while Connells elevated from Bronze to

Silver status. This highlights our Group

commitment to supporting those who serve(d)

and their families.

The Group has maintained a range of partnerships

to help inform our inclusive practices. Support

gained from Business Disability Forum

contributed to the Society maintaining our

‘Disability Confident’ status and our partners at

Inclusive Employers collaborated to upskill 204

colleagues on the importance of becoming Active

Bystanders. Connells partnered with AccessAble

to enhance physical accessibility practices and

broaden colleague understanding of disabilities.

In 2024, we were proud to achieve gender parity in

senior roles at the Society (determined by the HM

Treasury Women In Finance Charter), and for

2025 we maintained that position – see here:

Women in finance for further details. Our

partnership with WISE (Women in Science and

Engineering) will support how we continue to

embed gender parity across the Society and

broader Group.

In 2026, our Inclusion and Wellbeing strategy will

continue work on strengthening accessibility and

inclusion throughout our recruitment practices,

utilising expertise from our variety of partners.

Male^

Female

Skipton Group Annual Report & Accounts 2025 27

Our approach to sustainability

As a member-owned business, we have a

responsibility to act in the long-term interests of our

members, colleagues and communities. Our mutual

status means we are member-owned, and we have a

responsibility to our members to remain financially

sustainable, generating profit to invest back into our

businesses for the future benefit of members and to

support sustainable growth.

Our strategy for driving positive change is shaped by

our purpose and reflects the environmental and

social challenges facing the UK today. We focus on

the areas where we can support our members and

communities most effectively, including supporting

people to improve the energy efficiency of their

homes, promoting long-term financial wellbeing and

contributing to resilient, thriving communities. We

continue to align our work with recognised

sustainability themes, including the United Nations

(UN) Sustainable Development Goals and our

banking businesses, the Society and SIL, are

signatories to the UN Principles for Responsible

Banking.

Our separate 2025 Group Sustainability Report

provides further detail on our commitments,

performance and progress throughout the year.

Supporting the transition to more energy-efficient

homes and buildings

Rising energy costs and the UK’s ageing, poorly

insulated housing stock continue to place pressure

on households, hitting those on the lowest incomes

the hardest. Helping our members understand the

benefits of more energy-efficient homes and the

options available to them remains an important part

of our sustainability ambitions.

In 2025, we completed our Big Retrofit project,

retrofitting a Society-owned property in Skipton to

understand first-hand the costs, barriers and benefits

associated with home energy improvements. The

project produced valuable insights which we shared

publicly through two reports, which included policy

recommendations for Government. These learnings

will help inform our member engagement,

proposition development and wider influencing

activity. Further information about the Big Retrofit

project is available on our website.

The Society continue to be members of the

Sustainable Business Consortium and the Wates

Innovation Project, joining other financial services

organisations in exploring green technologies that

could support the transition to more energy-efficient

buildings. This participation helps us explore

practical opportunities to reduce the environmental

impact of our operations and improve the energy

efficiency of our premises.

Supporting our members, customers and

communities

We remain focused on helping members move

forward in life, whether through home ownership,

financial resilience or transitioning to lower-carbon

living. We continue to pledge 1% of our annual Group

profit before tax to charitable causes aligned with

our purpose.

Our three strategic charity partners and the

programmes we supported for 2025 are:

• National Energy Action (NEA)

• Age UK

• Refuge

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 28

Further details of our partnerships and the

programmes we supported during the year can be

found in our standalone Group Sustainability Report.

Responsible supply chain

The Society continues to work in partnership and

closely monitors relationships with key suppliers. On

an ongoing basis we assess any risk of adverse

impact, on our customers, colleagues or the

environment, as a result of these relationships. Our

suppliers are requested to agree with the Society’s

Code of Conduct as part of our onboarding process.

This includes commitment to being a responsible

and sustainable business, as well as supporting our

business ethics and complying with the Modern

Slavery Act 2015.

Suppliers’ service-delivery is tracked against key

performance indicators to ensure the service

provided is of an acceptable standard and the

Society is working with EcoVadis, a sustainability

ratings provider, to assess the sustainability

standards within our supply chain. In 2025, we

assessed 50% of the Society’s critical (“material”)

suppliers on their net zero and energy reduction

strategies.

The approach will be widened to include Connells

next year, enabling a comprehensive analysis to

inform our approach to reducing supply chain

emissions.

We appreciate that this will require supplier

participation and there is a risk that some suppliers

may not participate. The data we collect from this

may, therefore, be limited.

Being Accountable

The Group is committed to a zero-tolerance

approach to instances of bribery or corruption

across any area of our business. We have anti-

corruption and anti-bribery policies in place in each

business line, which are readily available. The

policies provide guidance about what constitutes a

bribe and prohibits the offering, giving, solicitation or

the acceptance of any bribe to or from any person or

company, by any individual colleague, agent or other

person or body acting on behalf of the Skipton

Group. In addition, our colleagues and employees are

required to complete annual training to refresh their

knowledge.

The Society’s Board fully supports the objectives of

the Modern Slavery Act 2015, further details of which

can be found at skipton.co.uk/about-us/governance.

We have a position of zero tolerance of modern

slavery and human trafficking in any form in our UK

business and supply chains. Suppliers to our UK-

based business lines must comply with the Modern

Slavery Act 2015, where applicable, and ensure their

supply chain is transparent about the process

through which employees are managed.

The Group also has regard to the above matters as

part of our risk assessment processes; a full

description of our principal risks and how we

manage these is found in the Risk Review.

To read more on how we keep ourselves

accountable and for details of our corporate

governance, please see the Corporate Governance

Report.

Community Retrofit Hubs

supporting local awareness of home energy

efficiency and retrofit options.

A Place to Call Home

helping older people to live well and

independently in safe, secure and warm homes.

Towards Financial Freedom

supporting survivors to regain financial security

and independence as they rebuild their lives free

from abuse.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 29

Climate-related risks continue to shape the environment in which financial services organisations operate and

are becoming an increasingly important consideration for the sector. For the Group, understanding how

climate-related factors may affect our members, our operations and our business remains an essential part of

how we navigate this changing landscape.

During 2025, we continued to build our understanding of these risks and opportunities and the implications

they may have for the Group and the markets in which we operate. This work also helped us understand how

we can play our role in supporting the wider transition to a lower-carbon economy in a way that reflects the

needs and circumstances of our members.

Over the following pages, we present our summarised climate-related financial disclosures aligned to the four

pillars of the Taskforce on Climate-related Financial Disclosures (TCFD) framework, the structure adopted by

the International Sustainability Standards Board (ISSB) and the proposed UK Sustainability Reporting

Standards (UK SRS):

Further details on how we manage climate-related risk, and our 2025 performance can be found in the Group

Climate-related Disclosures published on our website.

Performance & Strategy Governance

Financial Statements

Other Information

Governance across the Skipton Group around

climate-related risks and opportunities.

Impacts of climate-related risks and opportunities

on Skipton Group strategy and financial planning

How Skipton Group identifies, assesses, and

manages climate-related risks.

How Skipton Group assesses and manages climate-

related risks and opportunities

Governance Strategy

Risk Management Metrics and Targets

Skipton Group Annual Report & Accounts 2025 30

Board oversight of climate-related risks and

opportunities

The Society’s Board has ultimate responsibility for

oversight of climate-related risks and opportunities

across the Group. The Board Risk Committee

supports the Board in this role, receiving regular

updates and reviewing key climate-related

information during the year.

Board Risk Committee (BRC)

The BRC has received a range of climate-related

information to support its oversight responsibilities,

including:

• Updates on climate-related credit risk

management information

• An update on the Climate-related credit risk

appetite limits

• An update on the Society’s gap analysis in

relation to a PRA climate-related risk consultation

paper

• A review of the Board’s climate risk appetite

statement for the Society

The Board Remuneration Committee

Climate-related performance is linked to

remuneration through the Society’s new Group Long-

term Incentive Plan (LTIP), which includes an ESG

measure aligned to our strategic priorities. The LTIP

applies to the Society’s Executive Directors and other

selected Group Executive Committee members. For

further details, please refer to the Directors'

Remuneration Report.

The Board Audit Committee (BAC)

The BAC is responsible for reviewing and approving

external sustainability reporting, including the

Group’s annual Climate-related Financial

Disclosures.

Board and Executive training

In 2025, specialist training on climate-related risks

and opportunities was delivered for all Board

members and the Group Executive Committee. The

training, led by external specialists, focused on

sector developments, regulatory expectations and

emerging risk themes, supporting effective oversight

and decision-making.

Executive and management oversight

The Group Executive Committee and the boards of

subsidiary firms are responsible for the management

of the financial and operational risks arising from

climate change and the strategy to mitigate these

risks.

Within the Society, climate-related financial risks are

overseen through two key Executive committees:

• Executive Risk Committee (ERC): responsible for

overseeing climate-related scenario analysis and

the integration of climate considerations into the

Society’s risk management framework.

• Group Sustainability Committee: responsible for

overseeing other climate-related risk activity and

wider sustainability matters. This committee

provides a centralised view of the sustainability

and climate risk initiatives and how they connect

and align with the Group’s strategic opportunities.

Responsibility for the identification and management

of financial risks from climate change is held by the

Group Chief Financial Officer as the designated

Senior Management Function in line with the

Prudential Regulation Authority’s (PRA) updated

expectations set out in Supervisory Statement 5/25

on ‘Enhancing banks’ and insurers’ approaches to

managing climate-related risks’.

The Climate Change Risk Forum supports Executive

committees by coordinating activity relating to the

identification and monitoring of climate-related risks

across the Group.

The Stress Testing Steering Committee, reporting

into the ERC, continued to support the development

and reviews of climate-related stress tests and

scenarios analysis during the year.

Subsidiary governance

Subsidiary boards are responsible for managing

climate-related risks relevant to their businesses.

• At Connells, management of risks from climate

change is allocated to Connells’ Chief Lender

Services Officer. Oversight is provided through

Connells’ Audit & Risk Committee, which reports

directly to the Connells board.

• For the other Group subsidiaries, management

responsibility sits with the respective CEOs and

boards.

Performance & Strategy Governance

Financial Statements

Other Information

Governance

Skipton Group Annual Report & Accounts 2025 31

Understanding our climate-related risks and

opportunities

Climate change continues to influence how the

Group delivers its purpose. As the UK transitions to a

lower-carbon economy, we recognise both the risks

climate change presents to our business model and

the opportunities it creates to support our members

and the wider housing market.

We continue to build our understanding of climate-

related risks that may impact the Group, considering

both physical risks and transition risks across the

following time horizons:

We also continue to review the potential

opportunities climate change presents, including

supporting members with home energy efficiency

improvements and enhancing business resilience.

Further details can be found in our standalone Group

Climate-related Disclosures.

Impact on our organisational business, strategy and

financial planning

We continue to consider how both the transition to a

low-carbon economy and the physical impacts of

climate change may affect the Group over time. This

includes assessing climate risks as part of our risk

management framework and our annual going

concern assessment (see the Directors’ Report). An

assessment of climate change on the Society’s

financial position has been conducted and

separately Connells have considered the financial

impact of the risks on its income and costs, business

strategy and financial planning.

The most material potential climate risk impact

continues to relate to credit risk in our residential

mortgage portfolio. Changes in climate have the

potential to increase the frequency and severity of

physical risks, which could lead to an increasing

number of properties subject to physical flooding or

subsidence, for example. This could result in a

decrease in the valuation of the property which is

used as collateral to mitigate mortgage credit risk. In

addition, transitional risks associated with progress

towards a net zero economy could lead to reduced

property valuations or affect a borrower’s ability to

service their mortgage loan.

To manage these risks, we have quantitative Credit

Risk Appetite limits that incorporate the physical and

transition risks identified as high-risk from our

annual climate scenario analysis. We manage our

risk exposures by continuing to evolve our access to

climate information to enhance our lending controls

for flooding and coastal erosion to provide further

physical risk mitigation. We continue to monitor

Energy Performance Certificate (EPC) transition risk

to track mortgage portfolio property retrofitting.

We are also taking action to help the transition

towards a net zero carbon economy, through

initiatives such as EPC Plus home energy reports,

additional borrowing options for energy-efficient

home improvements, and sharing our own

experiences around undertaking retrofit through our

Big Retrofit Project.

Resilience of the strategy - Climate scenario

analysis

Climate scenario analysis continues to form a core

part of our climate risk assessment and supports our

strategic planning and risk appetite. In 2025, we

completed quantitative analysis, with qualitative

assessments for less material exposures across four

climate pathways, including one aligned with limiting

global temperature increases to below 2°C.

The assessment focused primarily on the potential

impact to credit risk in the residential mortgage

portfolio, including a quantitative assessment of

IFRS 9 Expected Credit Losses (ECL), and review of

the impact on the Society’s equity release portfolio.

Qualitative assessments were also completed for

other relevant business areas and Group companies.

For Connells, a review of the same climate pathways

with quantitative modelling of a below 2°C scenario

and additional assumptions for the volume of

properties sold was completed to consider impacts

on property-related income streams and valuation

services.

The 2025 results remain broadly consistent with

prior years. Across the scenarios modelled, the

financial impacts are manageable within the existing

risk management framework. Full details are

available in our Group Climate-related Disclosures.

Performance & Strategy Governance

Financial Statements

Other Information

Strategy

<5 years, aligned with

the Group’s financial planning horizon

5-10 years, covering

the main horizon for key transition risks

10+ years, capturing our

future outlook including key physical risks

Skipton Group Annual Report & Accounts 2025 32

Processes for identifying and assessing climate-

related risk

The Group undertakes an annual climate risk

assessment to identify potential risks that could

result in financial or reputational damage and is

reviewed by members of the Climate Change Risk

Forum (CCRF). Through the CCRF we review climate-

related risks to which the Group is exposed, informed

by internal processes and relevant regulatory

guidance.

The assessment to identify risks involves relevant

subject matter experts from across the Group and

considers the likelihood of risk crystallisation and

potential risk impact to the Group and our

customers.

Processes for managing climate-related risks

Climate risk is incorporated into relevant first line

processes, risk appetites and control frameworks.

With respect to mortgage credit risk, identified as our

key climate-related risk, our current controls for

managing new lending include:

• Physical or desktop inspection of the property for

higher loan to values, where any known flood risk

or risk of coastal erosion will be reflected in the

valuation.

• Desktop or physical survey on properties in

postcodes identified as potentially at risk of

future coastal erosion, to capture local knowledge

of the risks to each property.

• Insurance requirements at the point of

completion, in line with the Society’s loan

conditions, which provides assurance that the

property is insurable at that point in time.

Our concentration risk rules also consider flood risk.

How processes for climate-related risks are

integrated into overall risk management

Our ongoing approach to credit risk management is

carefully considered, based on experience from our

stress scenario analysis, alongside regular

monitoring of any emerging concentration risks

within the mortgage portfolio.

We continue to be prudent and proportionate in our

approach; balancing the risks with any adverse

impacts on our members and the wider UK housing

market.

Climate-related considerations are also incorporated

into our established Risk and Control Self-

Assessment (RCSA) process, supporting regular

assessment of key risks and controls across the

Group.

Risk management framework

Our climate-related risk management processes are

aligned and integrated into the Group Risk

Management Framework.

The Group has a formal structure for identifying and

managing risks throughout the business. This

framework supports the delivery of the Corporate

Plan in line with the Board’s overall risk appetite and

is based upon the three lines of defence risk

management model with risks rated on magnitude

and likelihood.

Climate risk is also managed in other risk areas

through various mechanisms including consideration

as part of the Internal Capital and Liquidity Adequacy

Assessment Processes (ICAAP and ILAAP) and the

inclusion of climate-related risks within our

Operational Risk Framework.

Further details on climate risk are included in the

principal risks section of the Risk Review.

Performance & Strategy Governance

Financial Statements

Other Information

Risk Management

Skipton Group Annual Report & Accounts 2025 33

Metrics used to monitor climate-related risks

To support the monitoring and management of

climate-related risks across the Group, we track a

range of physical and transition-risk indicators,

including:

Skipton Group scope 1, 2 and 3 GHG emissions

Across the Skipton Group we collect data to monitor

and assess energy used and emissions generated

across our operations. Group emissions are reported

under both the market-based and location-based

methods.

Our scope 1 and 2 GHG emissions relate to the

energy we use to operate our branches and offices,

and our company owned or operated vehicles for our

employees. Most of our operations are based in the

UK, with smaller facilities in Australia, Guernsey,

Jersey and New Zealand.

Our scope 1 and 2 location-based emissions have

reduced 12% from 2024, and our energy

consumption is down 3%. Our market-based

emissions have reduced 15% due to increased

purchasing of electricity backed by a renewable

energy of guarantee of origin (REGO), at 91% in 2025

(2024: 86%).

We aim to purchase electricity tariffs, with a

renewable energy guarantee of origin (REGO) for our

Group operations, with the Society purchasing a

green gas tariff, with renewable gas certification

(RGGO).

The work to lower energy used across our offices

and branches has continued throughout 2025,

continuing to switch to more energy-efficient LED

lighting, and installing smart electricity and gas

meters. Additionally, Connells continues the

transition of their fleet to lower emission vehicles,

with 43% of the fleet being hybrid or electric at the

end of 2025.

We report estimated scope 3 data covering financed

emissions from our lending for our residential and

legacy commercial mortgage portfolio (Society and

SIL). The total financed emissions are estimated as

at a 30 September snapshot, based on an LTV-

based attribution ratio, property type, and EPC data

available. We saw an increase in the number of

residential properties with an EPC available, at 84%.

In 2025, the total (residential and commercial)

attributed mortgage financed emissions increased

1% from 2024, in line with growth in the residential

mortgage book.

We recognise that there are certain limitations in the

collection of such data which will affect both the

metrics and our targets, and the usefulness of this

data for our strategic decision-making.

Performance & Strategy Governance

Financial Statements

Other Information

Metrics and targets

(2024: 8,723 tCO

Reduction in

Scope 1&2

emissions

• The level of flood risk in the Society mortgage

portfolio over different time periods and

climate pathways.

• The level of subsidence risk in the Society

mortgage portfolio over different time periods.

• The level of coastal erosion risk in the Society

mortgage portfolio over different time periods

and climate pathways.

• Society mortgage portfolio properties by

current and potential EPC category.

• Society quantitative portfolio credit-risk

appetite limits to manage the most material

physical and transition climate risks.

• Connells’ professional indemnity claims

caused by physical climate change.

• Group scope 1 and 2 GHG emissions.

• Estimations of Group scope 3 value chain

emissions.

• Estimations of Group scope 3 financed

emissions intensity for the residential

mortgage portfolio (Society and SIL).

Skipton Group Annual Report & Accounts 2025 34

Targets used to manage climate-related risks and opportunities and performance against targets

We remain committed to reducing the environmental impact of our operations and supporting the UK’s

transition to net zero by 2050.

We have a Group-wide approach to reduce our scope 1 and 2, and selected categories of scope 3 value chain

emissions, in line with net zero by 2050 or earlier. In addition, we have an ambition to reduce our financed

emissions intensity (kgCO2e/m2) of our residential mortgage lending in line with a net zero pathway.

The Board has approved a science-aligned near term 2030 target to reduce our gross scope 1 emissions by

42%, against a 2023 base year. For scope 2, we aim to source 100% REGO-backed electricity. Further

information can be found in the 2025 Group Sustainability Report.

We recognise, to reach our net zero target, there are factors and uncertainties beyond our control and require

the involvement of others including policy makers, governments, suppliers, and customers. We appreciate that

these may impact on our ability to meet our climate-related targets, or make them more challenging, and there

is a risk that all or some of them will not be achieved.

Performance & Strategy Governance

Financial Statements

Other Information

Scope 1 and 2

(notes 2 and 3)

Metric detail

2025 2024

Scope 1

— offices, branches and company vehicles

tCO

₂

3,155

3,380

Scope 2 (location

-based) electricity

tCO

₂

4,523

5,343

Scope 2 (market

-based) electricity

tCO

₂e

771

1,231

Scope 1 & 2 energy usage (inc. vehicles)

kWh

41,155,847

42,501,013

Total scope 1 & 2 emissions (location

-based)

tCO

₂e

7,652

8,723

Scope 1 & 2 emissions from UK operations (location

-based)

99%

Total scope 1 & 2 emissions (market

-based)

tCO

₂e

3,925

4,611

Scope 1 & 2 location

-based emissions intensity ratio

tCO

₂

e / £m

turnover

4.49

5.39

Scope 3 financed emissions, category 15

(note 4)

Estimated attributed financed emissions

— mortgage lending

from residential and commercial mortgage portfolio

tCO

₂

257,350

254,062

Notes

1. Further information on GHG emissions and limitations can be found in the 2025 Group Sustainability Report.

2. Where scope 1 and 2 actuals data was not available, consumption was estimated using average or proxy data. Data for Connells’

acquisition of Ryden and Stiles Harold Williams is for 1 April 2024 to 31 March 2025. Data for the Jade acquisition of Contec

Group International Limited will be included from 1 January 2026.

3. For market-based emissions where consumption was not REGO-backed, a residual or location-based factor has been applied. Our

renewable gas certificates are not used towards emission reductions.

4. Calculated on an annual 30 September snapshot basis, using Partnership for Carbon Accounting Financials emission factors.

The attribution ratio applied is based on the valuation of the property at loan origination. The 2024 figure is restated due to

the application of an improved LTV-based attribution methodology for floor area.

Metrics and targets

Group GHG emissions and energy data (note 1)

Skipton Group Annual Report & Accounts 2025 35

“Collectively, our Group businesses

delivered another year of strong

financial performance, despite

external headwinds and a ‘stop start’

UK housing market; while furthering

our ambitions to support first-time

buyers, broaden access to advice

and make membership matter more.”

Paul Chambers,

Group Chief Financial Officer

Key Financial Performance Indicators

Group profit before tax (PBT) to ensure we generate the capital

necessary to grow the business

Page

Underlying Group profit before tax to ensure we generate the

necessary capital to grow the business (note 1)

Page

Group net interest margin (% of mean assets) to manage the

earnings of our business

Page

Costs to mean assets (Society only) to maintain a manageable

cost base to ensure we remain efficient

Page

Retail funding (as a % of total funding) to demonstrate we can

fund most of our mortgages through retail savings

Page

Liquidity Coverage Ratio (LCR) (Prudential Group) to ensure we

hold sufficient levels and quality of liquidity (note 2)

Page

Common Equity Tier 1 (CET1) ratio (Prudential Group) to

ensure financial strength by having a strong (risk weighted)

capital base (note 2, 3)

Page

Leverage ratio (Prudential Group) to ensure financial strength

by having a strong (non-risk weighted) capital base (note 2, 3)

Page

£333.4m

£318.6m

£275.2m

2023

2024

2025

Notes

1. Included as a key measure in the Executive Directors’ remuneration policy calculations. For further details see the Directors’

Remuneration Report.

2. The Prudential Group excludes a small number of subsidiaries deemed as immaterial, or where not core to financial services, such as

Connells and Jade.

3. These ratios apply International Financial Reporting Standard 9 (IFRS 9) transitional arrangements for 2023 and 2024; which ceased

to apply from 1 January 2025.

£308.6m

£302.3m

£294.9m

2023

2024

2025

1.53%

1.28%

1.29%

2023

2024

2025

0.72%

0.73%

0.70%

2023

2024

2025

83.2%

85.6%

87.5%

2023

2024

2025

173%

193%

178%

2023

2024

2025

26.0%

28.7%

28.2%

2023

2024

2025

6.7%

6.6%

6.7%

2023

2024

2025

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 36

The Group has performed well in 2025, achieving balance sheet growth, good profitability (albeit down on last

year), and maintaining our strong capital position, despite economic conditions in the UK being subdued.

Economic growth slowed over the second half of the year as households adjusted to tighter fiscal conditions

amidst the effects of prolonged cost of living pressures, while businesses positioned themselves to take the

strain of rising business costs.

Financial performance

Group profit before tax (PBT) was £275.2m (2024: £318.6m). Growth in estate agency and surveying income in

Connells, and mortgage lending volumes in the Society (as housing market activity strengthened modestly),

while growth in cash ISA balances – with savers continuing to prioritise value and security, helped alleviate

underlying pressures from a shifting interest rate environment. The Group also saw an increase in cost base,

particularly at Connells, with rising salaries being the main driver. The Society and SIL also saw an increase in

loan impairment which further dampened profits; while there was a one-off charge for the Society on the buy-

back of Permanent Interest-Bearing Shares (PIBS) in the year.

We have maintained net interest margin, despite the

Bank of England Base Rate of interest being cut four-

times in the year, reducing from 4.75% to 3.75%. Net

interest benefited from favourable cost of funding,

offset by a more competitive mortgage market.

The Society delivered PBT of £189.3m, excluding

income from shares in subsidiary undertakings

(2024: £209.9m). While underlying net interest

margin has remained resilient, the one-off

redemption of £25m of the Society’s Permanent

Interest-Bearing Shares (PIBS) in the year, together

with further investment (people, brand and

technology) as well as increases to our loan

impairment, has ultimately resulted in a lower year-

on-year PBT position. Excluding the £27.9m cost to

redeem the PIBS, as detailed further on page 38, the

Society’s profits were marginally higher than 2024.

SIL reported a profit of £12.1m (£31.0m). The

reduction in SIL PBT was anticipated with the

business purposefully slowing growth, while

investing heavily to continue its transition to better

support customers. This has resulted in significantly

higher salary costs following the growth of back-

office teams.

Connells increased profitability this year, achieving

PBT of £73.1m (2024: £61.3m), as activity continued

to recover in the housing market, particularly early in

the year; buoyed by a surge of property transactions

as buyers rushed to complete purchases ahead of

the changes to Stamp Duty thresholds at the end of

March. However, activity was more subdued

following this.

For the Group, administrative expenses increased in

2025 by £111.1m (up 8.5%) to £1,423.4m (2024:

£1,312.3m). Spend in the year reflects further

investment in our services and our brand, and also in

our people. Salaries across the Group have

increased 10% on last year, through a combination of

rising headcount and higher pay awards as we

continue our focus on providing high levels of

customer satisfaction.

(2024: 1.28%)

Group net

interest margin

Summary Group Income Statement 2025 (£m) 2024 (£m)

Net interest income 514.9 488.4

Fees and commissions receivable 1,208.8 1,109.6

Fair value (losses) / gains on financial instruments mandatorily held at FVTL

(1.9) 18.0

Other operating (expenses) / income (11.0) 3.2

Total income 1,710.8 1,619.2

Administrative expenses (1,423.4) (1,312.3)

Operating profit before impairment loss and provisions 287.4 306.9

Impairment and provisions (12.2) 11.7

Total Group profit before tax 275.2 318.6

Tax expense (66.2) (78.1)

Total Group profit for the year 209.0 240.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 37

Alternative performance measures

The Board monitors and reports profits at a statutory level, governed by accounting standards and practices,

and at an ‘underlying’ level to give greater transparency of the performance of the Group’s ongoing trading

activities.

^Comprises fair value movements on the portfolio and associated derivatives, as shown in Note 5 to the Accounts.

Underlying Group Profit Before Tax 2025 (£m) 2024 (£m)

Total Group profit before tax 275.2 318.6

Add back / (less) fair value losses / (gains) in relation to the equity release

portfolio^

6.4 (9.3)

Less fair value gains on share warrants and equity share investments (6.0) (7.0)

Add back fair value losses on the loan to defined benefit pension scheme 2.2 -

Less profit on disposal of subsidiary undertakings (10.8) -

Add back charge on buy-back of Permanent Interest-Bearing Shares 27.9 -

Underlying Group profit before tax 294.9 302.3

Underlying Group PBT - Underlying profit is used to

measure the progress of the Group against its

strategic objectives and the Board uses this measure

to aid in strategic decision-making. The following

items are excluded from statutory profit to arrive at

underlying profit: gains or losses on disposal of

Group undertakings, impairment of Group

undertakings, fair value movements in relation to the

equity release portfolio, and fair value movements in

respect of share warrants, equity share investments,

the loan to defined benefit pension scheme

(following the introduction this year, as outlined in

Note 35 to the Accounts) and Group undertakings.

This reflects the Group’s current strategy and

business model, the majority of these items being

generated from the Group’s investments in other

entities not considered part of the Group’s core

strategy and thus excluded from underlying profit on

that basis.

In the year, the Society completed the successful

buy-back of £25m Permanent Interest-Bearing

Shares (PIBS). This was an exceptional occurrence,

outside of normal trading, and as such, given it does

not represent normal performance, has been

excluded from profit before tax to arrive at

underlying Group PBT.

The other items listed above are excluded from

underlying profit on the following basis:

• Fair value movements in relation to the equity

release portfolio and associated derivatives -

under IFRS 9, the equity release portfolio is held

entirely at fair value, as are the associated

derivatives, with resulting gains / losses taken to

the Income Statement and as a result, the Group

is exposed to significant income statement

volatility. Such gains / losses are therefore

excluded from underlying PBT on the grounds

that they are not reflective of the underlying

trading performance. This is also the case for the

fair value gains or losses on the loan to the

defined benefit pension scheme.

• Fair value gains or losses on equity share

investments and share warrants are recognised

through the Income Statement (except for certain

investments elected to be recognised through

other comprehensive income). As above, we

exclude any gains or losses from the disposal of

Group undertakings, and therefore on the same

basis i.e. not part of the Group’s core strategy, fair

value gains / losses on equity share investments

and share warrants are also excluded from

underlying PBT.

Underlying profit provides greater transparency of

the performance of the Group’s ongoing trading

activities and improves the comparability of

information between reporting periods.

The Group’s policy is to not adjust for amortisation

charges or acquisition costs when calculating

underlying profits. Therefore, amortisation charges

arising from the acquisition of Countrywide by

Connells in March 2021 are included within

underlying PBT - these charges will not recur in the

medium term.

Performance & Strategy Governance

Financial Statements

Other Information

The Group recognised an increase in expected credit

losses on loans and advances to customers of

£10.1m during the year (2024: £17.1m reduction).

This predominantly relates to residential mortgages

in the Homes business, driven by updates to our

underlying economic assumptions, as detailed

further on page 38.

Skipton Group Annual Report & Accounts 2025 38

Performance by segment

The Group’s total profit before tax and underlying profit before tax by key business line was as follows:

^ Information regarding segments that are not separately reportable is combined within the ‘Other’ category, together with

the impact of Group consolidation adjustments.

Society

The Society’s reported pre-tax profit includes a one-

off cost of £27.9m for the buy-back of PIBS in the

year. While the decision to repurchase our PIBS

resulted in a one-off charge to the Income

Statement, this will lead to a £3.2 million interest

saving per year, which will be reinvested into the

Society to deliver our purpose and create real value

for our members.

On an underlying basis, the Society achieved pre-tax

profits of £225.8m for the year (2024: £200.6m).

Net interest income is the income earned on assets

(principally mortgages, other loans and advances,

and liquidity), less that paid on liabilities (principally

retail savings, wholesale funding, subscribed capital

and subordinated debt); which amounted to

£442.2m (2024: £407.2m).

The Society’s net interest margin performed well in

2025 amidst a falling interest rate environment,

improving to 1.18% (2024: 1.14%). A lower cost of

funds within the retail savings market, particularly in

the first half of the year, supported this year-on-year

improvement in margin.

The Society’s net non-interest income, which is

predominantly made up of financial advice fees and

commissions receivable, was £46.2m (2024:

£43.9m).

Administrative expenses for the Society, including

depreciation and amortisation, increased slightly by

£0.4m compared to last year, rising to £262.4m

(2024: £262.0m). We have continued to invest in our

service, through improved digital pathways; and in

our brand and our people, whilst remaining focused

on controlling costs and realising efficiencies.

Despite continued investment, our ratio of costs to

mean assets, a traditional measure of efficiency,

reduced to 0.70% (2024: 0.73%) reflecting our strong

balance sheet growth (as outlined on pages 41 to

44).

A residential mortgage impairment charge of £9.5m

was recorded in the year, which has resulted from

changes to the Group’s forward-looking economic

assumptions, which reflect a greater weighting to

downturn scenarios, as discussed further in Note 1v)

to the Accounts.

This contrasts to last year, where a credit of £14.1m

was realised, with the modelling having taken into

account the reducing Base Rate, following its peak at

5.25% in 2023.

Performance & Strategy Governance

Financial Statements

Other Information

Group PBT 2025 (£m) 2024 (£m)

Society 189.3 209.9

SIL 12.1 31.0

Connells 73.1 61.3

Other^ 0.7 16.4

Total 275.2 318.6

Group Underlying PBT 2025 (£m) 2024 (£m)

Society 225.8 200.6

SIL 12.1 31.0

Connells 56.3 54.3

Other^ 0.7 16.4

Total 294.9 302.3

£225.8m

£189.3m

£12.1m

£56.3m

£73.1m

£0.7m

Society SIL Connells Other

Group

PBT

Group

Underlying

PBT

Skipton Group Annual Report & Accounts 2025 39

Homes

- Our Homes business is designed to provide

finance in order to access the housing market and

‘help more people have a home’.

Gross new mortgage advances in our Homes

business were £6,927m (2024: £5,940m), whilst net

lending was £2,460m (2024: £2,375m). Despite the

uncertain economic environment, the Homes

business again achieved strong net mortgage book

growth in the year of 8.6% (2024: 9.0%), while

maintaining our underwriting standards.

Residential mortgages in arrears by three months or

more totalled 592 cases representing only 0.31% of

mortgage accounts (2024: 541 cases, representing

0.29%). We have seen a small increase in arrears as

cost-of-living pressures continue to flow through to

customers, particularly for those coming off low

fixed rates. However, arrears remain low, and this is

testament to our strong up-front lending controls

and proactive credit management, whereby we

closely monitor and manage mortgages that have

fallen into arrears, working with borrowers to find

solutions that are appropriate for their individual

circumstances.

At the year end, the Homes business’s residential

impairment loss allowance was £20.9m (2024:

£12.8m), with a related debit to the Income

Statement of £9.5m (2024: £14.1m credit), as

detailed on page 38.

The commercial lending portfolio, closed to new

business since 2008, stands at £92.2m (2024:

£114.3m) with an average loan size of £218.6k. The

proportion of accounts in arrears by three months or

more in this portfolio was 2.68% (2024: 1.69%).

The commercial impairment loss allowance stood at

£2.6m (2024: £4.7m), with a related debit to the

Income Statement of £0.3m (2024: £2.9m credit).

The reduction in the impairment allowance, despite

the impairment charge in the year, is due principally

to the write-back of a specific provision made in the

prior year, while the level of allowance required is

reducing over time as this closed book continues to

run-off.

Our Homes business holds an equity release

mortgage book which is closed to new business. We

have seen a net fair value loss on our equity release

portfolio and associated derivatives of £6.4m (2024:

net gain of £9.3m). This net fair value loss is driven

by changes in market expectations of long-term

interest rates, inflation and house price growth.

Refer to Note 15 and Note 18 to the Accounts for further details

on loans and advances to customers and our equity release

portfolio.

Money

- Our Money business helps our members’

‘money work harder’ and combines our savings and

financial advice businesses with our online, branch

and contact centre capabilities.

Savings balances increased by £2,200m in the year,

which represents growth of 7.8% (2024: 8.9%)

compared to the UK savings market where net

savings grew by only 4.4% (Source: Bank of England

Statistics, December 2025). Funds under

management, as part of our financial advice offering,

totalled £5.3bn as at the year end (2024: £4.7bn).

Lifetime ISA (LISA) customers continue to be well

represented in our customer base and at 31

December 2025 we had 164,534 LISA customers

(2024: 167,660) with total balances of £1,126m

(2024: £1,170m), saving hard for their first home or

for later life. These customers benefited from

government bonuses in the year of £45.1m (2024:

£56.2m).

We were the first UK provider to offer a cash Lifetime

ISA upon launch in 2017 and today remain one of the

largest. The Budget announced a consultation will

take place on a new ISA for first-time buyers, and we

look forward to sharing our unique insight to help

shape its future replacement, in order to help even

more people take their first step onto the housing

ladder.

(2024: 9.0%)

Society mortgage

book growth rate

(2024: 0.29%)

Society residential

mortgages in arrears

by three months or

Performance & Strategy Governance

Financial Statements

Other Information

(2024: 8.9%)

Savings balance

growth rate

Skipton Group Annual Report & Accounts 2025 40

SIL

2025 saw SIL continue to focus on transitioning the

business, by strengthening its control and regulatory

environment, to provide an improved and robust

offering for its clients. This has had a consequential

short-term impact upon both revenue and

expenditure but is crucial for longer term growth. As

a result, underlying PBT reduced, as anticipated, to

£12.1m (2024: £31.0m).

The decrease in profits reflects a reduction in

interest income due to a combination of strategic

slowdown in growth and external market factors

reducing expected returns on mortgages, which has

impacted SIL’s net interest margin, reducing to 1.62%

(2024: 1.97%). Profit has also been heavily impacted

by related investment spend, with the ratio of costs

to mean assets increasing to 1.15% (2024: 0.81%).

Administrative expenses rose by nearly 40% to

£29.7m (2024: £21.4m) as a result of this

investment, which included increased professional

fees and higher salary expense following the growth

of back-office teams. Last years’ profit was also

bolstered by hedging gains when compared to the

current year.

SIL’s savings book decreased by 2.0% in the year to

£2,369m (2024: £2,418m) while SIL’s mortgage book

decreased by 0.9% to £2,082m (2024: £2,101m);

reflecting a combination of external market forces,

redemptions and the strategic decision to slow

growth. The quality of the mortgage book remains

good with only seven cases in arrears by three

months or more (2024: 10 cases).

2025 marks the end of the transitional period for SIL

with a ‘return to growth’ focus in 2026.

Connells

The UK housing market in 2025 experienced

contrasting dynamics between the first and second

halves of the year.

Connells saw a strong start to 2025, entering with a

higher sales pipeline than at the same time last year.

Momentum in front end sales activity, gained

through late-2024, continued, and was supported by

the Stamp Duty changes; with buyers and vendors

pressing for completion before the 1 April threshold

reductions. Connells benefited from this early-year

stimulus, with March being an outstanding month for

completions.

Market momentum slowed in the second half of the

year however, particularly amidst speculation around

changes to property taxes in the run up to the

November Budget. Despite this, Connells had a

strong year, with increased activity in mortgage

advice and the rental sector.

Underlying pre-tax profit in 2025, excluding £10.8m

profit on disposal of subsidiary undertakings (see

Note 20c) for details), was up 4%.

The number of properties that the business

exchanged contracts on during the year was 9%

higher than in 2024, with the surveying business

benefitting from this increased activity, with the total

number of survey and valuation cases completed in

2025 increasing by 7%.

Connells’ financial services proposition also

continued to perform well. The number of mortgages

arranged increased by 9%, with the value of lending

generated for UK mortgage providers in 2025

totalling £33.3bn (2024: £31.7bn).

The lettings business has continued to grow, with

properties under management increasing to 128,396

at the year end (2024: 126,590). Income from

lettings increased by 4% compared to the prior year

due to the increase in properties under management

and increases in average fees.

Administrative expenses totalled £1,102.5m (2024:

£1,008.9m), an increase of £93.6m (9.3%) on last

year. This was driven in the main by acquisitions

(noted below) and higher salaries, taking into

account wage inflation and the increase to

employer’s National Insurance contributions; with

additional headcount in key strategic areas to

drive growth.

During the year, Connells has continued its

commitment to strategic expansion and has

enhanced its national reach and deepened its client

service capabilities with the completion of several

acquisitions over the year. Further details of which

can be found in Note 20b) to the Accounts.

As the business continues to integrate these

acquisitions, Connells is expected improve

efficiencies and realise future benefits of scale.

Other

SBF generated increased pre-tax profits of £11.6m

(2024: £10.8m). Total drawn funds stood at

£200.6m as at the year end, surpassing last years’

record level (2024: £190.1m), despite client numbers

only increasing modestly to 887 (2024: 871). The

growth in total lending is as a result of SBF’s key

strategic priority to onboard larger client

(2024: £54.3m)

Connells

underlying PBT

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 41

Financial position

Consolidated total assets have increased by 4.4% to £40.7bn at 31 December 2025 predominantly due to our

increased trading. Both residential mortgages and retail savings have seen strong growth in a competitive

market; helping more people have a home and making their money work harder. Our mortgage balances

remain mostly funded by retail deposits, our primary source of funding - in line with our mutual ethos. We also

make use of longer-term funding from the wholesale markets.

In the second half of the year, we made a significant investment to simplify our balance sheet by completing a

successful buy-back of £25m Permanent Interest-Bearing Shares (PIBS). The up-front cost will be offset by the

year-on-year interest saving, in perpetuity.

The Group maintains sufficient levels of high-quality liquid assets in order to support growth plans and

recognise market uncertainty. Stress testing scenarios are regularly run to help ensure we remain within our

liquidity risk appetite and meet all regulatory requirements. Capital resources are in excess of regulatory

requirements, with substantial buffers across risk-based and leverage frameworks.

Liquidity

The Group continues to hold strong levels of liquid

assets to ensure it can meet its liabilities as they fall

due and to help mitigate economic uncertainties.

The Liquidity Coverage Ratio (LCR), a measure

designed to ensure that financial institutions have

sufficient high-quality assets available to meet their

liquidity needs for a 30-day liquidity stress scenario,

was 178% (2024: 193%). The reduction in liquidity

follows repayment of all outstanding ‘Term Funding

Scheme with additional incentives for SMEs’

(TFSME) in the year, as noted on page 43.

The Group’s liquidity levels are closely managed by

senior management and have remained above

internal and regulatory limits throughout the year.

Liquid assets at 31 December 2025 were £6.0bn

(2024: £6.7bn). When measured as a percentage of

shares, deposits and borrowings, the liquidity ratio

remained strong at 16.2% (2024: 19.1%).

Performance & Strategy Governance

Financial Statements

Other Information

transactions and to increase product penetration

across core client sectors, whilst maintaining credit

risk appetite. This, along with new product

deployment, is expected to translate into rising

profits in future years. The quality of SBF’s lending

continues to be good, with impairment as a

percentage of drawn funds remaining low at 0.71%

(2024: 0.78%).

Jade reported a profit of £0.4m for the year (2024:

£1.4m). The acquisition of Contec Group

International in November (as detailed in Note 20b)

to the Accounts) is expected to drive new recurring

revenue for the business going forward.

Summary Group Statement of Financial Position 2025 (£m) 2024 (£m)

Liquid assets 5,982.9 6,694.8

Loan and advances to customers held at amortised cost 33,378.9 30,601.1

Loans and advances to customers held at FVTPL 0.8 0.9

Equity release portfolio 263.1 277.2

Derivatives 350.8 752.1

Fixed and other assets 767.7 689.2

Total assets 40,744.2 39,015.3

Shares 30,526.3 28,268.5

Borrowings 6,408.7 6,786.0

Derivatives 186.2 225.1

Other liabilities 387.2 336.5

Subordinated liabilities and subscribed capital 371.2 731.8

Reserves 2,861.0 2,667.6

Non-controlling interests 3.6 (0.2)

Total liabilities and equity 40,744.2 39,015.3

Skipton Group Annual Report & Accounts 2025 42

At 31 December 2025, the Society held £5.0bn (2024:

£5.8bn) of High-Quality Liquid Assets (HQLA) as

analysed below:

The table above differs to the total amount of liquid assets

shown within the Group’s Statement of Financial Position

(2025: £6.0bn; 2024: £6.7bn) due to certain items that are

excluded from these tables, such as non-HQLA, liquid

assets used as collateral and those used in repurchase (or

‘repo’) transactions.

The Group’s treasury investments are held to provide

liquidity and over 99% (2024: over 99%) of the

Group’s treasury investments, excluding exposures

to a central clearing house used to clear derivatives,

are rated A3 or better. The Group’s policy is that

investments in treasury assets are typically A3 or

better (with the exception of some unrated building

societies where separate credit analysis is

undertaken).

The Net Stable Funding Ratio (NSFR) is a longer-term

stable funding metric, which measures the stability

of our funding sources relative to the assets (e.g.

mortgage balances) we are required to fund. The

Group’s NSFR (2025: 137.7%; 2024: 140.3%) is well

in excess of the regulatory requirement of 100%,

confirming that the Group holds sufficient stable

funding to meet this requirement.

The Group regularly conducts an Internal Liquidity

Adequacy Assessment Process (ILAAP) in

accordance with the Prudential Regulation

Authority’s (PRA) liquidity guidelines and the Board

remains satisfied that the Group has sufficient liquid

assets at its disposal in order to meet its obligations

as they fall due.

Loans and advances to customers

The Group continues to grow its mortgage assets in

a controlled manner, lending within clearly defined

risk appetites through both the Homes business and

SIL. The Group achieved net mortgage growth of

7.9% (2024: 8.2%) with mortgage balances

increasing in the year from £30.9bn at the end of

2024 to £33.3bn. The Group has continued to lend to

a broad range of borrowers, within our credit risk

appetite, throughout the year. New lending, delivered

through both mortgage intermediaries and our own

distribution channels, amounted to £5.9bn (2024:

£6.1bn). Net mortgage lending totalled £2.5bn

(excluding impairment and fair value adjustments for

hedged risk) (2024: £2.3bn).

The average residential loan-to-value (LTV) ratio

(calculated on a valuation-weighted basis) on new

lending has increased slightly to 68.4% (2024:

65.3%). We consider our new lending to remain

prudent and the mortgage book to be well diversified

by geographical location. As at 31 December 2025,

the average valuation-weighted LTV of the total

residential mortgage book (excluding equity release)

was 48.8% (2024: 46.1%).

Our well-managed spread of risk ensures that the

quality of the Group’s lending remains high, as such

we are well placed to deal with uncertainty ahead.

This is evidenced by the proportion of residential

mortgage accounts in arrears by three months or

more which remained low at 0.30% (2024: 0.29%)

excluding non-UK lending; this compares favourably

with the industry average of 0.78% (2024: 0.91%) of

UK mortgages in arrears by more than three months

(Source: UK Finance).

The Group’s commercial mortgage portfolio reduced

in the year by 19.3% to £92.2m. The average LTV of

this portfolio reduced from 42.3% to 38.9% and the

proportion of accounts in arrears by three months or

more in this portfolio was 2.68% (2024: 1.69%).

At 31 December 2025, the fair value of the Group’s

equity release portfolio was £263.1m (2024:

£277.2m). The decrease in fair value of equity

release mortgages is primarily due to movements in

external market rates which form the basis of the

rate at which the portfolio’s cash flows are

discounted to (see Note 18 to the Accounts for

further details).

We aim to support our customers who find

themselves in financial difficulty and where

appropriate we will apply a policy of forbearance,

based on the customer’s individual circumstances

and needs. Ensuring a fair outcome for our

customers is central to our strategy of forbearance,

further details of which can be found in Note 45 to

the Accounts.

Performance & Strategy Governance

Financial Statements

Other Information

Liquidity - HQLA 2025 (£m) 2024 (£m)

Balances with the

Bank of England

1,358.4 1,928.6

Gilts 492.5 885.5

Treasury bills 233.2 321.3

Fixed rate bonds 1,531.0 1,267.6

Residential mortgage

backed securities

619.0 619.9

Covered bonds 813.5 770.1

Total 5,047.6 5,793.0

Skipton Group Annual Report & Accounts 2025 43

Retail funding

As a mutual building society we remain committed

to providing savers with competitive returns along

with offering excellent customer service, which is

reflected in the 7.8% increase in retail savings

balances during the year, as detailed on page 39.

In addition to our UK retail funding, the Group also

accepts deposits through SIL (our Channel Islands

based business). SIL’s funding base totalled £2.4bn

(2024: £2.4bn); these balances are included in

‘Amounts owed to other customers’ within the Group

Statement of Financial Position.

Wholesale funding

At 31 December 2025 the Society’s wholesale

funding ratio was 12.5% (2024: 14.4%), with £4.0bn

(2024: £4.4bn) of our funding coming from the

wholesale markets, as analysed below:

In May, the Society issued a £500m 5-year covered

bond. The cash from this transaction, together with

general growth in retail savings balances, was used

to repay the outstanding £1.0bn of the Bank of

England’s ‘Term Funding Scheme with additional

incentives for SMEs’ (TFSME). The Society no longer

has any TFSME payable (31 December 2024:

£1.0bn).

The Society issued a second £500m 5-year covered

bond transaction in September.

The credit ratings of the Society are assigned by two

major credit rating agencies, Fitch and Moody’s. In

September 2025 Fitch affirmed the Society’s Long-

Term Issuer Default Rating (IDR) at ‘A-‘ with a Stable

Outlook, Short-term IDR at ‘F1’ and Viability Rating

(VR) at ‘a-‘. In June 2025 Fitch also affirmed the

Society’s mortgage covered bonds at ‘AAA’ with a

Stable Outlook. In June 2025 Moody’s affirmed the

Society’s Baseline Credit Assessment (BCA) at ‘A3’,

it’s ‘A2’ long-term deposit and senior debt ratings

with a Stable Outlook, and Short-term at ‘P-1’.

Moody’s also assigns ‘Aaa’ to the Society’s

Mortgage Covered Bonds. The ratings reflect the

continued financial strength of the Society, which

compares favourably to other large building

societies.

The Society’s current credit ratings, which have not

changed since 2021, are summarised below:

The Class A Notes of our rated securitisation

transaction (Darrowby No. 6 plc) is ‘Aaa’ rated by

both agencies.

Funding

Through our Money business, we continue to

manage the mix of retail and wholesale funding in

the best interests of members. Optimising the mix of

retail and wholesale funding is essential to achieving

both our retail savings and lending growth

objectives.

We maintain a diverse funding portfolio to prevent

over-reliance on one source and, taking into

consideration the term profile of our lending, closely

manage the term of our funding in order to manage

the risks of duration mis-match.

We remain primarily funded by retail savings.

Notes

1. Excludes shares held by others and fair value adjustments

totalling £358.4m (2024: £325.0m) which are classified as

wholesale funding.

2. Wholesale funding balances exclude £2,368.5m (2024:

£2,417.7m) of offshore funding in our Channel Islands based

business, SIL.

Wholesale Funding 2025 (£m) 2024 (£m)

Repo and other

secured agreements

165.9 1,019.2

Deposits 512.4 913.8

Certificates of

deposit

- 5.1

Covered bonds 2,941.3 1,934.9

Securitisation 398.3 491.6

Fair value

adjustments

22.3 3.7

Total 4,040.2 4,368.3

Credit Ratings Fitch Moody’s

Covered bonds AAA Aaa

Senior Preferred A A2

Baseline Credit

Assessment (BCA)

N/A A3

Issuer Default Rating

(IDR)

A- N/A

Short Term F1 P-1

Senior Non-Preferred A- Baa1

Outlook Stable Stable

Last change of rating August

2021

July 2021

Funding 2025 (£m) 2024 (£m)

Shares held by

individuals (note 1)

30,167.9 27,943.5

Wholesale funding

(note 2)

4,040.2 4,368.3

Total 34,208.1 32,311.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 44

In December, as a result of our strong capital

position, we took the opportunity to simplify our

balance sheet, by way of a liability management

exercise to buy back our £25m, 12.875% legacy Tier

2 eligible PIBS at a fair price. This reduced capital (as

detailed below) but will deliver interest savings, as

part of a more efficient capital model.

Capital (unaudited)

Common Equity Tier 1 (CET1) capital comprises

principally the general reserve and subscribed capital

provided through Permanent Interest-Bearing Shares

(PIBS), with the addition of a small number of

regulatory adjustments.

We monitor regulatory capital against the

requirements set by the PRA for both the Society and

the consolidated Prudential Group (PG). The PG

consolidation simply excludes a small number of

subsidiaries deemed as immaterial or not core to

financial services.

PG capital requirements are higher than for the

Society, therefore, the analysis throughout this

Capital section has been disclosed at a PG level only.

Total regulatory capital has increased by £174.9m

from 31 December 2024 to £2,590.0m as at 31

December 2025 (2024: £2,415.1m). This is mainly

due to the retained profits accumulated during 2025.

Risk Weighted Assets (RWAs)

RWAs have increased by £864.0m in the year to

£9,141.4m (2024: £8,277.4m). This increase is

principally driven by strong residential mortgage

book growth in the year.

The Society continues to work with the PRA to

update its IRB rating system to meet the latest

regulatory requirements. Until the new IRB rating

system is approved a temporary model adjustment

(TMA) is applied to the Society’s regulator-approved

IRB model output at portfolio level. The TMA uplifts

the expected loss (EL) and RWAs to the level

expected in the revised IRB models.

The TMA remains subject to change and may cause

variations in the capital metrics. There have not

been, and we do not expect there to be, any material

changes to the risk profile or strategy of the Society

as a result of changes to the TMA.

The CET1 ratio has decreased by 0.5% as growth in

RWAs outpaced the increase in CET1 capital.

The leverage ratio increased marginally by 0.1%.

Capital composition

The following table shows the composition of the PG

regulatory capital as at 31 December 2025. IFRS 9

Financial Instruments

transitional arrangements are

applied throughout 2024 and ceased to apply from 1

January 2025.

Capital management

The Group is regulated by the PRA and is required to

manage its capital in accordance with the rules and

guidance issued by the PRA under CRD V, the UK

CRR and the PRA rulebook.

(2024: 28.7%)

CET1 ratio

Regulatory Capital 2025 (£m) 2024 (£m)

Capital resources

CET1 capital 2,575.0 2,375.1

Total Tier 1 Capital 2,575.0 2,375.1

Total Tier 2 capital 15.0 40.0

Total regulatory

capital

2,590.0 2,415.1

RWAs 9,141.4 8,277.4

Capital and leverage ratios

CET1 capital 28.2% 28.7%

Tier 1 ratio 28.2% 28.7%

Total capital ratio 28.3% 29.2%

Leverage ratio 6.7% 6.6%

(2024: 6.6%)

Leverage

ratio

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 45

The Group completes an Internal Capital Adequacy

Assessment Process (ICAAP) at least annually to

assess current and projected capital requirements to

support the current risks in the business and future

risks arising from the Corporate Plan. The ICAAP

considers all of the Group’s material risks and

includes Board-approved stress scenarios which are

intended, as a minimum, to meet regulatory

requirements.

Pillar 1

The Group holds capital to meet Pillar 1

requirements for credit risk, operational risk, and

market risk. The IRB approach is used to calculate

the capital for the majority of residential mortgages

in the Group, and for equity and non-credit obligation

exposures.

The standardised approach is applied to all other

exposures relating to operational risk and market

risk, except for securitisations. The External Ratings-

Based Approach is applied for securitisation

investments.

Pillar 2A

The PRA requires the Group to hold additional Pillar

2A capital for risks not covered under Pillar 1. At 31

December 2025 this was £236.1m (2024: £170.2m).

The combination of Pillar 1 and Pillar 2A

requirements form the Group’s Total Capital

Requirement (TCR).

Minimum Requirement for Own Funds and Eligible

Liabilities (MREL)

MREL is a regulatory requirement set by the Bank of

England to ensure institutions can cover losses that

would need to be absorbed in the event of a potential

failure of the business. The amount of MREL that

institutions need to have is linked to the resolution

strategy chosen for each firm. The Bank of England’s

preferred resolution strategy for the Society is a

single point of entry bail-in under Part 1 of the

Banking Act 2009.

The Group maintained strong capital headroom over

its MREL requirement, enabling £350m of senior

non-preferred debt to settle at maturity during

October 2025 without being replaced.

Further information on the Society's financial strength can be

found in the Group’s Pillar 3 Disclosures, which are published on

the Society’s website skipton.co.uk.

Taxation

The Group tax charge for the year is £66.2m (2024:

£78.1m) with an effective tax rate of 24.2% (2024:

24.6%). For the Society, the tax charge for the year is

£49.5m (2024: £56.7m) with an effective tax rate of

18.2% (2024: 23.1%). In addition to UK corporation

tax payable on its profits, the Society’s taxable

profits above £100m are subject to a 3% banking

surcharge which increases the tax charge for 2025

by £2.3m (2024: £3.3m) for the Group and £2.6m

(2024: £3.3m) for the Society. The Group’s effective

tax rate is offset by the impact of lower tax rates in

other jurisdictions, whilst the Society’s effective tax

rate is also impacted by non-taxable dividend income

of £82.8m (2024: £36.0m).

A reconciliation of the effective tax rate to the

statutory tax rate in the UK is provided in Note 12 to

the Accounts. More detailed tax disclosures are

provided in Note 34 to the Accounts and in the

Country by Country Reporting section.

Further details of the Group’s taxation strategy can

be found at www.skipton.co.uk/about-

us/governance.

Taxes borne are a direct charge impacting the

financial results of the Group - the table below shows

the total UK tax contribution borne in the year:

UK taxes collected in the year comprised the

following:

Taxes borne 2025 (£m) 2024 (£m)

Employment taxes 99.4 79.7

Corporation tax paid 54.2 64.0

Irrecoverable VAT 20.4 22.5

Taxes on property 18.4 18.9

Economic Crime Levy 1.4 0.4

Total 193.8 185.5

Performance & Strategy Governance

Financial Statements

Other Information

Taxes collected 2025 (£m) 2024 (£m)

PAYE 127.8 115.4

National Insurance 30.2 29.9

Stamp Duty Land Tax

(SDLT)

29.8 19.4

Net VAT 145.7 135.0

Total 333.5 299.7

Skipton Group Annual Report & Accounts 2025 46

Pension funds

The Group manages three funded defined benefit schemes as described in Note 36 to the Accounts. Using the

methodology set out in IAS 19

Employee Benefits

, the aggregate valuation of the three schemes at 31

December 2025 was a combined deficit of £7.4m (2024: £3.8m deficit).

We continue to take steps to manage the Group’s exposure to the schemes and all schemes are closed to new

members and to future accrual of benefit. The actuarial valuation deficits, as described in Note 36 to the

Accounts, are used to judge the level of contributions that should be made and a schedule of deficit

contributions has been agreed between the Trustees and the Group.

On 31 January 2025, as part of a strategy to de-risk the Society’s exposure to its defined benefit obligation, the

Skipton Building Society (2015) Group Pension Scheme was subject to an insurer buy-in. The majority of the

Scheme’s defined benefit obligations to members are now insured under a policy held by the Scheme,

significantly reducing exposure to investment and longevity risk; certain obligations are not insured, for

example any future impact of the application of Guaranteed Minimum Pension (GMP) equalisation

requirements to historical transfers out of pension schemes.

Ahead of the insurer buy-in transaction, in January 2025, the Group made two payments to the Scheme to

facilitate the full scheme buy-in. The first was a loan to the Scheme of £14.6m in recognition of the fact that

the Scheme held illiquid assets of the same value. The loan is repaid as the illiquid assets currently held by the

Scheme mature. The second was a payment of £10.7m to top up the Scheme’s assets to the buy-in policy’s

value of £105.0m.

During the year, the Countrywide defined benefit pension scheme was subject to a full insurer buy-out. As a

result, all major obligations and associated assets were transferred to an insurance provider. There is only a

small portion of assets and liabilities remaining in the balance which is expected to be settled in 2026. No

settlement gain/loss has been recognised in the income statement following the buyout.

The pension Trustees will continue to monitor and manage the pension schemes in a responsible manner,

working with the employer to share the aim of ultimately eliminating the actuarial funding deficit.

The Group also operates defined contribution schemes into which eligible employees are automatically

enrolled.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 47

The UK growth forecast remains subdued, with only modest economic expansion recorded through 2025.

Inflation continued to fluctuate throughout the year and is forecast to gradually ease through 2026 while

remaining above the Bank of England 2% target. Unemployment has edged up gradually over the year,

reflecting a soft labour market and cautious business sentiment amid ongoing global uncertainties and

persistent geopolitical tensions.

The Bank of England’s decision to lower interest rates in the second half of 2024, followed by further gradual

reductions in 2025, has contributed to improved credit conditions. Shifting customer behaviours and

preferences, particularly in digital engagement and financial services, continue to create both opportunities

and challenges across our diversified Group.

Despite some ongoing uncertainty with the economic and political environment in 2025, the Society’s and SIL’s

mortgage books remained resilient and are not showing any material signs of stress. We are closely

monitoring our key risk management metrics so that proactive action can be taken should this be required. We

remain vigilant for any credit deterioration in the year ahead and are ready to support any member who may be

concerned about facing financial difficulty.

The results of Connells are principally driven by the volume of UK property transactions, in particular second-

hand property sales. This market is heavily influenced by consumer confidence, driven by the general state of

the economy, level of unemployment and interest rates, together with the availability of mortgages, particularly

for first-time buyers.

Any slowdown in the housing market puts pressure on Connells’ income levels, but the business is partially

protected against the performance of its core business through its own diversification into complementary

businesses such as lettings and property asset management. Through our estate agency division, we are

carefully monitoring the housing market, and expect growth to be geographically uneven, with some regions

projected to see stronger growth than others.

Principal risks

The outlook for the Group remains cautiously positive. Persistent economic challenges remain, alongside

ongoing uncertainty regarding the long-term direction of government policy following the 2024 General

Election. Aside from these factors, the Directors do not consider that the principal risks and uncertainties

affecting the Group have changed materially since the publication of the 2024 Annual Report and Accounts

and the interim Half-Yearly Financial Report 2025. However, our principal risks continue to evolve and will be

managed throughout 2026 and beyond.

The principal risks presented on the following pages are those that are inherent to the Group’s business model

and strategy, as well as the economic environment in which the Group operates. During the year, all risks that

our business is exposed to are assessed for severity and evaluated based on their likelihood and potential

impact. Risks are managed through the Group’s internal control framework, with key mitigation strategies

highlighted below.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 48

Performance & Strategy Governance

Financial Statements

Other Information

Capital Risk

Risk definition:

The risk of not maintaining sufficient capital and MREL (minimum requirement for own funds

and eligible liabilities) to support day to day operations, withstand stressed economic conditions and meet

regulatory requirements.

Risk management and mitigation

The Capital Management Framework governs the capital adequacy and allocation processes in normal and

stressed conditions. This is supported by monthly reporting of the capital and MREL requirements to Board.

The Internal Capital Adequacy Assessment Process (ICAAP) is conducted to assess the Society’s and the

Prudential Group’s current and projected capital and MREL requirements to mitigate the current risks in the

business and any future risks arising from the Corporate Plan.

The Group currently adopts the following

approaches to calculating its Pillar 1 minimum capital requirements:

• Internal Ratings-Based Approach (IRB) for the residential mortgage exposures of the Society.

• IRB approach for exposures relating to investments in subsidiaries outside the regulatory group and non-

credit obligation assets (property, plant and equipment, fair value adjustments for hedged risk and cash).

• Standardised approach for other lending exposures.

• Standardised approach for treasury portfolios.

• Standardised approach for operational risk and market risk

Within the ICAAP we consider the impact of emerging capital regulation over the Corporate Plan horizon,

including the reforms to the Basel III regulation, and how we expect to meet those requirements

. A Recovery

Plan is maintained which provides a suite of viable options and actions to restore the Society’s financial

strength in the event of a severe capital and/or liquidity stress in compliance with associated regulations.

Climate Risk

Risk definition

: The risk of the commercial impact that climate and environmental changes present to our

business model.

Risk management and mitigation

Climate change presents a range of risks and opportunities to the Group, our members and customers. These

include both physical risks and transition risks. The

Sustainability Governance Framework supports the

management of climate

-related risks in accordance with risk appetite and regulatory expectations.

Climate

-related risks are assessed through annual climate risk stress and scenario testing. The analysis is

focused on a quantitative assessment of the impact of climate change on our residential mortgage portfolio,

while also considering potential impacts across the wider Group.

Lending controls are in place to manage physical climate risks within the mortgage book, with regular climate-

related management information

provided to the Board Risk Committee.

Conduct Risk

Risk definition

: The risk of delivering poor or inappropriate outcomes for customers.

Risk management and mitigation

Ensuring fair value and good customer outcomes across our channels, products and services, including more

tailored support for our vulnerable customers where required, remains a priority in line with the requirements

of Consumer Duty.

All product launches, product withdrawals, pricing, and contractual changes are reviewed, validated and

approved through internal governance, ensuring alignment with Corporate Plan and Consumer Duty principles.

The competency and oversight of our colleagues to ensure we provide good outcomes for our customers is

regularly assessed to maintain the confidence and trust upon which our brand is based. Our Quality

Framework ensures regular risk

based assurance is undertaken to confirm customers receive good outcomes

in their interactions with us.

Skipton Group Annual Report & Accounts 2025 49

Performance & Strategy Governance

Financial Statements

Other Information

Credit Risk

Risk definition

: The risk of financial losses or adverse impacts on the business’s performance and solvency

due to the failure of its borrowers to meet their contractual obligations.

Risk management and mitigation

The Group faces credit risks from its lending to individual customers (retail mortgages); to businesses through

debt factoring, invoice discounting and asset

based lending; and to wholesale counterparties for the purposes

of liquidity management.

Retail and commercial credit exposures are managed and monitored by a team of experienced professionals,

with oversight provided by the Retail Credit Committee, underpinned by an established credit risk appetite

framework.

The credit decisioning process applies credit scoring, affordability assessment and lending policy criteria

which is supported by manual underwriting and model risk management practices.

The Credit Management function supports effective arrears management, with early intervention central to its

approach. Borrowers in financial stress are proactively engaged, and forbearance is considered case

-by-

case,

in line with industry standards.

Economic Crime

Risk definition

: Financial losses, regulatory penalties, and reputational damage resulting from fraudulent

activities, money laundering, terrorist and proliferation financing, bribery, corruption, or other illicit behaviour

by the business, its employees, or associated third parties.

Risk management and mitigation

Economic crime risk is managed through a comprehensive framework that establishes clear principles,

responsibilities, and procedures for identifying, preventing, and responding to this principal risk. This

framework ensures compliance with legal and regulatory obligations while safeguarding members and

customers from financial crime. It also mitigates reputational and operational risks through robust

governance and oversight. Key controls include rigorous customer identity and verification processes,

alongside ongoing transaction monitoring, to detect and reduce the likelihood of fraudulent account activity.

Legal and Regulatory Risk

Risk definition

: Financial losses or adverse outcomes arising from failure to comply with applicable laws,

regulations, and industry standards, as well as risks related to contractual agreements, litigation, and

changes in legislation, and corporate governance issues.

Risk management and mitigation

The Society manages legal and regulatory risk through a robust Policy and framework that combine first

-line

business ownership with specialist support from Legal, Compliance, and Prudential Risk teams. Business

units are accountable for embedding appropriate policies, procedures, and oversight to ensure compliance

with applicable laws, regulations, and industry standards. This approach is informed by proactive horizon

scanning to identify emerging regulatory developments and adapt accordingly. To provide assurance, second-

line functions conduct risk

-based reviews to assess control effectiveness and identify any areas of non-

compliance, delivering oversight and reassurance to senior management.

Skipton Group Annual Report & Accounts 2025 50

Performance & Strategy Governance

Financial Statements

Other Information

Liquidity, Market and Funding Risk

Risk definition

: The risk of being unable to meet current and future financial obligations as they fall due, or

only able to do so at excessive cost, and the risk to earnings or capital resulting from adverse movements in

interest rates.

Risk management and mitigation

The Group manages liquidity, market, and funding risks through a robust Treasury Policy that sets principles,

limits, and governance for these exposures within the Board’s approved risk appetite. Group Treasury is

responsible for implementing this policy, supported by strong oversight from the Asset & Liability Committee

(ALCO) and its sub

-committees, with regular reporting to the Board Risk Committee and the Board.

Liquidity and funding risks are managed through a strategy that ensures sufficient and diversified liquidity to

meet regulatory requirements and support the Corporate Plan, complemented by contingency arrangements

and stress testing under the Internal Liquidity Adequacy Assessment Process (ILAAP).

Market risk, including interest rate risk, is mitigated through hedging strategies using derivatives within

defined limits, while wholesale credit risk is controlled through counterparty limits, collateral arrangements,

and oversight by the Group Wholesale Credit Committee. These measures collectively ensure resilience under

normal and stressed conditions, safeguarding the Group’s financial stability.

Model Risk

Risk definition

: Model Risk is the potential for adverse consequences from model errors or the inappropriate

use of modelled outputs to inform business decisions. These adverse consequences could lead to a

deterioration in the business’ financial strength, non

-compliance with applicable laws and/or regulations, or

damage to a firm’s reputation.

Risk management and mitigation

The Group manages model risk through a dedicated Model Risk Committee (MRC), which provides oversight

in line with a Board

-approved Model Risk Appetite, Policy and Framework. The MRC monitors model

performance, regulatory compliance, and emerging risks, reporting regularly to the Executive Risk Committee

and Board Risk Committee.

As the use of models to support strategic and business decisions continues to grow, the Group invests in

robust model risk management practices, including enhanced governance, policies, and standards to meet

evolving regulatory requirements.

Recent regulatory changes, such as updates to Internal Ratings

-Based (IRB) modelling approaches, have

driven significant investment in model development and validation. Our suite of IRB models are being further

developed to align with updated regulatory requirements, and in the interim, a temporary model adjustment

(TMA) has been applied to ensure expected loss and risk

-weighted assets remain aligned with regulatory

expectations.

These measures ensure that model risk is effectively managed and mitigated across the Group.

Skipton Group Annual Report & Accounts 2025 51

Performance & Strategy Governance

Financial Statements

Other Information

Operational Risk

Risk definition

: The risk of losses, resulting from inadequate or failed internal processes, people and

systems or from external events.

Risk management and mitigation

The key operational risks the Group face include:

• Change Demand and Delivery: Balancing day-to-day operations with transformation initiatives requires

robust governance. Our Change Management Framework ensures all changes are assessed, governed, and

implemented in a controlled, risk-aware manner through structured planning and review.

• Data Management and Protection: Customer data is safeguarded through robust governance and data

management frameworks. Our approach ensures secure processing, quality maintenance, and appropriate

retention throughout the data lifecycle.

• Information Security (Cyber Threat): We remain vigilant against the growing global cyber threat.

Cybersecurity controls are continuously strengthened with evolving industry standards, covering network,

encryption, and access management to protect our customers and colleagues. We operate an overarching

Information Security Framework, Access Control Policy and Security Incident and Event Management

Framework and continue to invest in automating cyber controls, educating colleagues on the latest

technology and information to further enhance resilience and awareness.

• Operational Resilience: We maintain a strong focus on operational resilience, ensuring the ability to

prevent, respond to, and recover from any disruptions. Regularly tested business continuity plans support

controlled, documented, and risk-aware continuity across all business areas. We also continue to

strengthen controls, governance, and knowledge by leveraging insights from the latest incidents both

within our business and across the wider financial services sector, ensuring lessons learned drive

continuous improvement.

• Payment Processes: This risk is managed through automated workflows, exception reporting, continuity

and contingency processes and strong oversight. Financial integrity and compliance is maintained through

automated reconciliation, segregation of duties, and variance checks to ensure accurate and timely

processing.

•

Physical Security and Safety: We safeguard colleagues, customers, premises, and physical assets through

policies which regulate access, ensure visitors are authorized, and monitored, and enforce procedures

such as entry controls and surveillance. Regular reviews and testing strengthen these measures, mitigating

risks including unauthorized access, theft, and data breaches.

• Technology: IT Service Management provides controls to help technology services withstand, recover

from, and adapt to any disruptions without impacting critical operations. Key practices include managing

end-of-life technologies, implementing disaster recovery and failover protocols, responding to incidents,

and monitoring capacity and performance.

• Third-Party and Supply Chain Risk: We manage this risk through strong procurement and supplier

management processes, ensuring material suppliers maintain services under stressed conditions.

Continued investment supports resilience amid a growing dependency on external providers.

Skipton Group Annual Report & Accounts 2025 52

Performance & Strategy Governance

Financial Statements

Other Information

Reputational Risk

Risk definition: Failure to manage the potential loss or damage to the Group’s reputation arising from actions

/ behaviours / external outcomes.

Risk management and mitigation

The Group’s reputation is safeguarded through effective external communications, marketing, public affairs,

and robust issue and crisis management preparedness. A dedicated Crisis Response Framework ensures

swift, consistent, and transparent action during incidents that could impact brand integrity, defining clear

roles, escalation paths, and messaging protocols to maintain stakeholder trust.

The Group also invests in its control environment and focuses on delivering member value through high

quality service, competitive products, and good customer outcomes. These measures, combined with ongoing

monitoring and purposeful engagement, help mitigate reputational risk and protect the Group’s long

-term

resilience.

Regulatory, Financial Reporting and Tax Risk

Risk definition: Financial losses, penalties, or reputational damage due to failures in accurately preparing and

submitting financial reports, regulatory reports, complying with tax laws and regulations, or implementing

effective tax planning strategies.

Risk management and mitigation

The Group manages Regulatory, Financial Reporting, and Tax Risks through a comprehensive framework

overseen by the Group CFO. This includes robust policies, procedures, and internal controls designed to

ensure compliance with applicable laws, accounting standards, and regulatory requirements. Governance is

supported by clearly defined roles and responsibilities, skilled personnel, and strong oversight through the

three lines of defence model, with regular reporting to senior committees and the Board.

Financial reporting controls include formal attestations, reconciliations to approved source data, and system

enforced transaction validations to ensure accuracy and completeness. The Group maintains proactive

engagement with regulators and auditors, supported by horizon scanning and specialist advice where

required, ensuring transparency and resilience in managing these risks.

People Risk

Risk definition

: Financial losses or operational disruptions arising from misconduct, fraud, inadequate

training, or ineffective management and oversight of the businesses’ employees and workforce.

Risk management and mitigation

The Group Executive Committee and subsidiary leadership teams are accountable for identifying, managing,

and escalating any workforce

-related risks — such as talent, conduct, culture, wellbeing, and capability.

Oversight is maintained through People Partners, formal governance forums including the Executive People

Committee, and Board reporting.

Key indicators such as colleague engagement, grievances, legal claims, turnover, recruitment, and mandatory

learning are monitored alongside regulatory developments. A comprehensive suite of People Policies

underpins this approach, covering areas such as pre

employment screening, whistleblowing, health and safety,

and reward, ensuring compliance and alignment with Group values. Where issues arise, the Group acts

promptly to investigate, remediate, and apply lessons learned to strengthen controls.

Skipton Group Annual Report & Accounts 2025 53

Performance & Strategy Governance

Financial Statements

Other Information

Emerging risks and uncertainties

In addition to the principal risks, the Group actively considers emerging risks that could impact long-term

viability and the delivery of strategic objectives. These risks are regularly monitored to ensure timely oversight

and appropriate mitigation. The most significant emerging risks are described below, together with mitigating

actions we are taking to manage the risk:

Risk description Mitigation

Economic environment and geopolitical

A significant escalation in

ongoing or new conflicts, a

significant change in

government policy or

sudden economic impacts

to the housing market,

could detrimentally impact

growth plans.

Macroeconomic and geopolitical risks continue to be closely monitored

across all Group businesses, as the near

-term outlook remains uncertain.

Risks associated with the housing market and future trajectory for UK inflation

and interest rates are closely managed as part of our strategic planning, to

ensure any potential consequences can be considered and acted on in a timely

manner. The Group regularly conducts stress tests based on economic

conditions to ensure we can withstand severe yet plausible scenarios.

Continued monitoring of both direct and potential secondary impact risks

associated with ongoing or new conflicts remains a key consideration.

The impact of changes to existing or new government policies are closely

monitored.

Technology

and innovation

Potential for losses or

operational disruptions

that can arise from the use,

ownership, operation,

influence, and adoption of

technology e.g.

cybersecurity, Artificial

Intelligence (AI), Cloud,

third party risk

management.

The Group continues to strengthen our governance, processes and controls,

including robust cybersecurity measures, regular system maintenance, and

disaster recovery planning.

We continue to monitor the development of AI technologies closely and

consider the associated risks across multiple areas. Informed decision making

enables us to strike a balance between the opportunities of utilising

technology such as Cloud, and managing any associated risks, to ensure our

technology and processes are secure and resilient by design.

Strategic / Business Risk

Risk definition:

Failing to formulate and deliver the strategy and/or a lack of response to changes in the

external environment affecting the sustainability of the business.

Risk management and mitigation

The Corporate Plan sets the strategic direction aligned with the Group’s values and risk appetite, ensuring

coordinated delivery and strong oversight. Risk appetite acts as a key governance control, guiding decision

making and setting boundaries for risk

-taking to maintain alignment with regulatory expectations.

Business risks, including revenue volatility, market changes, and evolving customer behaviours, are assessed

through regular strategic analysis, and stress testing. In line with regulatory requirements, the Group maintains

recovery plans detailing actions to sustain operations under severe stress scenarios. These measures

collectively support resilience and enable the Group to adapt to changing conditions while protecting long

term sustainability.

Skipton Group Annual Report & Accounts 2025 54

Performance & Strategy Governance

Financial Statements

Other Information

Risk description Mitigation

Regulatory

environment

Potential for losses or

adverse outcomes arising

from failure to comply with

applicable laws, regulations,

and industry standards.

Well established processes are in place to support compliance with existing

and new regulations across the Group.

We engage proactively with regulators and industry bodies to stay ahead of

regulatory changes and emerging requirements. By maintaining a forward

looking approach, the Group aims to manage regulatory risks effectively,

safeguard our members’ interests and support sustainable growth in a

dynamic landscape.

Operational

resilience

A major operational risk

event such as a cyber

attack or national

infrastructure failure could

disrupt our ability to

provide key services to

members and customers.

The Group carefully plans for different possible situations to ensure we are

ready to handle and recover from major risk events. We also invest in our IT

systems and operations to improve overall resilience and our ability to

respond quickly to new and changing threats.

We have robust procurement and supplier management policies to ensure that

outsourced service providers can maintain their services and service

standards, even in a stressed environment.

Environmental,

Social and Governance (ESG) and Climate risk

The risk associated with

increased supervisory

expectations and

regulatory requirements for

ESG and disclosure

requirements.

The Group is committed to embedding the management of ESG and climate

risk across its businesses. Our 2025 Group Sustainability Report details our

approach to managing these risks.

The Group will continue to review available data sources and enhance our

methodology and processes to improve the robustness of our ESG

governance and reporting, aligned with emerging developments and regulatory

requirements in 2026 and beyond.

Changing

customer behaviours

The risk of an adverse

impact on profitability if

customers are more

actively seeking a better

rate through ease of

switching and increased

competition.

Enabling current and future members to interact with us through a channel

that suits their needs and delivers good outcomes remains a key focus.

The Group is responding to these risks by investing in digital infrastructure,

enhancing our customer engagement strategies, and developing our product

offerings to meet evolving customer needs and behaviours.

Supporting more of our members to interact digitally and removing more

paper from our journeys supports our ambitions to become paperless.

Group

reputational risk

The risk that a significant

event within a Skipton

Group business

detrimentally impacts the

Group or an individual

Group business, leading to

operational, financial and

reputational impacts.

The Skipton Group brand has continued to develop and become more

prominent throughout 2025. We continue to look for product opportunities for

members, customers and colleagues by harnessing the power of the Group.

We have strengthened our Group operating model and risk management

framework; this will continue through 2026 to ensure the right resources and

capabilities are in place to minimise any associated risks.

Skipton Group Annual Report & Accounts 2025 55

Non-financial Information Statement

The Society, although not required to follow the Companies Act 2006, has sought to voluntarily comply with

elements of s414CB of the Act by including certain non-financial information within our Annual Report &

Accounts to provide our stakeholders with a fuller picture of our performance.

Information regarding the following matters can be found on the following pages:

Non-Financial information Further Detail

Business model Pages 13 and 14

Key performance indicators Pages 16 to 24, and page 35

Key risks Pages 47 to 54

Climate matters Pages 27 to 34

Environmental matters Pages 27 to 34

Colleagues Pages 65

Societal matters Pages 27 to 34

Respect for human rights Pages 25 to 26, page 28 and page 65

Anti-corruption and anti-bribery Page 28

This Strategic Report was approved by the Board of Directors and signed on behalf of the Board by:

Paul Chambers

Group Chief Financial Officer

17 February 2026

P Chambers

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

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Other Information

58Skipton Group Annual Report & Accounts 2025

“My role is to lead the board’s focus on the

development and delivery of the corporate plan. I

also remain focused on making membership

matter. As members’ behaviour in dealing with

their financial affairs continues to evolve, I’m

working with the team to ensure we serve the

needs of our members today and in the future. This

includes championing change to deliver increased

support for our members – which can be seen in

the initiatives we’ve launched already and those we

plan to introduce. I’m proud to lead a board that’s

tireless in its efforts to support our members and

colleagues and have a positive impact.”

Gwyn brings wide-ranging Executive experience in

retail, thanks to her previous roles at Asda and

Sainsbury’s. She also has significant financial

services experience, having previously held Non-

Executive Director positions with Principality

Building Society, Sainsbury's Bank plc and the

Financial Ombudsman Service. She is currently a

Non-Executive Director at Metro AG.

Appointed to the Board: 2022

• Chair of the Board

• Chair of the Board Nominations Committee

• Chair of the Non-Executive Remuneration

Committee

“I am fully focused on creating a strong franchise

by careful stewardship of the Group. This will

ensure that it matters more to our members and

customers. The Skipton Group is an incredible set

of businesses. It’s well placed to address

challenges such as access to your first home,

financial education and quality impartial advice, as

well as improving access to the housing market

and energy efficiency in UK homes. We’ve made a

start, but there’s so much more we need to do to

support people in these crucial areas. My job is to

make our organisation even more relevant for both

existing and new members as they consider their

long-term financial needs and aspirations.”

Stuart has over 20 years of business leadership

experience across financial services. He brings a

unique blend of technical and customer-facing

skills and experience which will support delivering

value to our members and the modernisation of

the Group. Stuart is driven by the purpose of

serving members' interests now and preparing the

business so we can serve those interests in future.

He has previously held senior Executive roles at

NatWest and HSBC and was CEO of Wealth and

Personal Banking at HSBC UK.

Appointed to the Board: 2022

• Group Chief Executive

• Chair of the Group Executive Committee

• Member of the Non-Executive Remuneration

Committee

Stuart Haire

Executive Director

Gwyn Burr

Non-Executive Director

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59Skipton Group Annual Report & Accounts 2025

“My early focus is to learn more about the

business and meet as many colleagues as I can –

especially teams directly serving our members. I

am keen to find ways to understand issues which

our members are most concerned about, then

seek to find solutions to help. I look forward to

becoming a trusted adviser and confidant to our

Chair, as well as being available to support all

board colleagues as they undertake their

important roles delivering value for our members.”

Graham has over 45 years’ executive-level

experience in retail, wealth and commercial

banking, primarily within Lloyds Banking Group.

He was Managing Director of Lloyds’ branch

networks and held Group Director roles in HR,

mortgages and responsible business. Graham

also sat on the boards of the Institute of Financial

Services, the Professional Standards Board and

The Brain Tumour Charity (where he remains as

an emeritus). He is currently a Non-Executive

Director with Vanquis Banking Group plc and One

Family as well as Vice Chair of Break charity.

Appointed to the Board: 2025

• Deputy Chair of the Board and Senior

Independent Director

• Member of the Board Nominations Committee

• Member of the Board Audit Committee

• Member of the Board Change Committee

• Member of the Board Remuneration

Committee

Graham Lindsay

Non-Executive Director

“My priority in 2026 is to continue to balance

providing competitive rates for our members

with the need to keep the Society financially

sustainable. A lower interest rate environment,

combined with inflationary pressures on our

expenses, puts additional pressure on our

financial performance and requires us to

maximise efficiencies across our Group.

Achieving this will allow us to continue to fund

the transformation of our products and

services across our Group.”

Paul brings over 30 years’ financial services

experience, across international banking,

wealth management and management

consulting. He joined the board from Standard

Chartered Group, where he held a number of

senior leadership roles, the most recent being

Group Financial Controller. Paul has an

extensive track record of leading diverse

teams through periods of change, from market

entry to market exit. This includes launching

new products and services, reporting and

control process re-design, and core system

change.

Appointed to the Board: 2024

• Group Chief Financial Officer

• Member of the Group Executive Committee

• Member of the Non-Executive

Remuneration Committee

Paul Chambers

Executive Director

Performance & Strategy Governance

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60Skipton Group Annual Report & Accounts 2025

“I was attracted to an organisation that takes a

long-term view and focuses on delivering value to

its members through supporting them with their

mortgages to helping them plan and save for their

future. In what was a year of significant change for

the Society, my main priority was to ensure a

smooth transition for our new Group Chief Financial

Officer. This year, I’ll be focusing on how we

demonstrate that our material controls are

operating effectively to support the requirements of

the updated Corporate Governance Code and our

realisation of the value for members from the

considerable levels of investment and change

within the Society.”

Iain is a Fellow of the Institute of Chartered

Accountants in England and Wales with over 35

years of experience working in the financial sector.

He was a partner at KPMG for over 24 years,

working with banks and other major financial

services firms in both audit and advisory roles,

including three years leading KPMG's banking audit

practice. He is a Non-Executive Director of

Rathbones Group plc (a listed wealth manager),

where he is Chair of the Audit Committee, and a

Non-Executive Director of Tradition London Group,

which comprises the UK subsidiaries of Compagnie

Financiere Tradition SA (an interdealer broker),

where he is Chair of the Audit and Risk

Committees.

Appointed to board: 2022

• Chair of the Board Audit Committee

• Member of the Board Change Committee

• Member of the Board Nominations Committee

• Member of the Board Risk Committee

• Designated Speak Out (Whistleblowing) Non-

Executive Director

“As Chair of the Board Remuneration Committee, I

have continued to ensure that our remuneration

policies and practices are grounded in fairness,

closely aligned with our strategy, and strongly

driven by pay for performance.”

Steven has over 35 years’ experience in retail, fast-

moving consumer goods (FMCG) and financial

services, in the UK and abroad. Over the past 20

years he has held senior Executive roles in HR,

retail operations and change management, always

with a strong focus on the colleague and customer

experience. His last role was with Sainsbury’s

Bank, where he also sat on the Sainsbury’s Group

HR Executive. Steven is a Non-Executive Director of

Peter Vardy, Scottish Ballet and Philip Kingsley. He

brings a wealth of experience in strategy, change

leadership and building strong customer

propositions.

Appointed to board: 2023

• Chair of the Board Remuneration Committee

• Member of the Board Nominations Committee

• Designated Colleague Non-Executive Director

Non-Executive Director

Steven Davis

Non-Executive Director

Iain Cummings

Non-Executive Director

Performance & Strategy Governance

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Other Information

61Skipton Group Annual Report & Accounts 2025

“Skipton’s mission of helping people into homes,

saving for the future, and enjoying long-term

financial security, resonates deeply with my own

values. I firmly believe that financial services have

the potential to create meaningful and positive

changes in people’s lives. As a mutual organisation

owned by its members, Skipton’s focus on giving

back to the community and prioritising its members’

needs is something I am passionate about. We can

make a real difference in people’s lives through

integrity, responsibility, and a commitment to their

long-term well-being.”

Hasintha brings more than 20 years of experience

in financial services, working at Barclays Bank and

HSBC Bank plc in Europe, India and the UK. In that

time, she has led large-scale initiatives aimed at

driving growth, including business, risk, digital, and

culture transformation programs. Hasintha is an

alumna of Harvard Business School and is a

member of the Chartered Institute of Management

Accountants (CIMA) - UK. She is also a Non-

Executive Director of the Countess of Chester

Hospital Trust and coach and mentor, dedicated to

empowering future leaders.

Appointed to board: 2024

• Member of the Board Nominations Committee

• Member of the Board Risk Committee

Hasintha Gunawickrema

Non-Executive Director

“My priority has always been on making sure the

interests of our members are safeguarded.

Whatever happens in the world, it’s important that

we service their needs effectively. I’m a big

advocate of Skipton’s core principle in putting

members first. And it’s been great to see our

member-driven values and purpose grow even

further over the years. As well as the Society, I also

serve on the boards of other financial institutions

in Europe. This keeps me informed on current

issues, so I can contribute to the Society by

weighing up different approaches to common

challenges.”

Denis has worked in senior risk roles with Citibank,

Deutsche Bank and GE Capital. He brings a wide

knowledge of risk management, regulation and

financial services enabling him to Chair the Board

Risk Committee and provide support, advice and

challenge to the Executive team on risk

management issues. Denis is a Non-Executive

Director of Germany's Aareal Bank where he sits on

the Risk Committee and is Chair of the Audit

Committee. He is also a Non-Executive Director for

Moneta Bank in the Czech Republic where he sits

on both the Risk and Audit Committees and Non-

Executive Director and Chair of the Risk and Audit

Committee for Auxmoney Holding in Ireland.

Appointed to board: 2017

• Chair of the Board Risk Committee

• Member of the Board Audit Committee

• Member of the Board Nominations Committee

Denis Hall

Non-Executive Director

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62Skipton Group Annual Report & Accounts 2025

“My focus is on fairness and always considering

situations from a member viewpoint. I want to

make sure the change initiatives make the lives of

our members and customers better and easier.

Having being born and always lived in Yorkshire, I’m

focused on value for money! Making sure we have

a positive impact on our members is what drives

me personally. I gain motivation from our purpose

and from our colleagues' desire to serve all

members’ best interests.”

Heather brings her strategy, technology and

operational change background, which is vital as

the Society focuses on improving our customer

service across all channels and on our use of data

to support better decision making. Her experience

is crucial to chairing the Board Change Committee,

ensuring that the Group gains maximum value for

our members from our investment in change. She

has 25 years’ experience in senior Executive roles

at Lloyds plc, Capital One, Boots the Chemist, Asda

and Burton Group plc. She is a Non-Executive

Director for Ikano Bank Europe, Rothesay and The

Veterinary Defence Society, as well as a trustee

Director of Yorkshire Cancer Research.

Appointed to board: 2018

• Chair of the Board Change Committee

• Member of the Board Nominations Committee

• Member of the Board Remuneration Committee

• Member of the Board Risk Committee

Heather Jackson

Non-Executive Director

Board Changes throughout 2025

During 2025 we continued to strengthen our Board

with changes made to its composition, as detailed in

the Chair’s Statement.

Andrew Bottomley, Mark Lund and Philip Moore

stepped down from Skipton Group Board in 2025,

following the AGM on 28 April.

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 64

Business objectives

The business objectives of the Group are set out in

‘Our Group Business Model’ and ‘Focusing on

Ensuring Long-term Success’ sections of the

Strategic Report.

Business review and future developments

The Chair’s Statement, the Group Chief Executive’s

Report and the Strategic Report set out the

performance of the business and its future

objectives.

Profits and capital

Group profit before tax (PBT) was £275.2m (2024:

£318.6m). Total profit after tax (attributable to the

Group) transferred to the general reserve was

£208.6m (2024: £240.5m).

Total Group reserves at 31 December 2025

(excluding non-controlling interests) were £2,861.0m

(2024: £2,667.6m) including the fair value reserve of

£(6.3)m (2024: £(10.6)m), the cash flow hedging

reserve of £9.8m (2024: £16.6m), the cost of

hedging reserve of £(0.4)m (2024: £(1.4)m), and the

translation reserve of £2.8m (2024: £3.2m).

Gross capital at 31 December 2025 was £3,235.8m

(2024: £3,399.2m) including £356.0m (2024:

£690.2m) of subordinated liabilities and £15.2m

(2024: £41.6m) of subscribed capital. The ratio of

gross capital as a percentage of shares, deposits

and borrowings at 31 December 2025 was 8.76%

(2024: 9.70%) and the free capital ratio was 7.24%

(2024: 8.31%). The Annual Business Statement gives

an explanation of these ratios.

Mortgage arrears

Group mortgage balances at 31 December 2025

included 87 cases (2024: 80) either in possession or

where payments were 12 months or more in arrears.

The capital balances of these loans were £16.9m

(2024: £14.1m). The total amount of arrears on

these loans was £1.9m (2024: £1.3m).

Charitable and political donations

In the year, the Group made charitable donations of

£3.1m in relation to our commitment to donating 1%

of pre-tax (2024) Group profits. Our performance this

year means we will donate £2.8m (being 1% of pre-

tax Group profits for 2025), which will be paid in

2026.

No contributions were made for political purposes

(2024: £nil).

Creditor payment policy

The Group’s policy concerning the payment of

suppliers is to negotiate and agree terms and

conditions with all suppliers and upon complete

provision of goods and services, unless there is an

express provision for stage payments, undertake to

pay suppliers within the agreed payment period. The

number of trade payable days as at 31 December

2025 for the Group was 13 days (2024: 11 days).

Performance & Strategy Governance

Financial Statements

Other Information

Dear Member,

The Directors have pleasure in presenting the

Group's Annual Report & Accounts for the year

ended 31 December 2025.

The financial information included in this

Directors’ Report is taken from the statutory

Accounts on pages 131 to 286 prepared in

accordance with UK-adopted International

Accounting Standards in accordance with the

requirements of the Building Societies Act 1986

and with those parts of the Building Societies

(Accounts and Related Provisions) Regulations

1998 that are applicable. Further unaudited

information which allows comparison between

2025 and 2024 is set out in the Strategic Report.

Gwyn Burr,

Chair, Skipton Group

Skipton Group Annual Report & Accounts 2025 65

Principal risks and uncertainties

The principal risks and uncertainties are set out in

the Risk Review and in Notes 43 to 45 to the

Accounts.

Financial risk management objectives and policies

Details of the key risks to which the Group is

exposed in relation to its financial instruments, and

how these risks are managed, are set out in the Risk

Review and in Notes 43 to 45 of the Notes to the

Accounts.

Colleagues

The Group remains committed to its policy of

treating all colleagues and job applicants fairly,

ensuring equal opportunities. Our policy is that no

colleague, or potential colleague, is treated less

favourably on any grounds including age, race,

colour, religion, nationality, ethnic origin, gender,

marital status or sexual orientation. We also give all

applications from disabled people full consideration

in relation to the vacancy concerned and their own

aptitudes and abilities. In the event of an existing

colleague becoming disabled, we make every effort

to maintain their present position or to employ them

in alternative suitable work.

We also aim to provide high quality relevant training

and development opportunities to all colleagues,

which enables them to achieve their full potential

and helps the Group meet its corporate objectives.

The Board is briefed regularly on key colleague

matters as they arise. There is a comprehensive

internal communications structure to cascade

relevant business information to colleagues

throughout the Society in an appropriate and timely

way. The Group’s other businesses have similar

arrangements in place to ensure effective

communication of relevant matters.

The Society recognises an independent trade union

(Aegis) with which management meets regularly to

consult and negotiate on a wide variety of matters

and to which colleagues may make their views

known on issues affecting their interests.

Property, plant and equipment

The Directors consider that the overall market value

of the freehold and leasehold properties occupied by

the Group, excluding the principal office of the

Society, is in excess of their corresponding book

value that is included within property, plant and

equipment (per Note 22 to the Accounts). In arriving

at this view, the Directors have taken account of the

value-in-use, together with internal and external

valuations of the Group’s property portfolio.

It is difficult to ascertain a reliable market value for

the principal office of the Society, which is a special

purpose facility, however the Board considers that its

value in use to the Group is greater than its book

value.

Directors’ responsibilities in respect of the

preparation of the Annual Report, Annual Business

Statement, Directors’ Report and Annual Accounts

This statement, which should be read in conjunction

with the Independent Auditor’s Report, is made by

the Directors to explain their responsibilities in

relation to the preparation of the Annual Report &

Accounts.

The Directors are responsible for preparing the

Annual Report, Annual Business Statement,

Directors’ Report and the Annual Accounts in

accordance with applicable laws and regulations.

The Building Societies Act 1986 requires the

Directors to prepare Group and Society Annual

Accounts for each financial year. Under that law they

are required to prepare the Group Annual Accounts

in accordance with UK-adopted international

accounting standards in conformity with the

requirements of the Building Societies Act 1986 and

have elected to prepare the Society Annual Accounts

on the same basis.

The Group and Society Annual Accounts are required

by law and UK-adopted International Accounting

Standards, in accordance with the requirements of

the Building Societies Act 1986 and with those parts

of the Building Societies (Accounts and Related

Provisions) Regulations 1998 that are applicable, to

present fairly the financial position and the

performance of the Group and the Society. The

Building Societies Act 1986 provides in relation to

such annual accounts that references in the relevant

part of that Act to annual accounts giving a true and

fair view are references to their achieving a fair

presentation.

Under the Financial Conduct Authority’s Disclosure

Guidance and Transparency Rules, group financial

statements are required to be prepared in

accordance with UK-adopted international

accounting standards.

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Other Information

Skipton Group Annual Report & Accounts 2025 66

In preparing each of the Group and Society Annual

Accounts, the Directors are required to:

• Select suitable accounting policies in accordance

with IAS 8 Accounting Polices, Changes in

Accounting Estimates and Errors and apply them

consistently;

• Present information, including accounting

policies, in a manner that provides relevant,

reliable, comparable and understandable

information;

• Make judgements and accounting estimates that

are reasonable and prudent;

• State whether they have been prepared in

accordance with UK-adopted International

Accounting Standards in accordance with the

requirements of the Building Societies Act 1986

and with those parts of the Building Societies

(Accounts and Related Provisions) Regulations

1998 that are applicable, subject to any material

departures disclosed and explained in the

financial statements;

• Assess the Group and Society’s ability to continue

as a going concern, disclosing, as applicable,

matters related to going concern; and

• Use the going concern basis of accounting unless

they either intend to liquidate the Group or the

Society or to cease operations, or have no

realistic alternative but to do so.

In addition to the Annual Accounts, the Act requires

the Directors to prepare, for each financial year, an

Annual Business Statement and a Directors’ Report,

each containing prescribed information relating to

the business of the Group.

The Directors are also required by the Disclosure and

Transparency Rules of the Financial Conduct

Authority to include a management report containing

a fair review of the business, which is set out in the

Strategic Report, and a description of the principal

risks and uncertainties facing the Group which is set

out in the Risk Review.

The Directors have decided to prepare voluntarily a

report on the relevant aspects of corporate

governance as if the Society were required to comply

with the Listing Rules and the Disclosure and

Transparency Rules of the Financial Conduct

Authority in relation to those applicable matters. This

is set out in the Corporate Governance Report.

A copy of these Annual Report & Accounts is placed

on the Society’s website. Information in respect of

the Capital Requirements (Country-by-Country

Reporting) Regulations 2014 is included as an annex

to these Annual Accounts.

Directors’ responsibilities for accounting records

and internal controls

The Directors are responsible for ensuring that the

Group:

• keeps proper accounting records that disclose

with reasonable accuracy at any time the financial

position of the Group and Society, in accordance

with the Act; and

• takes reasonable care to establish, maintain,

document and review such systems and controls

as are appropriate to its business in accordance

with the rules made by the Financial Conduct

Authority and Prudential Regulation Authority

under the Financial Services and Markets Act

2000.

The Directors are responsible for such internal

control as they determine is necessary to enable the

preparation of annual accounts that are free from

material misstatement, whether due to fraud or error,

and have general responsibility for taking such steps

as are reasonably open to them to safeguard the

assets of the Group and to prevent and detect fraud

and other irregularities.

The Directors are responsible for the maintenance

and integrity of the corporate and financial

information included on the Society’s website.

Legislation in the UK governing the preparation and

dissemination of annual accounts may differ from

legislation in other jurisdictions.

Directors’ responsibilities in respect of going

concern

The Group’s business activities together with its

financial position, capital resources and the factors

likely to affect its future development and

performance, including the impact of climate risks

are set out in the Strategic Report and the Risk

Review. In addition, Notes 43 to 45 of the Annual

Accounts include the Group’s objectives, policies and

processes for managing its liquidity risk, details of

financial instruments and hedging activities, and its

exposure to credit risk, liquidity risk and market risk.

In common with many financial institutions, the

Group meets its day-to-day liquidity requirements

through managing both its retail and wholesale

funding sources, and is required to maintain a

sufficient buffer over regulatory capital requirements

in order to continue to be authorised to carry on its

business. The Group’s forecasts and objectives,

which take into account potential changes in trading

performance and funding retention, indicate that the

Group expects to be able to operate at adequate

levels of both liquidity and capital for the next 12-

month period.

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Skipton Group Annual Report & Accounts 2025 67

Consequently, after reviewing the Group’s forecasts

and the risks it faces, the Directors are satisfied that

there are no material uncertainties that may cast

significant doubt about the Group’s ability to

continue as a going concern and have, therefore,

continued to adopt the going concern basis in

preparing these Annual Accounts, as explained in

Note 1b) to the Accounts.

Directors’ statement of longer-term viability

In accordance with the UK Corporate Governance

Code, the Directors have assessed the prospects and

the ongoing viability of the Group over a longer

period than the 12-month period required by the

going concern basis of accounting.

The Directors’ assessment of the medium-term

prospects of the Group is based on the Group’s

corporate plans, which project the Group’s

performance, profitability, capital, liquidity and

funding position over a five-year period. The

assessment included a review of the Group’s current

position relative to the market and a review of the

Group’s strategic priorities over the medium-term

including management actions to achieve these

strategic goals.

The assessment also included a robust review of the

Group’s principal risks and uncertainties (outlined in

the Risk Review), which were taken into account to

ensure that the possible likelihood or impact of these

risks materialising would not materially impact the

prospects of the Group and to ensure that the

necessary control framework was in place to

mitigate the impact of these risks on the future

prospects of the business. Specifically, the Directors

took account of those risks that could result in

events or circumstances that might threaten the

Group’s business model, future performance,

solvency or liquidity and reputation, including the

social, economic, political and regulatory

environments and climate change.

The Directors concluded that the medium-term

prospects of the Group are satisfactory and that the

financial strength of the business remains healthy

throughout the period of assessment.

The Directors have assessed the viability of the

Group with the period of assessment being a five-

year period, to the end of 2030. Having considered

various options, the Directors determined that a five-

year period is an appropriate period for the purposes

of the Group’s viability assessment. This period

reflects the Group’s five-year corporate planning

horizon over which the prospects of the Group and

the principal risks threatening these prospects are

assessed as outlined above, and also the period over

which associated stress testing is performed.

In arriving at their conclusion on the longer-term

viability of the Group, the Directors considered the

following:

• The Group’s prospects over the five-year period

as outlined above.

• Stress testing carried out on the 2026 – 2030

business plans through the Group’s Internal

Capital Adequacy Assessment Process and

Internal Liquidity Adequacy Assessment Process.

The key economic stress test modelled reflected

a severe global supply shock which leads to deep

recessions across countries resulting in a sharp

rise in inflation. The Bank of England raise

interest rates to bring inflation back to target. UK

real GDP contracts by 5%, while house prices fall

for 14 straight quarters, with a decline of 28%.

Furthermore, businesses pass on higher costs

through to households with lower-income

households disproportionately affected. A further

scenario was also modelled whereby the key

variables such as unemployment and HPI are

generally aligned to the first scenario, but the

scenario is L-Shaped (GDP) and therefore there is

limited recovery in the outer years, with base rate

remaining low throughout, despite deflationary

fears. The Directors concluded that the impact of

these severe economic environments would not

threaten the longer-term viability of the Group.

• Reverse stress testing carried out by the Group,

which considers scenarios specific to the Group,

including operational issues and external threats,

that could cause the Group to fail. The Directors

have concluded that any such scenarios are

unlikely to materialise.

• The potential impact of climate-related financial

risks across a range of forecast scenarios. This

includes consideration of the potential impact of

two scenarios where there is a disorderly

transition to a low carbon economy by 2050 and

the impact of a scenario in which no such

transition occurs.

• The potential impact of emerging regulation,

where there is sufficient information regarding the

future regulation.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 68

• The principal risks facing the Group and the

control framework in place to manage and

mitigate these risks (as outlined in the Risk

Review and Board Risk Committee Report),

including an assessment of the likelihood and

impact of these risks on the Group. This includes

specific consideration of the UK’s subdued

growth outlook and the ongoing geopolitical

tensions that continue to exert pressure on

inflation. Despite inflation returning to more

normal levels, and wage growth helping to soften

cost-of-living pressures, there remains significant

strain on some household finances.

• A number of severe but plausible scenarios,

arising from the principal risks, which are remote,

but if they arose could threaten the longer-term

viability of the Group.

There are inherent limitations in preparing long-term

financial plans with regard to a number of factors

including, but not limited to, social, economic,

political, regulatory and climate factors. The

Directors consider that the outer years of the

financial planning period are more difficult to predict

and therefore these years have a greater degree of

uncertainty. For example, the external environment

remains uncertain and although inflationary

pressures are easing and the peak in bank base rate

has been reached, we expect competitive pressures

to remain in the mortgage and savings markets.

These impacts may have an effect on the

performance of the Group within the Group’s

financial planning period; the extent of the impact is

currently unknown.

However, based on the results of this assessment,

the Directors concluded that they have a reasonable

expectation that the Group will be able to continue in

operation and meet its liabilities as they fall due over

the next five years.

Directors

The Directors of the Society at 31 December 2025,

along with their roles and membership of board

committees, are set out in the Board of Directors.

During the year, the composition of the Board was

refreshed to ensure it continues to have an effective

balance of skills, knowledge, experience and

diversity to deliver on Skipton Group’s strategic

priorities. Details of changes to the Executive and

Non-Executive Directors of the Society in the year are

set out in the ‘Board changes’ section of the Chair’s

Statement.

Details of Directors’ service contracts or letters of

appointment are disclosed in the Corporate

Governance Report. No Director of the Society had

any interest in the shares of any Group undertaking

as at 31 December 2025.

In accordance with the UK Corporate Governance

Code, all Executive and Non-Executive Directors offer

themselves for election or re-election by the

members at the 2026 AGM.

Auditor

In accordance with Section 77 of the Building

Societies Act 1986, a resolution for the re-

appointment of Ernst & Young LLP (EY) will be put to

the forthcoming AGM of the Society.

The Directors who held office at the date of approval

of this Directors’ Report confirm that, so far as they

are each aware, there is no relevant audit

information of which the Society’s auditor is

unaware, and each Director has taken all the steps

that they ought to have taken as a Director to make

themselves aware of any relevant audit information

and to establish that the Society’s auditor is aware of

that information.

Signed on behalf of the Board:

G Burr

Gwyn Burr

Chair, Skipton Group

17 February 2026

Responsibility statement of the Directors in respect

of the Annual Report & Accounts

The Directors who held office at the date of

approval of this Directors’ Report confirm that, to

the best of their knowledge:

• The Annual Accounts, prepared in accordance

with UK-adopted International Accounting

Standards in accordance with the requirements

of the Building Societies Act 1986 and with

those parts of the Building Societies (Accounts

and Related Provisions) Regulations 1998 that

are applicable, give a true and fair view of the

assets, liabilities, financial position and profit of

the Group and Society; and

• The Strategic Report includes a fair review of the

development and performance of the business

and the position of the Group and Society,

together with a description of the principal risks

and uncertainties that they face.

We consider the Annual Report & Accounts, taken

as a whole, are fair, balanced and understandable

and provide the information necessary for members

to assess the Group’s and Society’s position and

performance, business model and strategy.

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 70

Dear Member,

On behalf of the Board of Directors, I am pleased

to present the Group’s Corporate Governance

Report, which details how the Group’s governance

framework operated in 2025.

As Chair of the Skipton Group, I recognise that

good governance is essential to ensuring

accountability to our members of the

Society. Effective governance underpins a well-

managed business, and I am dedicated to

upholding the highest standards of best practice.

Gwyn Burr,

Chair, Skipton Group

Our approach is based on the principles and

provisions of the UK Corporate Governance Code

2024 (the Code), published by the Financial

Reporting Council (FRC), which applies to listed

companies. There is a regulatory requirement for

building societies to have regard for the Code and, as

it represents industry best practice, the Society’s

Board of Directors (the Board) is committed to

adhering to it in so far as it applies to building

societies and has readily embraced its provisions.

This report outlines the Society’s governance

arrangements and how we meet the requirements of

the Code, which is applicable to listed entities with

accounting periods commencing on or after 1

January 2025. A copy of the Code is available at

frc.org.uk.

The Code operates on a ‘Comply or Explain’ basis.

The philosophy of the Board is to comply with the

Code and the guidance on it issued by the FRC and

the Building Societies Association. However, as the

Code was not designed for mutual organisations,

there are certain provisions with which the Society

cannot comply. The areas of non-compliance during

the year and the reasons for this were:

• Provision 3, which requires the Chair to discuss

governance matters with major shareholders and

relay their views to the Board as a whole (as a

mutual organisation, owned by its members, with

each voting member having one vote, there are no

major shareholders and therefore this specific

requirement is not relevant to the Society);

• Provision 36, which requires remuneration

schemes to promote long-term shareholdings by

executive directors (not possible for the Society

due to its mutual status); and

• Provision 39, which requires directors’ pension

contribution rates to align with those of the

workforce. (All new appointments comply with

this requirement; however, one historical

arrangement remained in place until the director’s

retirement in April 2025.)

During 2025, other than the points listed above, the

Board believes that the Society complied with all

other aspects of the Code.

In March 2026, Denis Hall, the Chair of the Board

Risk Committee, will have served as a non-executive

director for nine years, the maximum tenure

recommended under Provision 10 of the Code. The

recruitment of Denis’ replacement is underway and it

has been agreed that he will remain on the Board

until later in 2026 to ensure a robust handover to his

successor.

The updated Code, published in January 2024,

includes a revised Provision 29 (effective for

accounting periods beginning on or after 1 January

2026) requiring boards to make a declaration in

relation to the effectiveness of their material internal

controls. During 2025, the Risk and Control Self-

Assessment process was strengthened to embed a

culture of risk ownership and continual improvement,

supported by a strong understanding of our material

control activities. Group-wide risk reporting has also

been enhanced to provide a clear, aggregated view

of current and emerging risks to the Board.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 71

The Role of the Board

The Board’s terms of reference clearly set out its responsibility for the overall stewardship of the Group within

the context of the Group’s governance arrangements which are described below.

The Board formulates strategy and establishes the Society’s risk appetite and balance sheet strategy. It is

organised to have a proper understanding of, and competence to deal with, the current and emerging issues

facing the business of the Group, exercising independent judgement, and effectively reviewing and challenging

the performance of management.

Other changes in the Code included a requirement

for boards to examine how culture is monitored and

embedded; and to ensure that directors’

remuneration includes malus and clawback

provisions. Culture is covered in the People section

of this report and details of applicable malus and

clawback provisions are set out in the Directors’

Remuneration Report.

Governance Framework

The Group comprises the Society, regulated by the

Financial Conduct Authority (FCA) and the Prudential

Regulation Authority (PRA), and its direct and indirect

holdings in a number of legal entities, some of which,

including Connells, are also regulated by the FCA.

SIL, based in the Channel Islands, is regulated by the

Guernsey Financial Services Commission (GFSC).

The Group’s governance arrangements ensure that it

meets the requirements and expectations of

members, colleagues and regulators. The Board

oversees the Group supported by a number of board

committees. Information on these committees is

included on page 73.

The Group Chief Executive is responsible for

ensuring that the Group meets its strategic and

operational objectives set out in the Corporate Plan.

He is supported by the Group Executive Committee,

which he chairs, and comprises the Group Chief

Financial Officer and senior Group Executives.

Each Group subsidiary is governed by its own board,

responsible for the prudent management of the

subsidiary’s businesses, operating within the Board’s

risk appetite and delegated authorities and for

delivering agreed Corporate Plan objectives.

Regular reviews of corporate governance

arrangements across the Group are conducted to

ensure that key subsidiary boards maintain an

appropriate level of independence and flexibility.

Overall, the Board’s governance arrangements

provide the systems and controls needed to set the

Group’s direction and ensure effective oversight.

Board

responsibility

How this is achieved

Governing

Body

The Society is headed by an effective Board which is responsible for the overall

stewardship and the long-term success of the Group.

The Board reviews and approves the Group’s long-term objectives, commercial strategy

and Corporate Plan, ensuring that the interests of the Society’s members remain central to

all decisions, while considering other key stakeholders. It embeds a culture that prioritises

customer outcomes and maintains oversight of the Group’s material risks. The Board is

structured to understand and address current and emerging issues, exercise independent

judgment, and effectively review and challenge management performance.

Effective

Oversight

The Society’s governance framework enables the Board to provide strategic guidance and

effective oversight across the Group.

The governance framework clearly defines the respective roles and responsibilities of

directors and senior executives, ensuring accountability to the Group and its

members. This ensures a balance of authority such that no single individual has

unfettered powers. Through clear lines of sight into activities, the Board can challenge

effectively, obtain assurance on performance, uphold the integrity of reporting, and

confirm the effectiveness of internal control implementation.

Risk

Management

Oversight

The Board has a sound strategy for oversight of risk management and systems of internal

control supported by timely and transparent reporting.

This approach enables the Board to monitor risks on an ongoing basis and ensures the

Board is informed of material changes to the risk profile of the Group. It facilitates

challenge of the effectiveness of actions taken to mitigate risk. The approach is forward-

looking to reduce both the likelihood and the impact of known risks crystallising.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 72

The Board has established a clear framework of

delegated authorities setting out matters reserved

for the Board and those delegated below board level.

The Board also has a general duty to ensure that the

Group operates within the Society’s Rules, relevant

laws, regulations and guidance issued by relevant

regulatory authorities and that proper accounting

records and effective systems of internal control are

maintained and audited.

Culture

The Board has agreed purpose, behaviours and

culture statements for the Society to guide the

business and set expectations for colleagues. Our

purpose remains constant: helping more people have

a home, helping people save for life ahead and

supporting long-term financial well-being. To help

deliver this it is important that our culture puts

members and customers at the centre of our

thinking and values diversity amongst our workforce

and the communities we serve.

The Board monitors culture and how culture is

embedded in a number of ways including through the

appointment of a designated Non-Executive lead for

colleague listening and engagement, customer

feedback, employee surveys and independent

assurance reviews. The Group Chief People Officer

formally reports to the Board on cultural evolution on

a quarterly basis.

Board meetings

The Board met eleven times during 2025. In line with

good governance and to support independent

discussion, the non-executive directors met privately

after most Board meetings. The attendance record

of each director at Board and Board committee

meetings is set out on page 76.

In addition, the Board held two strategy meetings in

the year, in June and December, where the Group’s

strategic objectives (which the Board formally

approved in December 2024 and re-approved in

December 2025) were reviewed and discussed.

A forward-looking meeting planner, maintained by

the Group Secretary and General Counsel, ensures

effective use of Board time whilst allowing flexibility

for emerging matters.

Each Board meeting receives:

• Reports from the Chair, Group Chief Executive and

the Group Chief Financial Officer;

• A detailed management report on the Society and

the Group, containing financial and non-financial

data; and

• Updates on all Board committee meetings held

since the previous meeting of the Board.

For the Board to be effective, the relationship

between the executive directors and non-executive

directors must be constructive, open and respectful.

The boardroom environment is collegiate, and all

directors are encouraged to contribute. The role of

the non-executive directors is not only to challenge

but to support the Group Executive Committee and

bring their experience to bear. To this end, the non-

executive directors are welcomed to meetings

outside the formal Board and committee structure,

which develops their understanding of the business

and allows the management teams to benefit from

their experience and fully understand the Non-

Executive perspective on particular issues.

Performance & Strategy Governance

Financial Statements

Other Information

Responsibility Key activity

Strategy

• Approved the ongoing Corporate Plan and monitored delivery of the strategic actions

identified to achieve the Group’s strategy.

• Reviewed progress on the delivery of each of the Society’s key strategic change

projects, particularly focusing on the development of the Society’s digital capabilities.

• Approved additional investment for the continued upgrade of Connells’ IT infrastructure.

Risk

Management

and Regulatory

Matters

• Approved the Society’s risk appetite and monitored ongoing adherence.

• Approved the Board Risk Appetite Statement, the Internal Liquidity Adequacy

Assessment Process (ILAAP) and the Internal Capital Adequacy Assessment Process

(ICAAP).

• Approved the Society’s Recovery Plan and Resolvability Assessment Framework (RAF)

to ensure that adequate provisions and processes are in place to protect the Society’s

business and its members.

• Approved the Consumer Duty Board Assessment.

Below are some of the material matters considered by the Board during the year:

Skipton Group Annual Report & Accounts 2025 73

Responsibility Key Activity

Performance

and Financial

Reporting

• Reviewed and approved the Society’s interim and full year financial results.

• Considered and approved the redemption of the Society’s Permanent Interest-Bearing

Shares (PIBS).

• Reviewed and approved the Society’s Annual Report & Accounts and Summary

Financial Statements.

• Approved the Long-term Viability Statement.

• Approved the Letter of Representation to the Auditors.

• Approved amendments to the Group Tax Strategy.

People and

Culture

• Reviewed and implemented changes to Board Committee membership.

• Appointed Graham Lindsay as Senior Independent Director and Deputy Chair from 19

May 2025.

• Reviewed the 2026-2030 Colleague Plan.

• Considered the outcomes of colleague pulse surveys.

• Considered the annual report on Gender Pay Gap within the Society.

• Approved the Board Composition Policy.

Environmental,

Social and

Governance

(ESG)

• Completed the annual review and approved the terms of reference of the Board & each

of its committees.

• Reviewed and approved the Society’s Speak Out (Whistleblowing) Policy and received

the Whistleblowing Annual Report.

• Approved the Group Sustainability Report.

•

Approved the Society’s costed emission reduction plan and approved the Group’s 2030

Scope 1 target & Scope 2 aim.

Performance & Strategy Governance

Financial Statements

Other Information

Board Structure at 31 December 2025

The Board has delegated certain matters to its committees in order that these can be considered in more

detail. The terms of reference of all Board committees are available at skipton.co.uk/about-us/governance

or from the Group Secretary and General Counsel.

Group Chair: Gwyn Burr

Responsible for leading the Board, setting the Board’s agenda and ensuring the Board’s effectiveness.

Board

Responsible for the overall stewardship and the long-term strategy of the Society and the Group

9 Directors

Non-Executive Directors: Gwyn Burr, Iain Cummings, Steven Davis, Hasintha Gunawickrema, Graham Lindsay,

Denis Hall, Heather Jackson

Executive Directors: Stuart Haire, Paul Chambers

Board Audit

Committee

Board Change

Committee

Board

Nominations

Committee

Board

Remuneration

Committee

Board Risk

Committee

Non-

Executive

Remuneration

Committee

Chair:

Iain Cummings

Members:

Denis Hall

Graham Lindsay

Chair:

Heather Jackson

Members:

Iain Cummings

Graham Lindsay

Chair:

Gwyn Burr

Members:

Iain Cummings

Steven Davis

Hasintha

Gunawickrema

Denis Hall

Heather Jackson

Graham Lindsay

Chair:

Steven Davis

Members:

Heather Jackson

Graham Lindsay

Chair:

Denis Hall

Members:

Iain Cummings

Hasintha

Gunawickrema

Heather

Jackson

Chair:

Gwyn Burr

Members:

Stuart Haire

Paul Chambers

Skipton Group Annual Report & Accounts 2025 74

Responsibilities

Senior

Independent

Director & Deputy Chair

Graham Lindsay

• In conjunction with the Chair, providing support and challenge to the Group

Chief Executive and other members of the senior management team, and

building a working relationship with them, that enables this to happen

effectively.

• Upholding high standards of integrity and probity and supporting the Chair

and executive directors in instilling the appropriate culture, values and

behaviours in the boardroom and beyond.

• Working closely with the Chair, deputising for the Chair in their absence

and acting as a sounding board, sharing with the Chair other representative

duties and providing support as and when required.

• Acting as an intermediary for other directors as and when necessary.

• Being available to meet with any directors or other key stakeholders,

including regulators, to understand their concerns and, in the event that

contact with the Chair and/or Group Chief Executive is inappropriate or has

failed, to present their views to the Board as a whole.

• Leading the annual performance evaluation of the Chair, meeting with the

non-executive directors (without the Chair or executive directors present)

for this purpose, ensuring that views of the executive directors are also

taken into account.

Responsibilities

Chair of the Board

Gwyn Burr

• Managing and providing leadership to the Board and Group, safeguarding

and promoting the long-term success and sustainability of the Society in

the interests of current and future members.

• Leading the Board’s contribution to supporting the Group CEO and

Executive team in the development of the Group’s strategy.

• Establishing agendas for Board meetings, ensuring they are appropriately

focused on strategy, performance, culture and risk management matters,

and proactively managing the annual calendar of business to ensure the

most appropriate use of the Board’s time.

• Fostering a culture where Board members can challenge issues openly and

encouraging and managing strong debate whilst achieving decisions on

issues considered by the Board.

• Demonstrating ethical leadership and upholding the highest standards of

integrity and probity, setting clear expectations concerning the Society’s

and Group’s culture and behaviour.

•

Building an effective and diverse Board reflecting an appropriate balance of

skills and experience given the Group’s current and future activities.

• Leading the development of, and monitoring the effective implementation

of, the approach to the training and professional development of all the

non-executive directors.

• Ensuring effective communication with all stakeholder groups and

communicating with the Society’s members on behalf of the Board.

• Supporting the Group Chief Executive and leading the annual appraisal of

the Group Chief Executive.

Division of responsibilities

The roles of the Board Chair and the Group Chief Executive are distinct and held by different individuals. The

responsibilities of each role holder is set out in their role profiles and terms of appointment.

The Senior Independent Director and Deputy Chair plays a key role in supporting the Chair in leading the

Board and acting as a sounding board and source of advice for the Chair and the Board. Graham Lindsay

was appointed as Senior Independent Director and Deputy Chair effective 19 May 2025, following Mark

Lund stepping down from the Board at the 2025 AGM.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 75

Responsibilities

Group Chief Executive

Stuart Haire

• Delivering the strategy for the Group as agreed by the Board.

• Ensuring the prudent day-to-day management of all Group businesses.

• Providing leadership and direction to, and developing the vision and

strategy of, the Group.

• Communicating the purpose, vision, strategy and performance of the

Skipton Group to members, colleagues, regulators and other stakeholders.

• Building and leading an effective Group Executive team to manage Group

businesses in the longer-term interests of the Society’s members.

• Ensuring that effective succession and development plans are in place and

implemented for all key Executive roles.

• Leading the Group Executive Committee to successfully deliver agreed

plans, objectives and targets within the Board agreed appetite for risk.

• Monitoring the effective implementation of policies and procedures for the

induction, training and on-going development of all individuals performing

designated senior management functions on behalf of the Group.

Performance & Strategy Governance

Financial Statements

Other Information

Conflicts of interest

The Society’s directors are required to comply with

the Board Conflicts of Interest Policy. The policy

gives effect to various legal and regulatory

requirements on the Society in relation to conflicts of

interest and aims to ensure that directors do not

assume roles which would conflict with their

obligations as a director of the Society. Prior to

appointment, prospective directors must disclose

any actual or potential conflicts of interest that may

prevent them from taking on an appointment with

the Society.

In addition, directors must seek approval from the

Chair and the Group Secretary and General Counsel

before committing to any additional external

appointment. Where such approval is sought, the

director must confirm the existence of any potential

or actual conflicts, that the role does not exceed the

regulatory limits on directorships and provide

assurance that the appointment will not adversely

impact their ability to continue to fulfil their role as a

director of the Society.

In accordance with their duties as directors, each

director is also obliged to notify the Board of any

actual or potential interest that they have in any

matter to be considered at a meeting. If any potential

conflict does arise, the Board Conflicts of Interest

Policy permits the Board to authorise it, subject to

any conditions or limitations as it may deem

appropriate. Such instances are recorded in the

minutes of the relevant meeting.

Induction and professional development

On appointment, new directors receive a

comprehensive and tailored induction covering the

Group’s businesses and regulatory environment.

Directors from non-banking backgrounds receive

specific training on the capital and liquidity regimes

governing the Society’s operations. In line with the

Code, directors have access to the necessary

resources to maintain and update their knowledge

and capabilities. In addition, each director undergoes

an annual "fit and proper" assessment in compliance

with regulatory requirements, which includes

competence and capability. Training and

development needs are reviewed regularly and

addressed through external seminars and interactive

Board training sessions led by internal and external

specialists. During 2025 training has been delivered

on employment law, climate risk, model risk

management and the resolvability assessment

framework. Non-executive directors are encouraged

to attend one group subsidiary board meeting per

year, and to engage with members of the Group

Executive Committee to demonstrate support and to

undertake visits to subsidiaries, branches and

departments.

Directors have access to the Group Secretary and

General Counsel for advice on all corporate

governance matters and to ensure that Board

procedures are followed. The appointment and

removal of the Group Secretary and General Counsel

is a matter reserved to the Board.

Directors also have access to independent

professional advice, if required, at the Society’s

expense and benefit from appropriate liability

insurance cover.

Skipton Group Annual Report & Accounts 2025 76

Performance & Strategy Governance

Financial Statements

Other Information

Time commitment

One of the criteria which the Board takes into consideration when recruiting a non-executive director is their

ability to commit sufficient time to take on the position. In addition, throughout their term of office directors

are required to inform the Chair in advance of any other positions that they wish to take up so that the time

commitment and any potential conflict of interest can be considered.

*Monthly commitment relates to months in which there is a committee meeting. It is in addition to the annual commitment for Non-

executive Directors.

Independence

No non-executive directors have any direct business relations with the Society or any of its subsidiaries or

have any personal or family ties with any of the organisation’s advisers, other directors, or senior employees.

The Board considers all the non-executive directors to have been independent at the time of their

appointment and to have continued to be so in accordance with the criteria set out in the Code. As Chair, I

can confirm that I am independent and have no conflicting relationships or circumstances that might affect

my judgement on Group or Society matters.

Role

Expected annual time commitment

Chair

80 to 100 days

Senior Independent Director & Deputy Chair

As required to fulfil the role

- minimum of 30 to 36 days

Non

-executive Directors

30 to 36 days

Committee Chairs

Expected monthly commitment*

Board Audit Committee

2 to 2.5 days

Board Change Committee

1.5 to 2 days

Board Remuneration Committee

2 days

Board Risk Committee

3 to 3.5 days

Board and Committee membership attendance record

The attendance of directors at scheduled Board and committee meetings during the year is set out below:

Scheduled

Board

Audit

Committee

Board

Change

Committee

Board

Nominations

Committee

Board

Remuneration

Committee

Board

Risk

Committee

NED

Remuneration

Committee

Gwyn Burr

11 of 11 4 of 4 5 of 5

Paul Chambers

11 of 11 5 of 5

Iain Cummings

11 of 11 5 of 5 4 of 4 4 of 4 6 of 6

Steven Davis

11 of 11 4 of 4 8 of 8

Hasintha

Gunawickrema

10 of 11 2 of 4 4 of 4

Stuart Haire

11 of 11 5 of 5

Denis Hall

10 of 11 5 of 5 3 of 4 6 of 6

Heather Jackson

11 of 11 4 of 4 4 of 4 8 of 8 6 of 6

Graham

Lindsay

5 of 6 3 of 3 3 of 3 3 of 3

Andrew Bottomley

3 of 3 1 of 1

Mark Lund

3 of 3 2 of 2 4 of 4

Philip Moore

3 of 3 2 of 2 2 of 2

Notes

1. Where directors are not available to attend meetings, they still receive all papers and provide feedback as appropriate.

2. Graham Lindsay was appointed to the Board on 19 May 2025.

3. Andrew Bottomley resigned from the Board on 28 April 2025 .

4. Mark Lund resigned from the Board on 28 April 2025.

5. Philip Moore resigned from the Board on 28 April 2025.

Skipton Group Annual Report & Accounts 2025 77

Performance & Strategy Governance

Financial Statements

Other Information

Composition, succession and evaluation

Board Composition

Under the Society’s Rules, the Board must comprise no more than 15 and no less than six directors and, under

the Code, at least half of the Board should comprise non-executive directors. At 31 December 2025, the Board

comprised the Chair, six other independent non-executive directors and two executive directors. This

composition is designed to be able to meet the needs of the Group and allow for appropriate and efficient

operation of the Board’s committees. Details of the Society’s directors are set out in the Board of Directors

section.

Non-executive directors Mark Lund and Philip Moore, and executive director Andrew Bottomley stepped down

from the board at the 2025 AGM. Graham Lindsay was appointed as Senior Independent Director and Deputy

Chair from 19 May 2025. An independent recruitment search firm, Russell Reynolds, which has no connection to

the Society or any individual directors, assisted in the recruitment of Graham Lindsay.

The diagrams below set out the current composition of the Board in respect of tenure, age, gender and the

number of executive and non-executive directors.

At 31 December 2025, three members (33%) of the Board were female. The Society is a signatory to the Women

in Finance Charter, which underlines the Board’s commitment to gender equality. Harnessing the benefits of

diversity is a key consideration in all new recruitment to the Board.

As Chair, I will continue to review the size and composition of the Board and its committees regularly, in

conjunction with the Board Nominations Committee, to ensure that they are optimally resourced and refreshed

at appropriate intervals. Our Board Composition Policy is available on the Society’s website.

Appointments to the Board and its committees and at Executive level

The Board Nominations Committee (NomCo), comprising all the Society’s non-executive directors and chaired

by me, leads the process for Board and Group Executive Committee appointments and succession planning and

is also responsible for non-executive and executive director appointments across the key group companies.

Appointments to the Board, its committees and to the Group Executive Committee are made by the Board on

the recommendation of NomCo, in consultation with relevant committees’ chairs and, where appropriate, group

company boards. All appointments are based on merit. The Board considers all aspects of diversity when

reviewing the composition of the Board, its committees and the Group Executive Committee. Copies of the letter

of appointment for each of the non-executive directors are available for inspection on request from the Group

Secretary and General Counsel.

Succession planning remains a key priority. NomCo conducts an annual review of the Board’s structure, size,

and composition to ensure the right balance of skills, knowledge, and experience aligned to the Group’s

activities. This review considers both short- and long-term requirements for delivering the Group’s strategy,

taking account of strategic priorities and evolving customer behaviours.

Tenure of Non-Exec DirectorsAge of all Directors

All Directors (9)

40-49 50-59 60+

2 2 2

<1 year 1 to 3 3 to 6 >6

Non-Executive Directors Only (7)

All Directors (9) All Directors (9)

Gender of all Directors

Type of Director

Non-Exec Exec

Male Female

Skipton Group Annual Report & Accounts 2025 78

Performance & Strategy Governance

Financial Statements

Other Information

In Q2 2025, NomCo undertook an internal Board

effectiveness evaluation review and completed a

Board Skills matrix. Board composition was also

reviewed at the Q4 2025 NomCo meeting.

Succession planning covers both planned and

unforeseen events. NomCo reviewed arrangements

for senior Executives and their direct reports,

incorporating diversity considerations. Plans ensure

that individuals with potential receive appropriate

development opportunities and that robust

contingency measures are in place. Succession

planning for the Board was also considered.

Tenure, election and re-election of directors

The Society’s Rules require that all directors stand

for re-election annually. Non-executive directors are

generally appointed for an initial period of three

years and, whilst expected to serve for six years, this

may be extended to nine years in total.

All Society directors are subject to election following

their appointment and annual re-election by our

members at the AGM. Details of each individual

director’s role and experience are provided in the

booklet accompanying the Notice of AGM sent to all

qualifying members each year.

As mentioned earlier, the Board is currently recruiting

a new Board Risk Committee chair as the current

chair, Denis Hall, will reach the maximum tenure

recommended by the Code in March 2026. We

anticipate that the new Board Risk Committee chair

will be appointed during the summer of 2026 and will

stand for election at the 2026 AGM.

Board evaluation

The Board undertakes an annual evaluation of its

own performance and that of its committees. An

external review is undertaken at least every three

years. The outcome of the most recent external

review, undertaken by Claire Chalmers Ltd in 2023,

was considered by the Board in February 2024. The

recommendations informed a board effectiveness

action plan.

The directors participated in an internal board

performance review of 2024 using anonymised

questionnaires and which was discussed at the

NomCo meeting in Q2 2025. All directors engaged

fully in the process.

The review confirmed that the Board and its

committees continue to operate effectively, with high

levels of engagement and expertise. Key areas for

further development, such as enhancing workforce

engagement and maintaining focus on board

composition and subsidiary oversight, were

incorporated into the action plan. Progress has been

monitored in 2025 and will continue to be overseen

by the Board.

Individual review

Individual non-executive directors are evaluated

annually on a one-to-one basis by the Chair.

Executive directors are evaluated by the Group Chief

Executive against agreed performance targets for

their areas of responsibility and their own personal

performance. The Chair evaluates the Group Chief

Executive’s performance whilst the Deputy Chair and

Senior Independent Director leads the Board

evaluation of the Chair’s performance. All reviews

are documented and conducted at least annually.

Remuneration

Details relating to directors’ remuneration are

contained in the Directors' Remuneration Report.

Directors’ service contracts and notice periods

The executive directors are engaged on rolling

service contracts which can be terminated by either

the Society or the director giving one year’s notice.

Unless notice to terminate is given by either party,

the contracts continue automatically.

All non-executive directors are provided with a letter

of appointment on joining the Board and do not have

service contracts. The Chair has a 6-month notice

period and all other non-executive directors have a

notice period of 3-months.

Audit, risk and internal control

Financial reporting

After appropriate enquiries, review of internal

management reports and completion of the external

audit, the directors consider that these Annual

Report and Accounts, taken as a whole, are fair,

balanced and understandable, and provide the

information necessary for members to assess the

Group’s performance, business model and strategy.

Further details on how this conclusion has been

arrived at can be found in the Board Audit Committee

Report.

The directors’ responsibilities in relation to the

preparation of the Group’s Annual Accounts and a

statement confirming that the Group is a going

concern are contained in the statements of Directors’

Responsibilities in the Directors’ Report.

Risk management and internal control

The Board is responsible for overseeing the Group’s

strategy for managing risk and systems of internal

control, which includes reviewing and approving its

risk appetite on, at least, an annual basis. The

executive directors and senior management are

responsible for the continuous operation of an

effective Group risk management framework based

on a robust system of internal control.

Skipton Group Annual Report & Accounts 2025 79

Such systems are designed to manage rather than

eliminate the risk of failure to achieve the Group’s

business objectives.

The principal categories of risk confronting the

Group are described in greater detail in the Risk

Review, together with an explanation of the Three

Lines of Defence framework adopted by the Group

for managing risk.

The Board reviews the ongoing effectiveness of its

internal control systems through a combination of

processes including:

• Regular reports to the Board by the chairs of its

various committees;

• Presentations to the Board by functional leaders

relating to the strategy and performance of each

business, summarising business performance,

key business risks, issues and strategies;

• Regular reports to the Board, through the Board

Audit Committee, from the Group Internal Audit

function in respect of its independent audits of

risk management processes and effectiveness of

internal controls across the Group. The Group

Chief Internal Auditor reports to the Chair of the

Board Audit Committee and attends Board Audit

Committee and Board Risk Committee meetings;

and,

• Regular reports to the Board, through the Board

Risk Committee, from the Group Risk function on

the principal conduct, operational, credit, market

and liquidity risks facing the Group and the

strength of the controls in place to mitigate these.

The Group has a comprehensive system for

reporting financial results to the Board. Each

business prepares monthly management information

with comparisons against budget which the Board

reviews and challenges, as appropriate, where

performance is not in line with expectations.

The Group has a number of central oversight and

control functions, including Finance, Risk and

Compliance, which establish and monitor the

implementation of compliance and operational

standards. Each of these functions is subject to

periodic review by the Group Internal Audit function.

The Group Internal Audit function is responsible for

independently reviewing and reporting on the

adequacy and effectiveness of internal controls

operated by management throughout the Group,

thereby helping to evaluate and improve the

effectiveness of risk management. Through its

programme of work, approved by the Board Audit

Committee, the Group Internal Audit function is able

to provide assurance on control effectiveness.

To ensure sufficient focus is devoted to risk

oversight, the Group Chief Risk Officer role is a

senior Executive position and member of the Group

Executive Committee. The Board Risk Committee

and the Board receive regular reports from the Group

Chief Risk Officer throughout the year and he attends

all meetings of the Board Audit Committee and the

Board. The Board is satisfied that it understands the

risks confronting the Group and that senior

management are taking appropriate action to

mitigate these. More detail is provided on these in

the Risk Review.

To further strengthen the standard of Group

governance, the Group Risk Management Framework

(GRMF) was implemented in 2025. The GRMF

defines clear risk management roles and

responsibilities, governance structures and risk

reporting expectations across all Group businesses.

The Board is satisfied that the Group maintained an

adequate system of internal control during 2025,

with a clear focus on risk management. This was

carried out in a manner that met the requirements of

the Code and good business practice generally.

In anticipation of the revised Provision 29 of the

Code which comes into effect in January 2026, the

Group has undertaken a programme of work in 2025

to further enhance and strengthen existing

approaches. Further details are included within the

Board Risk Committee Report.

Stakeholder engagement

The Board recognises the importance of engaging

with its stakeholders and understanding their views

and concerns. It has identified its key stakeholders

as our members and customers; our colleagues; our

suppliers; our banking counterparties; and our

regulators.

Members and customers

The Society’s membership comprises its savers,

borrowers, holders of its Permanent Interest-Bearing

Shares (PIBS) and non-corporate borrowers. A

‘member’ is different from a shareholder of a listed

company, whose owners may include institutional

shareholders.

The vast majority of the Society’s customers are,

therefore, its members. Against a backdrop of

significant economic and political uncertainty, it is of

the utmost importance that we understand our

members and listen closely to their views. In

recognition of this, the Society actively seeks

feedback from members on all aspects of its

activities and strives to respond quickly to points

requiring action.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 80

All our research is conducted by skilled Market

Research Society registered practitioners, employed

both in-house and through carefully selected

partners (including award-winning research

agencies).

Further, to help fulfil our aim of allowing meaningful

participation, our Member Panel remained strong

with over 21,000 panellists.

Over the last year, Panel feedback has helped us

better understand topics such as longer-term

mortgage products, life insurance, online security

and intergenerational wealth.

We were able to make various improvements in 2025

that have benefitted our members.

Making Money Work Harder

• We expanded our member exclusive savings

range further, giving members access to

exclusive savings rates. Throughout 2025 we saw

over 90k accounts opened.

• Alongside our member exclusive range, we

continued to offer competitive savings rates

across the entire range and as at 31 December

2025 we paid 0.68% above market average on all

our savings rates.

• We continued our support for members, through a

My Money Review or Enquiry where our skilled

colleagues provide access to free advice to

members so that they can better understand the

savings and investment choices available to them

and make clear, informed decisions; helping their

money work harder.

• We created a free Stocks & Shares ISA advice

product exclusively for members.

• We are one of a small number of providers that

give our members more choice in how they split

their current year ISA subscription allowance

across multiple Cash ISA accounts.

• We continue to be the largest high street provider

of the Lifetime ISA, a product designed to give a

boost to first-time buyers saving for a deposit.

We’ve enabled bonus payments from the

Government of over £45m in 2025.

Helping People Have a Home

• We are here to help more people than ever have a

home and have continued to innovate to make

this a reality.

• We continue to offer our Track Record product

range and make it available to more first-time

buyers. We also offer mortgages on properties

bought through Government Schemes including

Shared Ownership and LIFT, as people continue

to need a variety of solutions to take their first

step onto the ladder.

• We recognised first-time buyers getting the keys

to their first home by gifting over 20,000 Home

Mover Boxes, containing a range of useful

household items.

• Helping homeowners and landlords to reduce

their carbon footprint remains a priority for us and

we understand that the first step is access to

expert guidance. That’s why we continue to offer

free EPC+ reports to all our members.

• This year has also seen us complete a full retrofit

on a Society owned property in Skipton with a

view to supporting our customers in

understanding the practicalities of installing

carbon-reducing measures in their own homes.

We also continue to use our findings to influence

policy makers.

Making Membership Matter

• Our colleagues sent gifts to more than 2,000

members to mark special occasions or times of

need.

• We actively invited members to participate in

shaping our business, and in 2025 60,647

members exercised their voting rights in the AGM,

which also gave members the opportunity to

select Refuge as our charity partner.

• We developed new products and functionality to

suit our customer needs and enhanced

communications to members ahead of product

maturities.

The Society has continued to achieve extremely high

levels of net member satisfaction across Homes and

Money, scoring 90% in 2025.

As a mutual organisation it’s important for us to be

transparent in sharing our member feedback. This

has been demonstrated by our continued pursuit to

gain public reviews from members via our

partnership with Trustpilot. Since integrating this

with our existing ongoing research programme

towards the end of 2020, we have maintained a

strong rating. This was 4.2 stars out of 5 as at 31

December 2025.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 81

Our colleagues

It is important to us that we have a thorough

understanding of our colleague’s views regarding

their experience of working at the Society and we do

this in a number of ways – through team meetings,

regular pulse surveys, employer review websites,

listening sessions and independent assessments.

In 2025 we formally introduced “employee Net

Promoter Score” as a robust method to assess

colleague engagement levels; including reviewing

over 50,000 comments as part of written feedback

submitted in our pulse surveys.

We have built on our work in 2024 and continued to

evolve our approach to colleague listening and

involvement during 2025, focusing more on

developing our culture and ways of working. The

Behaviours Framework continues to be incorporated

into our strategic communications, leadership

definition, performance management and approach

to colleague recognition (playing a central part in our

annual colleague recognition awards).

Part of our evolving approach to colleague listening

and participation is the desire to influence the large

and small details that form part of the everyday

colleague experience. In terms of the large details,

we have a programme to transform our technology,

customer and colleague journeys where we are

directly engaging with colleagues on how we build

our systems and processes. As part of our

Transformation Programme, we actively involve

colleagues in testing the customer engagement

platform, asking them to be critical and find what

worked and what we can improve on.

In terms of the smaller but important details,

additional emphasis has been placed on leaders

listening to their teams for feedback and to act upon

this locally, empowering both leaders and

colleagues. We will continue to use colleague

feedback to inform our work, further enhancing the

way we engage with our colleague base.

In line with the Code’s requirements, the Board

appointed non-executive director, Steven Davis, to be

the director responsible for providing a further

avenue for the voice of our people to be heard at the

Board table. This role also helps to identify cultural

trends, risks and opportunities; strengthen trust and

transparency and drive better decision making. In

2025, he held focus groups with customer-facing

colleagues to understand their views, took part in call

listening sessions and met with senior leaders.

Together with regular personal communications

from members of the Group Executive Committee in

the form of videos, we have also continued to hold

quarterly Strategic Updates where colleagues can

ask questions of the Group Chief Executive and the

Group Executive Committee regarding our direction

of travel.

Suppliers

The Group closely monitors all its business

relationships with suppliers, on an ongoing basis,

assessing any risk of an adverse impact on our

members, customers, our people and the

environment in which we operate as a result of these

relationships, or as a result of our policies.

In 2025, we implemented an enhanced supplier

governance and assurance framework to strengthen

the oversight and relationships we have with our

suppliers. As part of this framework we issue an

annual, online, anonymous questionnaire for

completion by suppliers to assess our performance

as a customer. The topics covered included how

timely and accurate we are when paying invoices, if

our corporate responsibility values are clear and

views on whether we live these, strength of

relationships and comparison of our approach to

other clients. Previous feedback has been very

positive, and the latest survey was issued to

suppliers in Q4 2025.

As part of our focus on sustainability, the Group is

clear regarding the selection of new firms aligning to

our expectations and sustainability goals. We

continue to support our existing supply chain to

achieve better ESG outcomes using data from our

ESG assessment platform.

Regulators

Fostering a positive relationship with our regulators

is a key priority for the Board and senior

management team, supported by continuous

dialogue as appropriate. This involves not only the

provision of prescribed reports but updates from the

senior management team on matters we believe

should be drawn to our regulators’ attention. The

Board sees it as important that regulatory bodies are

kept up to date with strategic and operational

developments within the Group and that they

maintain ongoing confidence in the Board and

management team.

Banking counterparties

Senior Executives and our Treasury team hold

meetings with banks and debt investors, where

appropriate, to update them on the Group’s

performance and respond to any questions. This is a

long-established arrangement which continues to

work well.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 82

Whistleblowing (Speak Out)

The Society has arrangements in place to ensure

that colleagues can speak up and raise concerns

they might have confidentially and anonymously, if

they prefer. Concerns can be reported via Safecall,

an independent third-party service engaged by the

Society. All concerns raised are investigated and

addressed appropriately. The Society is committed

to ensuring that no individual suffers any detrimental

treatment for speaking up.

Training on the Speak Out (whistleblowing) process

is provided annually to all colleagues and on

induction for new joiners. Each major business

within the Group maintains its own whistleblowing

policy. The Board’s commitment to whistleblowing is

reinforced by the appointment of a non-executive

director as Speak Out Champion. This role is held by

Iain Cummings, who chairs the Board Audit

Committee.

The Speak Out Champion oversees the integrity,

independence and effectiveness of whistleblowing

policies and procedures across the Society and the

Group, including arrangements for protecting

whistleblowers against detriment. An annual report

on the effectiveness of whistleblowing systems and

controls is presented to the Board.

The Annual General Meeting (AGM)

Each year the Society gives all eligible members at

least 21 clear days’ notice of its AGM. At the

meeting, the Chair, the Group Chief Executive and

other members of the Board report back to members

on the previous year’s performance and the main

developments across the Group. Members have the

opportunity to raise questions and put forward their

views. All directors normally attend the AGM, unless

their absence cannot be avoided, and are available

for questions both during a ‘question and answer’

session in the meeting and on an individual basis

before and after the meeting.

All eligible members are encouraged to vote at the

AGM (either personally or by appointing a

representative), although the voting form includes a

‘vote withheld’ option. Members can vote either at

the AGM, by post or online. All votes are returned to

independent scrutineers. A poll is called in relation to

each resolution at the AGM and the results of the

vote are published on the Society’s website and in

branches. As a minimum, the Society’s members at

the AGM are asked to vote on the Society’s Annual

Report and Accounts, election or re-election of all

Directors, appointment or re-appointment of the

external auditor and to receive the Directors’

Remuneration Report. At the 2025 AGM members

were also asked to vote on the advisory resolution to

approve the Directors’ Remuneration Policy.

I am pleased to report that no resolution received

less than 92% support from members at the 2025

AGM.

Board priorities in 2026

Together with the senior leadership team, the Board

will continue to focus on the delivery of the Group’s

strategy in 2026 through our Corporate Plan. Other

priorities for the Board in 2026 include:

• Continuing to strengthen Group-wide oversight

and governance arrangements, with a particular

focus on readiness to comply with revised

Provision 29 of the Code which requires boards to

make a declaration on the effectiveness of their

material internal controls;

• Approving the Group’s approach to managing

climate-related risks, and providing oversight of

the approach to delivery;

• Maintaining a clear focus on delivering excellent

customer outcomes, supported by continued

oversight of Consumer Duty compliance;

• Maintaining an awareness of geopolitical and

economic risks and assessing the potential

impact of those risks on members and the

communities served by the Group;

• Continuing its oversight of the Society’s and the

Group’s change programmes, ensuring effective

delivery and the Group’s ability to optimise

opportunities arising from technology.

Conclusion

In summary, with the exception for the matters

explained at the beginning of this report, I believe

that the governance arrangements operated by the

Group align with the Code’s requirements and have

enabled the Board to exercise effective oversight of

business performance, regulatory requirements and

delivery of our customer proposition.

Signed on behalf of the Board:

G Burr

Gwyn Burr

Chair, Skipton Group

17 February 2026

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 84

Membership and attendees

The members of the Board Audit Committee during

the year were:

The Committee is comprised of three members, all

of whom are independent non-executive directors.

Graham Lindsay joined the Committee from 19 May

2025. Mark Lund and Philip Moore stepped down

from the Committee at the 2025 AGM.

The Board is satisfied that the composition of the

Board Audit Committee includes non-executive

directors with recent, relevant financial experience

and sufficient understanding of the financial services

sector to provide appropriate challenge to

management. The relevant experience of the

members of the Board Audit Committee is set out in

the Board of Directors section.

In terms of good governance and to ensure holistic

oversight, I am also a member of the Board Risk

Committee (as is Denis Hall).

Meetings

The Committee held five scheduled meetings during

2025 aligned to our financial calendar and reporting

dates. The attendance of members at these

meetings is set out in the Corporate Governance

Report.

The Committee also held private discussions during

the year with the external auditor Ernst & Young LLP

(EY), the Group Chief Financial Officer, the Group

Chief Risk Officer, the Group Chief Internal Auditor

and the Chief Financial Officers of the Group’s

subsidiaries, to provide an opportunity for any

relevant issues to be raised directly with Committee

members.

In addition to Committee members, others who

regularly attended meetings (by invitation) include

the Chair of the Board, the Group Chief Executive, the

Group Chief Financial Officer, the Director of Group

Finance, the Group Secretary and General Counsel,

the Group Chief Risk Officer, the Head of

Compliance, the Group Chief Internal Auditor and

external auditor representatives.

Role and responsibilities of the Committee

The responsibilities of the Committee are delegated

by the Board and are set out in its written terms of

reference which are available on our website at

skipton.co.uk/about-us/governance. These were

reviewed and approved in May 2025 and are in line

with the provisions of the Financial Reporting

Council’s (FRC) ‘Guidance on Audit Committees’

which was last updated in April 2016 and have

Iain Cummings Non-Executive Director (Chair)

Denis Hall Non-Executive Director

Graham Lindsay Non-Executive Director and

Senior Independent Director

Performance & Strategy Governance

Financial Statements

Other Information

Dear Member,

On behalf of the Committee, I am pleased to

present this year’s Board Audit Committee Report,

which provides an overview of how we, as a

Committee, have discharged our responsibilities,

setting out the significant issues we have

reviewed and concluded on during the year.

The report focuses mainly on the following three

areas:

• The role and responsibilities of the Committee;

• The main activities of the Committee during the

year; and

• A review of the effectiveness of the Committee.

Iain Cummings,

Chair of the Board Audit Committee

Skipton Group Annual Report & Accounts 2025 85

regard to the FRC’s Audit Committee and the

External Audit: Minimum Standard.

Our primary responsibilities are:

• To monitor the integrity of the Group’s financial

reporting process, by reviewing, challenging and

recommending the Group’s annual and interim

financial statements to the Board for approval;

and reviewing, challenging and approving any

formal announcements relating to the Group’s

financial performance. We also review the

appropriateness and application of our

accounting policies, the impact of any changes to

them; and the significant estimates and

judgements in relation to the financial statements;

• To review the effectiveness of the Group’s

internal controls, including financial controls and

risk management systems;

• To review the effectiveness and independence of

the Group Internal Audit and Compliance

Monitoring functions and the performance of the

Group Chief Internal Auditor. This includes

considering the adequacy of internal audit's

resources, its periodic audit plans, performance

against these plans, their material findings and

delivery of actions to address them;

• To provide advice to the Board on whether the

Annual Report & Accounts, taken as a whole, are

fair, balanced and understandable and provide the

information necessary for members to assess the

Group’s strategy, business model and

performance; and

• To provide oversight of the external audit process

by monitoring the relationship with the external

auditor, agreeing their remuneration and terms of

engagement, monitoring their performance,

objectivity and independence. To ensure the

effectiveness of the external audit process, we

also review their approach to our audit, their

levels of materiality and their reports.

These responsibilities reflect key provisions outlined

in the Financial Reporting Council’s (FRC) Audit

Committees and the External Audit: Minimum

Standard.

Activities of the Committee during the year

During 2025 our work fell under three main areas, in

line with our responsibilities, as follows:

a) Internal controls and risk

The Group recognises the importance of good

systems of internal control in the achievement of its

objectives and the safeguarding of its assets and the

interests of its members. Good internal controls also

facilitate the effectiveness and efficiency of

operations, help to ensure the reliability of internal

and external reporting and assist in compliance with

applicable laws and regulations.

The Group operates in a dynamic business

environment and, as a result, the risks it faces

change continually. Management is responsible for

designing the internal control framework to ensure

thorough and regular evaluation of the nature and

extent of risk, and the Group’s ability to react

accordingly. Management is also responsible for

implementing the Board’s policies on risk and

control, noting that all employees are responsible for

internal control as part of their individual objectives.

Further details of the Group’s risk management

practices are provided in the Risk Review.

Through the Committee, the Group Internal Audit

function provides independent assurance to the

Board on the effectiveness of the internal control

framework. Group Internal Audit derives its authority

from the Board, through the Board Audit Committee,

and has unrestricted access to all Group records,

physical properties, and personnel as required for the

effective delivery of audit activity.

The information received and considered by the

Committee during 2025 provided assurance that

there were no significant control failings that would

lead to a material impact on the Group’s financial

statements.

Group Internal Audit is supported by external co-

source partners who provide specialist technical

support when required. The Group Chief Internal

Auditor reports directly to me to maintain their

independence from Executive Management. As a

Committee we are responsible for ensuring that

Group Internal Audit has adequate skills and

resource levels that are sufficient to provide the level

of assurance required.

The Board Audit Committee is also responsible for

approving the annual budget of Group Internal Audit

and for approving its annual plan of work. This is

prepared on a risk-based approach reflecting input

from management and the Committee.

We review reports produced by Group Internal Audit

that detail material findings, recommendations and

the status of management actions in

response. Group Internal Audit also verify the

completion of management actions using a risk-

based approach and updates the Committee on

progress.

During the year, key areas reviewed were as follows:

• The governance framework and key controls

around significant prudential and financial risk,

including capital and liquidity management;

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 86

• Key controls around cyber security, operational

resilience and information technology;

• Key controls to ensure regulatory compliance in

areas including, model risk management

Consumer Duty and responsible lending for

example; and

• A number of specific areas of internal control in

the Group’s subsidiaries, including key change

projects.

We monitor and assess the role and effectiveness of

the Group Internal Audit function in the overall

context of the Group’s risk management systems.

The Committee assesses the effectiveness and

independence of Group Internal Audit annually, and

this is reported to and discussed at a meeting of the

Committee.

We also review the results of Group Internal Audit’s

Quality Assurance and Improvement Programme

annually and oversee progress against Group

Internal Audit’s Strategic roadmap. Group Internal

Audit’s performance is monitored by the Committee

against a balanced mix of measures, covering

Quality, Delivery, Talent and Innovation.

The Committee is satisfied that, throughout 2025,

Group Internal Audit was appropriately resourced to

carry out its responsibilities, was independent, and

that it continued to perform effectively.

The Committee also has oversight responsibility for

the Society’s Compliance Monitoring function that

provides second line assurance over conduct risk on

activities regulated by the FCA, as well as assurance

over financial crime and data protection. The

Compliance Monitoring Plan includes control

reviews, shorter focused reviews and customer

outcomes testing which includes, but is not limited

to, investment, pension, mortgage and protection

advice, credit management, complaint handling and

post-sale customer outcomes. Consideration is

given to Consumer Duty as part of all relevant

reviews and consumer duty specific reviews are also

included in the plan where relevant. The Compliance

Monitoring function’s plan of work was approved by

the Committee and the outputs reported to the

Committee, together with progress updates on

management’s implementation of actions to address

the findings.

As part of the external audit process, the Society’s

auditor provides us with reports on the results of

their testing of the effectiveness of internal controls.

b) Financial reporting

The Committee considered the financial information

published in the Group’s annual and interim financial

statements and the accounting policies adopted by

the Group, presentation and disclosure of financial

information and the key estimates and judgements

made by management in preparing the financial

statements. The Committee also considered and

approved the Group’s Pillar 3 disclosure which is

available at skipton.co.uk/about-us/pillar-3-

disclosure.

The Directors are responsible for preparing the

Annual Report & Accounts. At the request of the

Board, we considered whether the 2025 Annual

Report & Accounts were fair, balanced and

understandable and whether they provided the

necessary information for members to assess the

Group’s position and performance, business model

and strategy.

This assessment included:

• Review of reports from management on

significant accounting matters and judgements

and challenge as to whether these treatments

were appropriate;

• Review of the continued appropriateness of the

Group’s accounting policies;

• Review of the use of models and their

appropriateness for determining values within the

financial statements;

• Consideration of the Group’s reporting processes

and the robustness of oversight procedures;

• Consideration with management of leading

reporting practices and recommendations,

including those published by the FRC and major

audit firms;

• Consideration of the main events during the

financial year and how these are reported in our

financial statements;

• Review of the alternative performance measure of

underlying profit before tax (defined in the

Financial Review), to ensure compliance with our

policy on these metrics and fair presentation;

• Reviewing drafts of the financial statements and

discussion of key matters; and

• Consideration by the Committee of comments

raised by our external auditors and actions taken

by management to address these.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 87

We paid particular attention to matters we

considered to be important by virtue of their impact

on the Group’s results, and particularly those which

involved a high level of complexity, judgement or

estimation by the Board.

The key areas of estimate and judgement that we

considered in reviewing the 2025 Annual Report &

Accounts are set out below:

Significant matter

Committee action taken

Impairment of

financial assets

The Committee has monitored loan impairment provisions, taking account of the

requirements of IFRS 9 Financial Instruments. During the year, the Committee

undertook the following work in relation to impairment:

• Reviewed and challenged the critical judgements made by management, including

the appropriateness of the Probability of Default (PD), Loss Given Default (LGD)

and Exposure at Default (EAD) models.

• Assessed management’s approach to Significant Increase in Credit Risk (SICR),

staging criteria, and the triggers used for movement between Stage 1, Stage 2 and

Stage 3.

• Considered the selection and weighting of forward-looking macroeconomic

scenarios, including the severity of downside scenarios and revisions to reflect

changes in the external environment.

• Considered the impact of key economic assumptions within the Group’s loan

impairment models on the level of provisions made and the relevant disclosure in

the Accounts.

• Examined and challenged the assumptions adopted, including key sensitivities of

the model, and scrutinised reports produced by management on the operation of

the impairment framework, including controls over data quality, model

performance, and monitoring of model limitations.

• Challenged the rationale and evidence supporting any Post Model Adjustments

(PMAs), ensuring that adjustments were transparent, well-governed and reserved

only for areas of model uncertainty.

• Assessed the risk recognised in respect of impairment relating to the SIL loan

book.

• Monitored the level of impairment held against treasury assets under IFRS 9,

including scrutinising reports produced by the Asset & Liability Management

function. We consider the level of impairment held against these assets to be

appropriate.

Based on the work performed throughout the year, the Committee is satisfied that the

impairment of financial assets, has been prepared on an appropriate basis, that the

key judgements, together with post model adjustments that have been applied, are

reasonable, and that the related disclosures in the Annual Report and Accounts are

fair, balanced and understandable.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 88

Significant matter

Committee action taken

Fair valuation of

the equity release

portfolio

The Group’s equity release portfolio is closed to new business. It continues to be

measured using an internally developed fair value model based on discounted future

cash flows. Key assumptions

—such as mortality, voluntary redemption behaviour,

house price growth, RPI, non

-negative equity guarantee (NNEG) costs and illiquidity

premiums

—

remain consistent with the prior year and are subject to established model

governance and second

-line oversight.

The Group hedges the interest rate and inflation risk arising from its equity release

portfolio through the use of derivatives which are also valued on a discounted cash

flow basis. Due to their long

-dated nature, changes in assumptions can significantly

impact valuations. As the underlying mortgage portfolio is not held at amortised cost

under IFRS 9, hedge accounting cannot be applied. Both the equity release portfolio

and the swaps are held at fair value through profit and loss.

There is some natural offsetting between the changes in value of the portfolio and the

derivatives, but this is not perfect, partly due to the different discounting requirements.

During the year, the Committee undertook the following work in relation to the fair

valuation of the equity release portfolio:

• Reviewed management’s supporting papers and assumptions. Considering the

specific characteristics of this portfolio, and general macro-economic indicators,

the Committee considers that the inputs and assumptions, and therefore the

valuation of the equity release portfolio is appropriate.

• Reviewed the control framework, assumptions, and key sensitivities disclosed in

Note 1v) to the Accounts and is satisfied that amounts recognised in the Income

Statement are fairly stated and that the valuations of the derivatives are

appropriate.

• Assessed the sensitivity of the fair values to changes in key assumptions and

confirmed that the sensitivities disclosed in the Accounts are appropriate and fairly

presented.

Defined benefit

pension liability

The Group manages three funded defined benefit pension schemes, as presented in

Note 36 to the Accounts.

The Committee has examined and challenged the pension scheme assumptions

adopted in these Accounts and

is satisfied that these are reasonable and appropriate;

this included consideration, in particular of the accounting/reporting impact of the

Skipton scheme buy

-in and the associated loan to the Scheme from the Society.

Impairment of

estate agency right-

-use assets

The Committee has considered the risk relating to the impairment of estate agency

right

-of-use assets. The Committee reviewed assessments prepared by management

and the results of impairment testing performed where indicators of impairment exist.

The Committee is satisfied that the level of provision held against right

-of-use assets

is appropriate.

Revenue recognition

within the estate

agency division

The Committee has considered the risk relating to the recognition of revenue within

the estate agency division, as described by the external auditor within the Independent

Auditor’s Report. The Committee reviewed reports prepared by management and by

EY regarding the effectiveness of key controls over the revenue recognition process.

The Committee also considered the results of external audit testing performed in this

area, including testing performed in previous years, which has not identified any

evidence of material misstatement or management override in this respect.

The Committee is comfortable that this matter has been appropriately considered and

disclosed within these Accounts.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 89

Significant matter

Committee action taken

Revenue

recognition relating

to effective

interest rate

accounting

Interest income on the Group’s mortgages is measured under the effective interest

rate method, as explained in Note 1f) to the Accounts. This method includes an

estimation of mortgage product lives. The Committee reviewed the reports prepared

by management to support these estimates and is satisfied with the conclusions

reached in this respect.

Derivatives and

hedge accounting

The Group uses fair value and cash flow hedge accounting to manage its interest rate

and foreign currency risk.

The Committee has examined and challenged the valuation of derivative financial

instruments and is satisfied that these are reasonable and appropriate.

Going concern and

longer

term viability

review

The Committee performed the following:

• Reviewed and confirmed the appropriateness of the going concern assumption for

both the Interim Accounts and the Annual Accounts, ensuring a consistent

assessment approach across reporting periods.

• Considered reports from key risk functions covering current and forecast liquidity,

capital, and funding positions.

• Evaluated the Group’s principal risks, including credit, liquidity, operational, and

conduct risks; Market developments; Social, economic, and political factors; and

Climate-related risks.

• Assessed the impact of relevant stress scenarios on the Group’s financial

resilience.

Based on the above the Committee concluded that the preparation of the financial

statements on a going concern basis remains appropriate.

Additionally, the Committee performed the following in respect of the Group’s longer

term viability statement in the Directors’ Report:

• Reviewed management papers and risk analyses supporting the Directors’ Viability

Statement.

• Considered the Group’s corporate plans, long-term financial resilience, and

potential severe-but-plausible failure scenarios.

• Determined that the likelihood of any scenario materialising that would threaten

the Group’s long-term viability is sufficiently low.

c) External Audit

The Committee assesses the effectiveness and

independence of the external auditor annually

following completion of their year-end audit, and this

is reported to and discussed at a meeting of the

Committee shortly thereafter. This assessment

covered the external audit of the previous Annual

Report & Accounts, and included consideration of

matters such as:

• Any risks to audit quality that the external auditor

identified;

• The key controls that the external auditor relied

on to address any identified risks to audit quality,

such as appropriate audit methodologies, training

and quality control policies and procedures;

• The findings from internal and external

inspections of the external audit and the audit

firm;

• Whether the original audit plan was met;

• Openness and quality of communication between

the external auditor and senior management;

• The skills and experience of the audit team and

their understanding of the business;

• Whether an appropriate degree of challenge and

professional scepticism was applied by the

external auditor; and

• The proposed strategy to be used in the next

audit, including the proposed level of materiality

to be used.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 90

The Committee considered the results of this review

and concluded that the external auditor had

performed an audit of good quality and that they

were sufficiently independent.

The Committee also reviewed and reaffirmed our

policy on non-audit services which can be provided

by our external auditors. The Committee reviews

fees paid to the Group’s auditor regularly and is

satisfied that the level of non-audit fees paid to our

external auditors complies with this policy and does

not compromise their independence or objectivity.

Details of the fees paid to EY for audit and non-audit

services are set out in Note 7 to the Accounts; non-

audit fees during the year represented 5.3% of total

EY audit fees for the Group (2024: 5.4%). To further

maintain auditor independence, the Group has

processes in place regarding the employment of

former employees of the auditor.

EY were appointed as external auditor following a

competitive tender process and their appointment

was approved by members at the AGM on 29 April

2019. EY were reappointed as the Society’s external

auditor at the 2025 AGM and the Audit Committee

has recommended to the Board that they be

approved for reappointment as external auditor at

the 2026 AGM. The Committee continues to monitor

auditor tenure to ensure compliance and best

practice. The Committee also reviewed advisory and

consulting fees paid to other firms which could be

suitable auditors of the Group. This is done

periodically to ensure that if a change of auditor is

required, we have appropriate options.

The Committee has overseen the external audit

process having regard for the FRC’s Audit

Committees and the External Audit: Minimum

Standard, confirming auditor independence,

transparency, and effectiveness.

We considered matters raised during the statutory

external audit and the half year independent review

and, through discussion with senior management of

the business and the external auditor, concluded that

there were no adjustments required that were

material to the financial statements as presented

d) Other matters

Other matters considered by the Committee during

the year include the following:

• Received and approved the Group Sustainability

Report, Group Climate-Related Financial

Disclosures and the Society’s and SIL’s Principles

for Responsible Banking Self-Assessment Report;

• Conducted the annual review of the Speak Out

(Whistleblowing) policy and received the annual

whistleblowing oversight report;

• Received a progress update from Group Risk on

activity to support adherence to the revised

Provision 29 of the UK Corporate Governance

Code; and

• Refined the approach to governance and

oversight of subsidiary company’s audit & risk

committees.

Effectiveness of the Board Audit Committee

The effectiveness of the Committee was assessed

as part of the most recent internal Board

performance review the results of which were

presented in April 2025 and which concluded that we

operated effectively during the year.

Committee members undertake relevant training as

part of their ongoing development and, periodically,

the Committee as a whole receives training on

current topics such as sustainability and climate-risk

reporting requirements, sector challenges, regulatory

developments, conduct risk issues and financial

reporting ‘hot topics’ to ensure we remain effective in

our role.

Iain Cummings

Chair of the Board Audit Committee

17 February 2026

I Cummings

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 92

Members of the Board Change Committee

The Committee is comprised of three members, Iain

Cummings, Graham Lindsay and I, all of whom are

independent Non-Executive Directors with significant

change management experience. Iain serves as

Chair of the Board Audit Committee and is a member

of the Board Risk and Board Nominations

Committees and Graham, our Senior Independent

Director for the Group, is a member of the Board

Audit, Board Nominations and Board Remuneration

Committees. I also serve as a member of the Board

Risk, Board Nominations and Board Remuneration

Committees. Together these arrangements ensure

good interaction between the various committees of

the Board.

The Committee was established by the Board during

2023 to oversee and govern the increasing scale and

complexity of the Group’s on-going change strategy. 

During 2025 the Committee held four meetings.

Attendance of its members at those meetings is set

out in the Corporate Governance Report. 

In addition to Committee members, other attendees

(by invitation) included the Group Chief Executive,

the Group Chief Information Officer, the Group Chief

Financial Officer, the CEO Homes, the CEO Money

and the Group Secretary and General Counsel. The

Committee received regular reports directly from

members of senior management across the Group

responsible for delivering our change agenda. These

included updates from Connells, SIL, Jade and SBF

as well as the Society and Group functions.

Role and responsibilities of the Committee

The Committee seeks to ensure change is delivered

as efficiently and effectively as possible and that the

impact on members, customers and colleagues is

positive and well handled.

The responsibilities of the Committee are delegated

by the Board and are set out in our Terms of

Reference which are available on our website at

skipton.co.uk/about-us/governance.

The Committee’s role is to provide guidance,

challenge and advice to the Executive Team on

behalf of the Board, to shape how change is

delivered across the Group. The Change Portfolio is

the programmes of work, systems and controls

through which changes to our business are

prioritised, coordinated and implemented. The

Committee’s primary responsibilities are:

• To oversee the alignment of the Change Portfolio

with the technology, process and people

strategies and be satisfied that the Change

Portfolio supports the Group’s strategic vision; 

• To oversee the Change Portfolio priorities and

methodology, including the capacity to resource

and absorb change;

Performance & Strategy Governance

Financial Statements

Other Information

Dear Member,

On behalf of the Board Change

Committee, I am pleased to present

the Committee’s annual report

covering the role of the Committee

and how it has discharged its

responsibilities during 2025.

Heather Jackson,

Chair of the Board Change Committee

Skipton Group Annual Report & Accounts 2025 93

• Review of significant change proposals before

presentation to the Board for approval;

• Review of assurance reports and management

actions to address any findings;

• Scan the horizon for future industry trends and

opportunities in technology that could impact or

benefit the Group; and

• To oversee and challenge change initiatives

including:

• Progress and delivery, including risk

management, benefits and outcomes;

• Financial management, including spend

and benefits delivery;

• The overall approach, including ‘lessons

learned’ when initiatives are completed;

• Adequacy of resource, including

appropriate levels of resourcing roles,

responsibilities and skills; and appropriate

use of data.

Activities of the Committee

Throughout 2025, the Committee has focused on:

• Ensuring the Change Portfolio aligns with the

Skipton Group Corporate Plan, including future

planning, delivered outcomes, and required

investments. This ensures the change we execute

builds to deliver the strategy set by the Board.

• Receiving updates from the Group Technical

Council, such as capability frameworks and

architectural models which helps ensure the

architectural approaches taken maximise re-use,

future-proofing and cross-Group opportunities.

• Promoting consistent approaches to change

delivery through the introduction of a

standardised Change Management Framework

which supports regular assessment of progress,

costs, effectiveness, and value. Additionally, we

have increased the visibility of each Group

Company’s change portfolio as well as promoting

the sharing of skills and knowledge, strengthening

collaboration and accelerating value creation.

• Monitoring the Society’s Digital Transformation

Programme, with a strong focus on delivering

member benefits, enhancing ease of use, and

driving measurable impact. Notably, the

Committee has overseen the successful rollout of

our new Customer Engagement Platform,

designed to significantly improve customer

servicing. In addition, we have overseen the

migration of the first cohorts of customers to our

new mobile app, marking a key milestone in our

digital journey.

• Enhancing quality of change initiatives by

assessing member and colleague impacts,

resource use, and incorporating post-

implementation reviews and second and third-line

inputs.

• Reviewing overall resourcing of change, including

where we use third party partners; ensuring they

are efficiently and appropriately adding value to

our change work and delivering clear returns on

investment. Additionally, we have also sought to

ensure recruitment and training strategies

maintain future-ready change capabilities.

• Overseeing robust and proportionate risk

management that balances the urgency of

change with the need to mitigate potential

negative impacts, safeguarding both strategic

objectives and operational stability, with a

specific focus on cyber risk mitigation and other

critical security considerations.

• Importantly in 2025 the Executive Team have

worked to enhance tracking of benefits delivered,

ensuring clear accountability for return on

investment. This will remain a priority and receive

ongoing focus throughout 2026.

• We have monitored progress on the Group’s Data

Strategy, delivering tangible benefits for members

and colleagues, unlocking new insights, and

capitalising on AI opportunities. The Skipton

Group Home Affordability Index demonstrates our

ability to leverage Group data alongside leading

economic sources to provide a clear view of UK

housing market trends.

• During every meeting, we consider the threats and

opportunities of change which includes a horizon

scanning topic on emerging technologies. In 2025

these were on: data usage, quantum computing,

cybersecurity, and further AI opportunities,

especially in mortgages.

Looking forward

Over the course of 2026, the work of the Committee

will continue to evolve and will include:

• Considering the change and technology required

to support the aims of the Group’s Corporate

Plan. Specifically, the Committee will oversee the

delivery of major change initiatives, including:

• Migration of the Society’s customers to a

new mobile app, coupled with

improvements giving colleagues faster,

clearer access to customer accounts -

enabling quicker service and better

customer interactions;

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 94

• The roll out of new technology across

Connells’ estate agency business to

increase colleague efficiency and improve

customer service; and

• Strengthening fraud prevention through

faster and more secure customer

identification processes within SIL and

SBF.

• Continued review of the member and colleague

impact from change alongside oversight of

delivery, risk, financial management and

implementation of change across the Group; 

• Reviewing required Group capabilities, and the

architecture, data and resource strategies for

change across the Skipton Group and continuing

to foster the sharing of Group skills and

experiences to best effect; and

• Continuing to explore new industry and

technology developments relevant to the work of

the Committee and understanding how those

developments can assist us to better serve our

members in the future. These may include

exploration of the use of Artificial Intelligence,

Digital Currencies and Identity, Cyber Security and

consideration of the future of Quantum Compute.

Conclusion

In fulfilling the above, we aim to ensure the change

we make is in the best interests of our customers

and colleagues now and in the future. On behalf of

the Committee, this report highlights the work

undertaken and underscores the importance of its

future role.

H Jackson

Heather Jackson

Chair of the Board Change Committee

17 February 2026

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 96

In 2025, we further strengthened our Group Risk

Management Framework to enable a more

consistent, proactive approach to the identification,

assessment, mitigation and ongoing management of

risks. This included strengthening governance

practices and improving oversight mechanisms to

align with upcoming changes to the UK Corporate

Governance Code.

Committee focus

In line with the Group Risk Management Framework,

the Board Risk Committee has focused on the

following areas during the year:

• Liquidity management, to ensure that the Group

maintains a prudent liquidity position and is well

placed to respond to the uncertain geopolitical

environment, while preserving our diversified

funding base.

• Capital and MREL, to ensure that the Group

maintains sufficient capital resources to support

our business strategy and potentially respond to a

severe economic stress.

• Cyber threats, to ensure that the Group has

effective tools, supported by a plan of continuous

improvement, to reduce the impact of a potential

cyber-attack. We remain alert to this risk given

ongoing geopolitical tensions and recent high-

profile attacks on UK firms.

• Artificial intelligence, to ensure we have

appropriate risk oversight and capabilities to

responsibly harness the power of AI.

• Credit performance, to ensure that the Group

appropriately evaluates and balances risk and

reward in a competitive mortgage market.

• Conduct risk, ensuring delivery of the Society’s

values and compliance with Consumer Duty, with

a focus on achieving good outcomes and fair

value for members and customers.

• Operational resilience, to ensure the Society and

Group businesses can recover in a swift and

organised manner in the event of an operational

failure, providing a reliable and resilient service to

members and customers.

• Climate risk, to ensure that the Group is

responding appropriately and with purpose to the

associated physical and transitional risks.

To assist the Board Risk Committee’s deliberations,

it receives regular reports from the Group Chief Risk

Officer. These reports provide clarity on the key and

emerging risks faced by the Group and direct the

Committee’s attention to those matters which the

Risk Officer believes warrant further consideration.

Risk appetite

Day-to-day operation of the business naturally

exposes the Group to a range of potential risks. To

limit the level of risk accepted by the Group in the

normal course of business, the Board has

established a risk appetite. This is reviewed, at least

annually, in the context of the prevailing environment

in which the Group operates.

Performance & Strategy Governance

Financial Statements

Other Information

Dear Member,

As the Chair of the Board Risk

Committee, I am pleased to present

the 2025 Board Risk Committee

Report. This report explains the risk

management practices we operate at

Skipton, and the key areas of focus

for the Board Risk Committee

through 2025.

Denis Hall,

Chair of the Board Risk Committee

Skipton Group Annual Report & Accounts 2025 97

Governance structure

To enable appropriate focus on risk matters, the

Board has delegated oversight of risk management

to the Board Risk Committee, although ultimate

responsibility continues to reside with the Board

which receives regular reporting to support its

oversight of risk. In addition, the Board receives

verbal updates from the Board Risk Committee Chair

on key topics of discussion and any concerns.

The Board Risk Committee is supported by an

Executive Risk Committee which is chaired by the

Group Chief Risk Officer. This is the primary

Executive body which meets regularly to oversee and

monitor the key risks across the Group, including

overseeing several specialist sub-committees

addressing specific risk areas, such as credit,

conduct, and operational risk.

At a Group business level, Connells, SIL and Jade

operate their own Audit and Risk Committees which

report directly to their respective boards. The Group

Chief Risk Officer maintains oversight of all Group

businesses in relation to risk management and

control.

Membership and attendees

The members of the Board Risk Committee during

the year were:

Corporate Governance Code readiness

In anticipation of the revised Provision 29 of the UK

Corporate Governance Code which comes into effect

in January 2026, the Group has undertaken a

programme of work in 2025 to further enhance and

strengthen existing approaches.

This activity focused on review and refinement of our

Group risk taxonomy to ensure this remains

reflective of the changing risk landscape and

business practices. We have also further

strengthened our Risk and Control Self-Assessment

process to embed a culture of risk ownership and

continual improvement, supported by a strong

understanding of our material control activities.

Group-wide risk reporting has also been enhanced to

provide a clear, aggregated view of current and

emerging risks to the Board.

Group Risk Management Framework

The Group operates a formal Risk Management

Framework that strengthens oversight, ensures

consistent identification and mitigation of both

emerging and known risks, and supports decision-

making across the business.

This comprehensive framework is designed to

enable delivery of the Corporate Plan in line with the

Board’s overall risk appetite. The framework defines

the principal risks to which the Group is exposed

along with governance expectations and roles and

responsibilities for the management of these risks.

The framework supports regulatory compliance,

promotes proactive risk culture, protects members’

interests and enables sustainable growth. It is

underpinned by a clear ‘three lines of defence’ model

with clearly defined roles and accountabilities:

The Group is alert to emerging risks and regulatory

changes. These are considered at each meeting of

the Board Risk Committee and by the Group Chief

Risk Officer on a day-to-day basis. Our reporting

process provides the Board and Board Risk

Committee with a robust continuous assessment of

the principal risks and risk environment across the

Group and enables it to challenge management on

its mitigation plans in a timely manner.

Performance & Strategy Governance

Financial Statements

Other Information

The first line of defence is formed by the frontline

business areas and operational teams that own

and manage risks directly. They are responsible

for identifying, assessing and managing risks

within their day-to-day activities, ensuring

processes are followed, controls are effective, and

issues are escalated promptly.

The second line of defence comprises our Group

Risk function and embedded risk teams, which

provide independent oversight, challenge, and

guidance to ensure risks are appropriately

identified, assessed, and managed by the first line.

The Board Risk Committee Chair safeguards the

independence of the second line by ensuring it can

exercise objective challenge without constraint.

The third line of defence, provided by Group

Internal Audit, is designed to provide risk-based

independent assurance to the Board (through the

Board Audit Committee) of the adequacy and

effectiveness of control systems operating within

the first and second lines in identifying and

managing risk.

Denis Hall (Chair) Non-Executive Director

Iain Cummings Non-Executive Director

Hasintha Gunawickrema Non-Executive Director

Heather Jackson Non-Executive Director

Skipton Group Annual Report & Accounts 2025 98

To meet the CRD V Pillar 3 requirements, the Group

publishes further information about its exposures and

risk management processes and policies on the

Society’s website skipton.co.uk.

Conclusion

The geopolitical and economic events that shaped

2025 are being closely monitored by the Group. Some

economic uncertainty exists in the markets in which we

operate, and whilst it may be difficult to predict the

outcome of such uncertainty, I am confident that the

Risk Management Framework operated by the Skipton

Group enables it to identify, assess and manage the

risks confronting it and support business sustainability.

To underpin this, the Board Risk Committee will

continue to promote a culture which views risk

management not as an additional activity but as

embedded in how the business is run.

Denis Hall

Chair of the Board Risk Committee

17 February 2025

D Hall

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Annual Statement

101

Summary Directors’ Remuneration Policy

105

Annual Report on Remuneration in 2025

106

2026 Remuneration Outlook

115

Skipton Group Annual Report & Accounts 2025 100

Dear member,

On behalf of the Board Remuneration Committee,

I am pleased to share the Directors' Remuneration

Report. This sets out the details of the Executive

Directors' pay, incentives and benefits and the

Non-Executive Directors' fees for the year ended

31 December 2025.

Our Directors’ Remuneration Report for the year

ended 31 December 2024, as well as our

Directors’ Remuneration Policy which applies until

the 2028 Annual General Meeting (AGM), received

strong support from our members at the 2025

AGM (with both receiving 92% of votes ‘FOR’) .

I would like to thank our members for their

ongoing support.

Steven Davis,

Chair of the Board Remuneration Committee

The Committee and its advisers

The members of the Board Remuneration Committee

are all independent Non-Executive Directors of the

Society and include members of the Board Risk, Board

Audit and Board Change Committees. The Committee

during the year included the following Non-Executive

Directors:

• Steven Davis, Non-Executive Director (Chair).

• Heather Jackson, Non-Executive Director (Chair of

the Board Change Committee and member of the

Board Risk Committee.

• Mark Lund, Non-Executive Director (member of

the Board Audit Committee). Mark Lund stepped

down from the Committee on 28 April 2025.

• Graham Lindsay, Senior Independent Director

(member of the Board Audit Committee). Graham

Lindsay joined the Committee on 19 May 2025.

In addition to Committee members, regular attendees

at Committee meetings include the Group Chief

People Officer, the Group Secretary and General

Counsel, and PwC, our independent external

consultants.

The Group Chair has a standing invitation to all

meetings of the Committee. The Group Chief

Executive, Group Chief Risk Officer and the Director of

Reward and Governance attend meetings by

invitation. The Committee met on eight occasions in

2025.

The purpose of the Board Remuneration Committee

• To determine, on behalf of the Board, the

Directors’ Remuneration Policy.

• To ensure that remuneration arrangements

support and encourage desired behaviours and

culture.

•

To maintain policies for the Group which are

compliant with applicable governing laws and

regulations and aligned, where appropriate, to the

remuneration expectations of the PRA and FCA

and those set out in the UK Corporate Governance

Code.

•

To ensure appropriate governance of

remuneration practices across the Group, which is

defined as the Society and its subsidiary

undertakings, including the following key

businesses: Connells, SBF, SIL, and Jade; and to

exercise effective oversight of these.

•

To ensure that remuneration policies, principles

and practices are appropriate, market competitive,

compelling to new hires and fair and equitable to

existing colleagues, to enable the Group to attract,

retain and reward people with the right skills

experience, knowledge and behaviours to support

achievement of the Group’s strategic objectives

and the successful delivery of its long-term

strategy and to promote long-term sustainable

success.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 101

Amongst its other duties, the Board Remuneration Committee has responsibility for:

• Setting the Remuneration Policy: Defines and agrees remuneration policies and principles on behalf of the

Board, ensuring they align with the Group’s strategy, risk profile, values, regulatory requirements and long-

term member interests.

• Group Oversight and Compliance: Ensures remuneration policies operate as intended and aligns with the

Board Audit and Risk Committees to promote sound risk management.

• Group-wide Risk-adjusted Remuneration: Maintain robust processes for risk adjustment, considering risk

appetite, capital, liquidity and overall performance. Reviews variable pay against performance targets and

applies malus or clawback where appropriate.

• Executive and Senior Pay Decisions: Determines remuneration for the Society’s Chair, executive directors,

senior officers in Risk and Compliance and other Material Risk Takers and executive directors across the

Group. Reviews and approves senior executive pay proposals recommended by the Group Chief Executive.

• Service Contracts: Sets the terms, objectives and content of Society executive directors and senior

executive service contracts across the Group to ensure alignment with policy, regulation and best practice.

• Exceptional Pay Reviews: Reviews any pay structures or proposals that fall outside established

remuneration principles.

The full terms of reference of the Board Remuneration Committee and the Remuneration Principles are

available on request from the Group Secretary and General Counsel. The terms of reference are also available

online at skipton.co.uk/about-us/governance.

We have set out this Directors’ Remuneration Report in the following four key sections:

1. An Annual Statement explaining the priorities of the Committee across reward for all colleagues and

summarising the remuneration policy for executive directors.

2. A Summary Directors’ Remuneration Policy in respect of the Society executive directors.

3. The Annual Report on Remuneration in 2025, which explains how the remuneration policy was

implemented during the 2025 financial year.

4. The 2026 Remuneration Outlook, which sets out our planned approach to applying the remuneration policy

in 2026.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 102

The key matters discussed, and the decisions made by the Committee during 2025 are set out below.

Remuneration component

Action taken

2025 Pay Review

Approved the 2025 salary awards for the Group Executive Committee, senior

managers and Material Risk Takers (MRTs), in line with the all colleague pay

review.

2024 SVPA* outcomes &

payments

Approved annual bonus awards for all employees in scope of the PRA and

FCA remuneration rules in respect of the performance year 2024, considering

the Group Chief Risk Officer’s risk report, the Group Chief Financial Officer’s

sustainability review, performance outcomes versus scheme measures and

related personal performance objectives.

2025 Group LTIP** design

Approval and implementation

of overall grants for the LTIP, for the executive

directors and selected Group Executive Committee colleagues.

Determined

the key performance measures and targets across the following areas:

• Financial

• Non-financial

2025 SVPA

design

Determined the updated key performance measures and targets across the

following areas:

• Financial

• Customer and Colleague

• Environmental, Social and Corporate Governance (ESG)

• Personal performance objectives

2025 Connells group LTIP

design

Reviewed and approved the design and measures of the LTIP and annual

bonus measures

for the Connells executives for performance year 2025.

2025 Group Subsidiary

Executive Pay Review and

incentives

Approved the 2025 salary increases and 2024 bonus awards for the

Subsidiary executive directors.

Market and regulatory

review

Assessed external benchmarking data as an input to ensure Society

remuneration remains competitive and appropriate. Received updates on the

regulatory consultation on remuneration reforms and determined the

approach to be taken by the Group as a result of the updated rules.

2026 Variable Pay plans and

design

Considered and approved the design of the Society’s SVPA & LTIP plans and

associated measures for the performance year 2026.

2026 Pay Review

Approved the 2025 salary awards for the Group Executive Committee, senior

managers and Material Risk Takers (MRTs).

* SVPA stands for Senior Variable Pay Arrangement, which is the discretionary annual bonus plan in which the executive directors and

selected colleagues of the Group Executive Committee participate.

** LTIP stands for Long Term Incentive Plan, which is the discretionary three-year performance plan in which the executive directors and

selected colleagues of the Group Executive Committee participate.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 103

Variable remuneration in respect of performance for

2025

A key objective for the Committee is to ensure the

remuneration of the Society’s executive directors is

both aligned with and drives business performance

across a range of measures taken from our

Corporate Plan. Each year we review the design and

focus of our annual bonus schemes to ensure

alignment with strategy and to ensure that they drive

the culture and behaviours we want to promote and

reward appropriately.

Financial and Customer performance

The scheme focused on three key financial metrics

for 2025, namely adjusted Group profit, adjusted

Society profit and Society administrative

expenses. Overall, as set out in the Group Chief

Financial Officer’s report Skipton Group’s financial

performance in 2025 has performed well, achieving

strong balance sheet growth, good profitability and a

stable capital position.

In 2025 our delivery against our purpose saw our

mortgage and savings book growth outpace the

market, with our Group mortgage book surpassing

£33bn, and our Society savings books surpassing

£30bn for the first time. Our Money business

continued to deliver seeing an increase in financial

advice conversations. Our Homes business

increased new lending to first-time buyers with our

segment market share increasing to 4.0% (2024:

3.8%). The combined success across the businesses

that make up the Skipton Group resulted in the

adjusted Group profit metric pay out, at 59.6% of

maximum (2024: 81.9%).

The Society’s net interest margin performed well in

2025 amidst a falling interest rate environment. The

Society delivered a resilient, above target

performance. As a result, the adjusted Society profit

metric pay-out remains strong, to 85.2% of maximum

(2024: 66.6%).

Administrative expenses for the Society increased

slightly by £0.4m compared to last year rising to

£262.4m (before any adjustments). We have

continued to invest in our service, through improved

digital pathways; and in our brand and our people,

whilst remaining focused on controlling our costs

and realising efficiencies. As a result, the

administrative expenses outturn is 67.3% of

maximum.

Our customer base has grown in 2025, and we have

maintained high satisfaction scores through our

delivery of both great service and products. In 2025 a

customer satisfaction score of over 90% was

achieved. The net customer satisfaction

performance measure achieved 10 out of 10 and will

pay out at 100% (2024: 90%).

Non-financial performance

In line with the Corporate Plan, two key non-financial

performance metrics were included for 2025. Two

Diversity and Inclusion metrics, focused on meeting

our Women in Finance Charter target and Ethnicity

target. The Society achieved an outcome of 48%

against the 2025 Women in Finance target (46.7% in

2024), which is a strong outcome compared to the

national average of 36% across financial services

organisations. This measure achieved 6 out of 10.

In line with our ongoing commitment to Diversity and

Inclusion, the Ethnicity metric score achieved 10 out

of 10, paying out at the maximum 100%.

A people-driven metric was first introduced in 2024.

In 2025 we introduced employee Net Promoter Score

to measure colleague engagement. By embedding

our new Society listening survey, we have turned

colleague feedback into actionable insight. As a

result, our engagement levels are now reporting at a

score of 42, with 89% of colleagues participating in

the survey. This metric in 2025 achieved 10 out of

10, paying out at 100%.

Awards of Long and Short Term Variable Pay in

Respect of Performance 2025

With the close of the year, the Committee reflected

on the outcomes under the Society’s 2025 SVPA and

concluded that there was no requirement to apply

any upward or downward discretion. After

considering the financial, non-financial and personal

performance, incentive payments awarded were

between 38.54% and 40.78% of salary, where the

maximum potential bonus under the scheme is 50%

of salary. 

In arriving at the decision on the Society’s 2025

SVPA awards, a risk assessment process was

undertaken, during which the Committee considered

a range of factors and input from the Board Risk

Committee. The Committee decided that no risk

adjustments were required.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 104

The Directors’ Remuneration Report and

Remuneration Policy for the year ended 31

December 2024 received strong member support,

both receiving 92% of votes cast in favour at the

AGM held in April 2025. Taking this outcome into

account and having assessed individual conduct and

performance, together with the Society’s overall

performance in 2024, the first LTIP grant, equivalent

to a maximum potential value of 75% of annual

salary was awarded to the executive directors and

selected colleagues of the Group Executive

Committee. These awards will be confirmed on the

third anniversary of grant, subject to meeting

performance conditions measured over a three-year

period ending on 31 December 2027. Any vested

awards at the end of the performance period will be

disclosed in the 2027 Directors’ Remuneration

Report.

Remuneration regulations

The final policy position on the changes to the PRA

regulation reforms was confirmed in October

2025. This included the simplification and reduction

in the deferral time horizons for variable pay. The

Committee remains committed to ensuring our

reward approach remains fit for purpose and aligned

with both the evolving regulatory landscape, the

Group's pay policy and member interests. Whilst

there will be an ongoing review of the application on

practices under the updated regulations, the

Committee has agreed that at present there will be

no changes made to the payment scheduling of any

historical bonus awards. Any awards made to the

executive directors in respect of the 2025

performance year and onwards will be paid in

accordance with the regulations. For further details

see page 110.

2026 look forward

Looking ahead to 2026, the Committee will continue

to review the LTIP to ensure alignment with our

strategy and member interests. As outlined on pages

115 and 116, executive directors and selected Group

Executive colleagues will participate in the following

variable pay schemes for 2026:

•Senior Variable Pay Arrangement (SVPA) maximum

award up to 50% of salary.

•Long term Incentive Plan (LTIP) maximum award

up to 75% of salary.

In the context of the wider workforce the Committee

approved a salary increase of 3% for the Group Chief

Executive Officer and Group Chief Financial Officer,

effective 1 January 2026. The Chair and non-

executive directors of the Society received a fee

increase of 4%, effective 1 January 2026, the

average increase received by the wider colleague

population was 4.48%.

Conclusion

On behalf of the Committee, I hope this report gives

you a clear view of how we have implemented the

Directors’ Remuneration Policy in 2025 and how we

are investing to support the Group’s ambitions and

strategic priorities set out in our Corporate Plan. The

Committee recommends that the members vote in

favour of the advisory resolution to approve the 2025

Directors’ Remuneration Report at the forthcoming

AGM.

Steven Davis

Chair of the Board Remuneration Committee

17 February 2026

S Davis

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 105

Summary of Remuneration Policy for Executive Directors in the Society

The complete policy is available in our Annual Report and Accounts 2024 on the Society’s website. The current

Directors’ Remuneration Policy was approved at the AGM on 28 April 2025 and in line with corporate

governance standards is expected to apply until the 2028 AGM when members will be asked to approve a

revised Policy.

The Committee is comfortable that the current policy is operating as intended and that the overall 2025

remuneration paid to executive directors as set out in the Annual Report on Remuneration, is appropriate. This

section summarises the current Directors’ Remuneration Policy. The table below outlines the key elements of

remuneration for executive directors, the operation and opportunity and the criteria for 2026.

Element of

remuneration

Operation and opportunity

Implementation

Base salary

Base salary is typically reviewed annually, and any increases are

effective from 1 January.

Salaries are set taking into account the size of the role and

responsibilities, and the skills and experience of the individual

as well as the individual's performance. Pay levels in

comparable organisations are also considered.

As set out in the Chair’s letter, the

Committee determined base

salaries for 2026 as follows:

• S Haire £761,302

• P Chambers £456,187

Pension Executive directors receive a contribution and / or cash

allowance to a defined contribution pension scheme. The

pension allowance rate for executive directors is aligned with

the maximum rate available to all other colleagues (currently

10% of base salary).

No change for 2026

Benefits Benefits provided to executive directors include a car or car

allowance, accommodation, private medical insurance, health

assessment, life insurance and group income protection benefits.

The Society bears the cost of providing benefits, which may vary

from year to year. The maximum potential value will depend on the

type of benefit and cost of providing it, which will vary according to

market rates.

No change for 2026

Annual bonus

SVPA (Senior

Variable Pay

Arrangement)

Performance is assessed against a balanced scorecard of measures

to determine the amount of the award for any particular year.

The maximum incentive which may be earned for any year under the

SVPA is 50% of base salary.

For awards made in respect of

2026 the target opportunity will be

30% of base salary, with a maximum

opportunity of 50% of base salary.

70% of the awards are based on

financial and non-financial

measures, with 30% of the award

based on individual performance

(including conduct and behaviours).

See page 109 for further details.

LTIP (Long-

Term Incentive

Plan)

Long term awards incentivise executive directors to deliver on

the long-term strategy of the Group over a three-year period,

thereby contributing to the long-term stability of Skipton and

creating value for the Society and its members.

The maximum potential opportunity under the LTIP is 75% of

base salary. On-target performance generally attracts an

incentive of 60% of the maximum.

Subject to the achievement of

satisfactory Society and

individual performance over the

2025 year, it is intended that LTIP

awards will be made at the

maximum potential opportunity.

See page 108 for further details.

Non-Executives Fees are typically reviewed annually. Non-executive directors do not

receive any benefits or variable pay. Travel and subsistence

expenses, including between home and Skipton offices, are

reimbursed and any tax that arises on those expenses is settled by

the Society. Fees are determined based on responsibilities, time

commitment and fees in comparable organisations.

The annual review of non-

executive director fees for 2026

has been undertaken and fees

adjusted by 4% with effect from 1

January 2026.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 106

The Annual Report on Remuneration explains how we applied our existing remuneration policy in 2025 and

how we intend to implement the policy in 2026. The Committee is comfortable that the current policy operated

as intended and that the overall 2025 remuneration paid to executive directors, as set out below, is

appropriate.

Key metrics for Remuneration in the SVPA for 2025

The Strategic Report provides a comprehensive explanation of the Group’s purpose and strategy. To keep us

focused on delivering our strategy we have three key priorities:

• Help more people have a home

• Make money work harder

• Make membership matter

These ensure we are driving the Group forwards and working together to deliver more for the Society’s

members. In addition, the Strategic Report explains how Environmental, Social and Corporate Governance

(ESG) are woven through the strategy. Further details on the 2025 measures for the SVPA and LTIP can be

found on pages 108 and 109.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 107

Executive Directors’ Remuneration

Any amounts awarded to the executive directors relating to the first LTIP for 2025 will be disclosed in the

Annual Report and Accounts 2027.

The total remuneration of each executive director in 2025 and 2024 is set out in the single figure tables below:

2025 audited

Executive

Director

Role

Salary

£000

Benefits

(1)

£000

Pension

(2)

£000

Total fixed

remuneration

£000

SVPA

£000

Total

remuneration

£000

Stuart

Haire

Group Chief

Executive

739 37 74 850 296 1,146

Paul Chambers

Group Chief

Financial

Officer

443 21 44 508 171 679

Andrew

Bottomley

(3)

CEO, Money 190 9 26 225 35 260

Total

Remuneration

1,372 67 144 1,583 502 2,085

Executive

Director

Role

Salary

£000

Benefits

(1)

£000

Pension

£000

Total fixed

remuneration

£000

SVPA

£000

Other

£000

Total

remuneration

£000

Stuart

Haire

Group Chief

Executive

718 39 72 829 282 - 1,111

Paul

Chambers

(3)

Group Chief

Financial

Officer

388 17 39 444 145 145 734

Andrew

Bottomley

CEO, Money

352 17 53 422 132 - 554

Bobby

Ndawula

(4)

Group Chief

Financial

Officer

365 15 37 417 66 - 483

Total

Remuneration

1,823 88 201 2,112 625 145 2,882

Notes

1. Includes all taxable benefits (private medical insurance, car allowance, health assessment, life assurance, group income protection

and travel and accommodation).

2. Current executive directors receive 10% of base salary paid into the pension scheme up to the tax approved pension limits with any

balance paid to them.

3. Andrew Bottomley’s employment with the Society ended on 30 June 2025. Andrew also received 15% of base salary (excluding any

unused holiday pay accrued, totalling £13,536) paid into the pension scheme during this period. The amount awarded to him under

the SVPA takes into consideration the period in office from 1 January to 31 March 2025.

2024 audited

Notes

1. Includes all taxable benefits (private medical insurance, car allowance, health assessment, life assurance, group income protection

and travel and accommodation).

2. Current executive directors receive 10% of base salary paid into the pension scheme up to the tax approved pension limits with any

balance paid to them, with the exception of Andrew Bottomley who received 15%.

3. Paul Chambers started his employment with the Society on 6 February 2024. Whilst we stated in the 2024 report that Paul would

receive a lost opportunity award of £250,000, the Society actually paid him £145,000 for his forfeited performance year 2023 bonus.

4. Bobby Ndawula’s employment with the Society ended on 22 November 2024. The amount awarded to him under the SVPA takes into

consideration the period in office from 1 January to 31 May 2024. His garden leave commenced on 1 June 2024.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 108

Base salary and fees

Pay awards of 3% were awarded to the executive directors as part of the Society pay review effective 1 January

2025.

Notes

1. Paul Chambers joined on 6 February 2024 and the salary stated in 2024 is effective from that date.

2. Andrew Bottomley retired from the Society on 30 June 2025 and therefore did not receive a pay increase in 2025.

Executive Director

Role % increase January 2025 January 2024

Stuart Haire

Group Chief Executive Officer

3.00% £739,128 £717,600

Paul Chambers

(1)

Group Chief Financial Officer

3.00% £442,900 £430,000

Andrew Bottomley

(2)

CEO, Money

- £ 351,942 £351,942

Variable Pay: Long-term Incentive Plan (LTIP)

The Directors’ Remuneration Report and Remuneration Policy for the year ended 31 December 2024 received

strong member support, ranging between 92-93% of votes cast in favour at the AGM held in April 2025. Taking

this outcome into account, and having assessed individual conduct and performance together with the

Society’s overall performance in 2024, the first LTIP grant* equivalent to a maximum potential opportunity of

75% of base salary, was awarded to colleagues of the Group Executive Committee, including the executive

directors.

The LTIP operates over a three-year forward-looking performance period commencing on 1 January 2025.

Performance will be measured against a balanced LTIP scorecard incorporating financial and non-financial

metrics aligned to the Society’s long-term goals and the Group’s strategic priorities. See the table below for

details of the 2025-2027 measures.

No LTIP payments are made straight away. Any payout will only be confirmed after conclusion of the three year

performance period and will remain subject to Committee approval. This approval includes confirmation that

performance conditions have been met and that the Society’s accounts for the year ending 31 December 2027

have been formally approved. No payout will be made if performance does not reach the required level.

Upon completion of the performance period, the Committee will assess overall outcomes against the LTIP

scorecard and will consider whether any significant conduct, risk, reputational, financial, operational, or other

matters should affect the release of awards**. This assessment will include input from the Board Risk

Committee and Board Audit Committee. The specific performance measures and the corresponding

performance outcomes will be disclosed in the relevant year’s Remuneration Report.

*Grant refers to the point at which an LTIP is formally awarded to an individual at the start of the performance period confirming the

moment the participant becomes eligible to earn an award subject to meeting the performance conditions during the full performance

period.

**Award refers to the value that becomes payable to a participant at the end of the LTIP performance period, once the Board Remuneration

Committee has confirmed the extent to which the performance conditions have been met. It represents the final, earned outcome of the

LTIP.

LTIP measures 2025-2027 Weighting

Financial

Profit: Adjusted Group PAT (£m)

40%

Growth: Growth in Mortgage Balances

30%

Non

-Financial

Uplift in Financial Advice

Proportion of lending to first time buyers

Society membership satisfaction score

Group scope 1&2 emissions

Risk Scorecard

Reduction in the number of customer complaints

Overdue audit findings

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 109

Variable pay: Senior Variable Pay Arrangement (SVPA)

The SVPA is a discretionary incentive plan designed to reward performance on an annual basis within the

context of achieving corporate goals and objectives as set out in our Corporate Plan, encouraging positive behaviours

and maintaining sustainable performance to support the achievement of strategic goals. Participation in the plan

relating to any financial year shall be at the discretion of the Board Remuneration Committee.

The table below summarises the measures, performance targets, outcomes and weightings of the 2025 SVPA.

Note

1. For bonus purposes, the Group and Society PBT figures and Society administrative expenses are adjusted as outlined in the Board

Audit Committee Report.

At the end of the year, the Committee reviewed the annual performance under the SVPA for all the executive

directors and selected Group Executive Committee members. The incentive outcomes for 2025 are based on

the performance relative to target for the SVPA measures. They also reflect the Committee’s assessment of

performance achieved against personal objectives, taking into consideration the views of the non-executive

members of the Board.

Based on this overall assessment, the outcomes for the executive directors were between 38.54% and 40.78%

of base salary reflecting the robust performance of the Group over the year.

2025

performance

measures

Performance target

range: Threshold -

Maximum

Performance

relative to Targets

Outcome

Weighting

Group Chief

Executive &

Group Chief

Financial

Officer

Weighting

other

Executive

Directors

Adjusted Group PBT

(1)

£262.9m

– £355.7m Above threshold £307.3m 17.5% 0%

Adjusted Society PBT

(

£177.1m

- £239.5m Above target £228.0m 17.5% 35%

Adjusted Society

administrative

expenses

(1)

£295.8m

- £218.6m Above target £250.2m 10% 10%

Society net customer

satisfaction

82%-90% At maximum 90% 15% 15%

Colleague engagement

and culture

20-40 At maximum 42 5% 5%

ESG

– D&I Women in

Finance

46.7%-50% At target 48%

5% 5%

ESG

– D&I Ethnicity

6.4%-8% At maximum 9.2%

Personal Objective: performance has been assessed against both the delivery

of the Society performance scorecard as well as individuals’ goals, values and

Behaviours i.e. the “how” and the “what”.

30% 30%

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 110

Risk considerations

To ensure that rewards are based on sustainable performance, set in a multi-year period, the Board

Remuneration Committee conducts a financial sustainability review for senior schemes (SVPA and senior

leaders), one year after the original performance year. The review also considers feedback from the Board

Risk and Board Audit Committees provided as part of the annual risk assessment process. The

sustainability review conducted in February 2026 for the 2025 SVPA and senior leaders’ schemes

demonstrated that 2024 performance levels had been maintained in 2025. The Board Remuneration

Committee therefore concluded that no adjustment to the 2024 awards was required at this point in time.

The Society has a Risk Adjustment Policy which sets out its approach to ex-ante and ex-post risk

adjustment, malus and clawback. Where the Remuneration Committee determines that risk adjustment is

required, payments due from the scheme and deferred payments (if applicable) may be postponed, reduced,

or cancelled for some, or all, participants. Examples of events in which malus and clawback may be

considered but is not limited to:

• Reasonable evidence of misconduct or performance issues

• The Group suffering financial or risk related failures

• Serious operational or regulatory issues.

In certain circumstances, the business may need to apply clawback arrangements and require repayment of

an appropriate amount of variable pay relating to the event which has occurred. The timescales in which

malus and clawback applies are in line with regulatory requirements.

The Board Remuneration Committee, after consultation with the Board Risk and Board Audit Committees

and consideration of performance against risk appetites, did not make any risk adjustments for 2025.

Deferral arrangements

In line with changes to remuneration regulations, variable pay may be subject to deferral. The Committee

has determined that, executive directors whose pay exceeds the ‘de-minimis*’ limit will have a five-year

deferral period. Under this policy, 40% of the first £660,000 of variable pay will be deferred, and 60% of any

amount above that will also be deferred. Regulations further require that 50% of total variable pay is

delivered in the form of an instrument. For 2025, variable pay includes the SVPA and the first LTIP grant.

SVPA payments are split equally between cash and a share-like instrument, while LTIP awards are delivered

entirely as share-like instruments**. See table below for details of the scheduling of payments.

*In the remuneration code, “de minimis” refers to a small-value threshold below which certain regulatory pay requirements — such as

bonus deferral or payment in instruments — do not apply because the amounts are considered too low to warrant full rules.

**A share-like instrument is a non-equity instrument used by mutual building societies to mirror the risk-alignment features of shares,

linking part of variable pay to the Society’s long-term performance and members’ interests.

Performance & Strategy Governance

Financial Statements

Other Information

Payments to former directors

A payment of £123,164 was made to David Cutter in March 2025 in respect of vested deferred

payments in 2025 from the 2017, 2018, 2019, 2021 and 2022 SVPA schemes.

A payment of £28,960 was made to Ian Cornelius in March 2025 in respect of vested deferred

payments in 2025 from the 2019 and 2021 SVPA schemes.

A payment of £90,409 was made to Bobby Ndawula in March 2025 in respect of vested deferred

payments in 2025 from the 2017, 2018, 2019, 2021, 2023 and 2024 SVPA schemes.

Payments for loss of office - no such payments were made in 2025.

Skipton Group Annual Report & Accounts 2025 111

Non-Executive Directors’ remuneration

The role of the Non-Executive Remuneration Committee is to set and review non-executive director (NED) fees

(other than the Chair of the Board) for the Society and key subsidiaries across the Group, ensuring that these are

appropriate to attract high quality individuals. Members of the Committee comprise of the Chair and both

Executive Directors. Following a review by our independent remuneration advisors, and in consideration of the

external market benchmarks, the Committee awarded the Society’s Chair a fee increase of 11.5% and the Senior

Independent Director a fee increase of 10.7%. Pay awards of 3% were awarded to the non-executive directors in

line with the Society pay increase, effective from 2025.

The table below sets out the annual fees payable for all non-executive director roles in 2025.

2025 (£) 2024 (£)

Chair

290,000 260,000

Non

-Executive Directors base fee 72,100 70,000

Senior Independent Director (“SID”) fee

87,000 78,613

Chair of Board Audit and Board Risk Committees fee

25,000 25,000

Chair of Board Remuneration Committee fee

20,000 20,000

Chair of Board Nominations Committee fee

(1)

- -

Chair of Board Change Committee fee

20,000 20,000

Board Audit, Board Risk, Board Change, Workforce Engagement, and Board

Remuneration Committee membership fees

10,000 10,000

Note

1. There is no separate Nominations Committee chair fee as the Board Chair assumes this role.

The actual total fees and expenses for the non-executive directors in 2025 and 2024 are set out below.

Detailed information regarding the non-executive directors may be found in the Corporate Governance Report.

Notes

1. Expenses relate to reimbursement of travel and subsistence between home and the Skipton head office, including for attendance at

Board and Committee meetings. In addition to reimbursement for expenses, any tax that arises is settled by the Society on behalf

of the non-executive directors.

2. Mark Lund was the Senior Independent Director for the Skipton Board. He was re-appointed as Chair of Connells, following Sarah

Whitney's departure, on 1 March 2024. The annual payment of £50,000 received as Chair of Connells board is included in the table

above. Mark Lund retired from the Society’s Board on 28 April 2025 but maintains the role of Chair of the Connells board until 13

February 2026.

3. Steven Davis received a one-off fee in 2024 for additional duties carried out on behalf of the Board.

4. Hasintha Gunawickrema was appointed as a non-executive director effective 1 November 2024.

5. Philip Moore was the Chair of Connells Audit & Risk Committee, and also a non-executive director of Connells Limited, for which he

received an annual fee of £35,000, included in the table above. Philip Moore retired from the Board and Connells on 28 April 2025.

6. Sarah Whitney was Chair of Connells board until 29 February 2024, for which she received an annual fee of £50,000. The pro-rata

amount is included in the table above.

7. Graham Lindsay was appointed as the Senior Independent Director for the Skipton Board effective 19 May 2025.

2025 2024

Non

-Executive Director

Fees

£000

Taxable

expenses

(1)

£000

Total

£000

Fees

£000

Taxable

expenses

(1)

£000

Total

£000

Gwyn Burr (Chair) 290 1 291 260 3 263

Mark Lund (Deputy Chair)

(2)

49 3 52 146 6 152

Graham Lindsay (Deputy Chair)

(7)

73 4 77 - - -

Iain Cummings 117 6 123 115 6 121

Steven Davis

(3)

99 3 102 110 6 116

Hasintha Gunawickrema

(4)

79 4 83 12 1 13

Denis Hall 107 4 111 105 6 111

Heather Jackson 112 2 114 110 4 114

Philip Moore

(5)

44 2 46 133 5 138

Sarah Whitney

(6)

- - - 22 3 25

970 29 999 1,013 40 1,053

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 112

Remuneration in the Society

Our Reward principles and aims

Our Board Remuneration Committee does not

consult colleagues on remuneration policy for

executive directors, but it does take into

consideration remuneration arrangements for the

wider population in the Society when determining

executive remuneration. A set of fair pay principles

has been developed taking into consideration the

views of colleagues from across the Society and

these underpin the Society’s current and future

reward strategies.

The Society has wellbeing at the forefront of its

culture and continues to support colleagues

physically, mentally and financially. Our reward

platform, ‘Select’, which is used by all colleagues,

builds awareness and enables personalisation and

choice of the benefits on offer. One of the many

features is a total reward statement allowing an

individual to understand how their package is

constructed and understand the full value when all

elements of remuneration are included.

Cascade of remuneration in the Society

Key measures and targets featured in the Executive

SVPA scheme are cascaded through the incentive

schemes covering all colleagues within the Society.

This common structure helps build a shared

commitment and alignment to our purpose, vision

and strategy and provides all colleagues in the

Society with an opportunity to be rewarded in a way

that recognises our collective success.

All employees of the Society receive base pay, are

eligible for participation in a bonus scheme and

benefits package including pension, life cover, group-

income protection, private medical and company

sick pay consistent with market practice. In addition

to this the executive committee members also

receive an annual health check.

During 2025 Colleagues have been able to use our

recently developed Reward Hub providing clear,

accessible information about how pay works at

Skipton. All employees are eligible to participate in

the appropriate incentive arrangements relevant to

their role. Members of the Group Executive

Committee and other selected senior managers may

be eligible to participate in the SVPA and LTIP on the

same terms as the executive directors, subject to the

discretion of the Group Chief Executive and the

Committee. The award size for these individuals may

be lower than for the executive directors.

A variable pay arrangement for all colleagues

(excluding those in the SVPA) is in place, so that

everyone employed by the Society will have the

opportunity to share in the Society’s success. The

key measures for the scheme are aligned with those

that apply for senior management.

How does executive remuneration for 2025 align with the wider organisation?

Average pay increase

Year-on-

year

change

Average bonus award

Year

-on-

year

change

1 Jan 2025 1 Jan 2024 2025 2024

Group Chief Executive

3.00% 4.00% -1.00% 40.04% 39.30% +0.74%

Executive Directors

3.00% 4.00% -1.00% 39.66% 37.40% +2.26%

Other Society

Executive Committee

members

6.25% 4.40% +1.85% 41.99% 34.80% +7.19%

Senior leaders

3.00% 5.15% -2.15% 21.99% 19.90% +2.09%

Other colleagues

3.15% 5.02% -1.87% 10.37% 9.20% +1.17%

Whilst the key focus of the Board Remuneration Committee is remuneration for the Group Executive

Committee, we also monitor how executive remuneration aligns with the wider Society colleague population.

The table below gives a snapshot of average pay increases and bonus awards for all colleagues in 2025.

The pay increase agreed for all colleagues in the Society was 3%, effective 1st January 2025. The Society also

provided an enhanced increase for those below the Real Living Wage. Market Adjustments were made to other

Group Executive Committee members in 2025 to ensure salaries were aligned with the market.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 113

CEO pay ratio

In line with the regulatory requirements of listed companies, the Board has agreed to voluntarily publish the

CEO pay ratio for the Society only. Given the diversity of the wider Skipton Group, the Society measure is

deemed to be more appropriate as it provides a more meaningful comparison with our peers in financial

services.

For the purposes of this year’s disclosure, the pay ratio calculation uses the Society’s April 2025 gender pay

gap data to identify the three appropriate colleagues for comparison with the CEO. This methodology is

referred to as ‘Option B’. This data is used to identify the best equivalent for three colleagues whose hourly

rates of pay are at the 25

, 50

and 75

percentiles for the Society and their total pay and benefits figure for

2025 is then calculated. A sample of colleagues with hourly pay rates either side of the initially identified

individuals are also reviewed to ensure that the appropriate representative colleagues are selected.

The table below sets out the total remuneration of the Group Chief Executive and the total remuneration of

employees who sit at the 25th, 50th and 75th percentiles for the Society.

Notes

1. As recognised by the BEIS, those companies with multiple subsidiaries and payrolls can opt to use Option B.

2. Ratio 1 includes a buy-out awarded to the incoming Group Chief Executive.

3. Ratio 2 excludes a buy-out awarded to the incoming Group Chief Executive.

4. The 2024 pay ratio figure was erroneous and has been re-stated in the table above.

The total remuneration and salary values for the 25

, 50

(median) and 75

percentile employees in 2025 are:

Year

Method

(1)

percentile

pay ratio

Median

pay ratio

percentile

pay ratio

2021 Ratio

Option B 54:1 38:1 22:1

2022 Ratio 1

(2)

Option B 74:1 55:1 39:1

2022 Ratio 2

(3)

Option B 29:1 21:1 15:1

2023 Ratio

Option B 35:1 27:1 19:1

2024 Ratio

(4)

Option B 39:1 28:1 20:1

2025 Ratio

Option B 38:1 26:1 16:1

Gender pay data

percentile

pay ratio

Median

pay ratio

percentile

pay ratio

Salary (£)

26,824 38,485 65,600

Total remuneration (£)

29,568 42,710 72,310

The CEO pay ratio for 2025 remains below that observed across comparable organisations within our peer

group. Reflecting the diverse range of roles within the Society, the Committee considers the ratios to be

appropriate and aligned with the Society’s established reward framework. The Committee is satisfied that

they provide a reasonable representation of the Society’s overall approach to colleague pay and reward.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 114

Relative importance of spend on pay

The following table sets out the changes in Society profit after tax in 2025 and 2024 and compares these with

the overall spend of remuneration over the two years. As a mutual organisation, the Society only seeks to

retain sufficient profit to maintain capital ratios and support investment in the business, with any surplus

above this returned to members through competitive pricing.

The spend in the year reflects further investments in our people. Total employee remuneration across the

Society has increased 15.1% on last year, through a combination of higher pay awards and rising headcount

as we continue our focus on providing high levels of customer satisfaction.

The Financial Review (within the Strategic Report) provides an overview of financial performance for the year.

Material Risk Takers (MRT)

Material risk takers are those colleagues whose professional activities have a material impact on the Society

and Group subsidiaries risk profile. In accordance with regulations, we have identified MRTs in the Society and

in the Group subsidiary companies who are in scope of the PRA and FCA regulations. 

The Board Remuneration Committee is responsible for approving remuneration policies, maintaining oversight

of the remuneration of MRTs and for ensuring that remuneration is paid to them in accordance with regulatory

requirements.

Details of the MRTs’ remuneration arrangements for 2025 are included in the Pillar 3 document which is

available on our website.

CEO Pay comparative over the past five years

The table below shows details of the total remuneration and the amount vesting under short-term incentives

as a percentage of the maximum that could have been achieved, in respect of the Group Chief Executive

Officer role for the previous five years.

Year

Single figure of total remuneration £000

Annual bonus earned against

maximum opportunity

2025

1,146 80.1%

2024

1,111 78.6%

2023

1,034 67.6%

2022

(1)

1,151 -

2021

(2)

1,309 100.0%

Notes

1. Stuart Haire commenced his role as Group Chief Executive Officer on 31 December 2022. As a result of his resignation from

HSBC, Stuart has forfeited deferred awards made to him in respect of financial years prior to 2022, as well as the opportunity

to earn a bonus for 2022. The figure in the table therefore includes an award of £345,000 to replace the forfeited bonus

opportunity.

2. The Group Chief Executive Officer in 2021 was David Cutter. The Committee made the decision to exercise its discretion by

awarding 100% of salary under the Society’s SVPA scheme due to the transformative impact of the Countrywide acquisition

and the contribution of the Group Chief Executive to the success of the transaction.

Performance & Strategy Governance

Financial Statements

Other Information

2025 £m 2024 £m Change %

Total assets

38,326.9 36,628.3 4.6%

Total employee remuneration

costs paid

152.8 132.8 15.1%

Profit after tax

222.6 189.2 17.7%

Skipton Group Annual Report & Accounts 2025 115

Base salary

The Committee approved a pay award of 3% for the

executive directors which will be effective from 1

January 2026. The average increase across the

wider workforce is 4.48%.

Effective 1 January 2026, the increase in fees for the

Chair and non-executive directors was 4%.

There are no changes to the Society's approach to

benefits and pensions.

Senior Variable Pay Arrangement (SVPA)

The maximum bonus opportunity will remain 50% of

base salary, with the target opportunity 30% of base

salary. Malus and clawback provisions apply.

The performance measures included in the SVPA

have been reviewed for 2026 to maintain a clear link

between the bonus plan and how it supports and re-

enforces business strategy. The measures and

weightings for the 2026 SVPA are set out in the table

below. The targets set and the extent of their

achievement will be disclosed in the 2026 Annual

Report as the Board Remuneration Committee

considers them to be commercially sensitive at this

point in time.

2026 performance measures Group CEO

Group CFO

Financial

Adjusted Group PBT*

17.5% 17.5%

Adjusted Society PBT*

17.5% 17.5%

Adjusted Society administrative expenses*

10.0% 10.0%

Financial: total weighting

45.0% 45.0%

Customer & Colleague

Society net customer satisfaction

15.0% 15.0%

Execution of the 2026 talent, capability, culture and

curiosity agenda to support future business growth

5.0% 5.0%

Customer & colleague: total weighting

20.0% 20.0%

ESG

Diversity & Inclusion

5.0% 5.0%

ESG: total weighting

5.0% 5.0%

Personal objectives

Personal objective / performance

– what? 15.0% 15.0%

Personal objective / performance

– how? 15.0% 15.0%

Personal objectives: total weighting

30.0% 30.0%

Statement of implementation of Remuneration Policy in 2026

* For bonus purposes, the Group and Society profit and Society administrative expenses are adjusted for those items that are not

considered part of the Group’s core strategy, to give greater transparency of the performance of ongoing trading activities - as defined

within the Strategic Report; or for those items that are outside of the directors’ control. This is reviewed and approved by the Board Audit

Committee.

Long-term Incentive Plan (LTIP)

LTIP awards in respect of the 2026-2028 performance period will be granted during 2026. LTIP awards are

discretionary and are made subject to a pre-grant performance assessment over the prior year. The

maximum opportunity will remain at 75% of base salary, with the target opportunity around 60% of the

maximum. Deferral, malus and clawback provisions will apply.

The Committee reviewed the performance measures and concluded that no changes were required for

2026 (see page 108 for further details). The selected measures remain aligned to the Group’s long-term

priorities, supporting sustainable performance and ensuring continued alignment with the business

strategy and member interests. Full details of the applicable performance metrics will be disclosed in the

Directors’ Remuneration Report for the relevant vesting year.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 116

Potential remuneration based on performance

The charts below set out the potential value each of the executive directors could earn under the directors’

remuneration policy, in different performance scenarios using an LTIP grant value of 75%: Minimum (i.e. fixed

pay, pension and benefits only, zero variable pay), Target (i.e. fixed pay, pension, benefits and 50% of the

maximum variable pay that may be awarded) and Maximum (i.e. fixed pay, pension, benefits and the maximum

variable pay that may be awarded).

The Committee is committed to keeping LTIP grant levels fixed unless a review during the three-year policy

determines that an adjustment is necessary, therefore the potential value illustrated may be subject to change

but will not exceed the maximum values set out within the directors’ remuneration policy.

A significant proportion of the potential remuneration of the executive directors is payable based on the

achievement of stretching performance measures and subject to deferral, malus and clawback. No payments

relating to LTIP awards will be made until after the end of the forward-looking three-year performance period

and Board approval of the accounts relating to these years.

761

114

228

381

343

571

£0k £500k £1000k £1500k £2000k

Minimum

Target

Maximum

£875k

£1,446k

£1,827k

456

137

228

205

342

£0k £500k £1000k £1500k £2000k

Minimum

Target

Maximum

Salary Pension & Benefits SVPA LTIP

£523k

£865k

£1,093k

Paul Chambers

Group Chief Financial Officer

Stuart Haire

Group Chief Executive Officer

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 117

Independent advisers

PwC were appointed as independent external consultants by the Committee in 2015 following a review of

potential advisers. PwC is a signatory to the voluntary Code of Conduct in relation to remuneration in the UK.

During the year, PwC have supported the Committee on a range of items advising on regulatory reporting and

risk adjustment, carrying out the non-executive directors benchmarking exercise, advising on the design and

implementation of the Long-Term Incentive Plan and executive director remuneration. The Committee is

satisfied that the advice received is objective and independent. PwC’s fees in respect of remuneration services

provided in 2025 were £119,077 (net of VAT).

In addition to remuneration, PwC provide other services to the Society such as accounting, internal audit, and

tax advice.

The Committee has undertaken a review of its independent external advisory support and confirms that

Deloitte will be appointed as the new independent external consultants to the Board Remuneration Committee,

effective from March 2026.

Statement of voting at the 2025 AGM

The Committee has, for a number of years, invited members to vote (on an advisory basis) on the

Remuneration Policy every 3 years and annual Remuneration Report every year, and takes member feedback

into account when determining policy and outcomes.

Our Directors’ Remuneration Report for the year ended 31 December 2024 received strong support at the AGM

held in April 2025, the results of which were as follows:

We will be seeking an advisory vote on the Directors’ Remuneration Report for the year ended 31 December

2025 at the AGM to be held in April 2026.

I would like to thank members for their ongoing support and encourage you to vote in favour of the Directors’

Remuneration Report.

Steven Davis

Chair of the Board Remuneration Committee

17 February 2026

Votes For Votes Against

Votes

Withheld

55,100 (92.84%) 4,250 (7.16%) 1,294

S Davis

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 120

Opinion

In our opinion:

• the Group financial statements and the Society’s financial statements (the “financial statements”) give a

true and fair view of the state of the Group’s and the Society’s affairs as at 31 December 2025 and of the

Group’s and the Society’s income and expenditure for the year then ended;

• the financial statements have been properly prepared in accordance with UK adopted international

accounting standards; and

• the financial statements have been prepared in accordance with the requirements of the Building

Societies Act 1986.

We have audited the financial statements of Skipton Building Society (the ‘Society’) and its subsidiaries

(together, the ‘Group’) for the year ended 31 December 2025 which comprise:

Group

Society

Consolidated Income Statement for the year ended 31

December 2025

Income Statement for the year ended 31 December

2025

Consolidated Statement of Comprehensive Income for

the year ended 31 December 2025

Statement of Comprehensive Income for the year

ended 31 December 2025

Consolidated Statement of Financial Position as at 31

December 2025

Statement of Financial Position as at 31 December

2025

Consolidated Statement of Changes in Member

Interests for the year ended 31 December 2025

Statement of Changes in Member Interests for the

year ended 31 December 2025

Consolidated Statement of Cash Flows for the year

ended 31 December 2025

Statement of Cash Flows for the year ended 31

December 2025

Related notes 1 to 50 to the financial statements,

including material accounting policy information

Related notes 1 to 50 to the financial statements

including material accounting policy information

Information in respect of Country by Country Reporting on pages 288 to 289

Information

in the Annual Business Statement described as forming part of the audited Accounts on page

290

Information identified as “audited” within the Directors’ Remuneration Report

The financial reporting framework that has been applied in their preparation is applicable law and UK adopted

international accounting standards.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and

applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities

for the audit of the financial statements section of our report. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group and the Society in accordance with the ethical requirements that are relevant

to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to public

interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Society

and we remain independent of the Group and the Society in conducting the audit.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 121

Conclusions relating to going concern

In auditing the financial statements, we have

concluded that the Directors’ use of the going

concern basis of accounting in the preparation of the

financial statements is appropriate. Our evaluation

of the Directors’ assessment of the Group and

Society’s ability to continue to adopt the going

concern basis of accounting included the following

procedures:

• We obtained the Directors’ going concern

assessment, including the cash flow forecasts for

the going concern period covering the 12 months

from the date of signing this audit opinion.

• We compared the budgeted financial information

with historical actual results, in order to form a

view on the reliability of the forecasting process.

• We assessed the results of the Directors’ stress

testing including consideration of principal and

emerging risks, on funding, liquidity and

regulatory capital.

• We considered whether there were other events

subsequent to the balance sheet date which

could have a bearing on the going concern

conclusion.

• We reviewed regulatory correspondence and

committee and board meeting minutes to identify

events or conditions that may impact the Group

and Society’s ability to continue as a going

concern.

• We reviewed the Group and Society’s going

concern disclosures included in the annual report

in order to assess that the disclosures were

appropriate and in conformity with the reporting

standards.

Based on the work we have performed, we have not

identified any material uncertainties relating to

events or conditions that, individually or collectively,

may cast significant doubt on the Group and

Society’s ability to continue as a going concern for a

period of 12 months from when the financial

statements are authorised for issue.

In relation to the Group and Society’s reporting on

how they have applied the UK Corporate Governance

Code, we have nothing material to add or draw

attention to in relation to the Directors’ statement in

the financial statements about whether the Directors

considered it appropriate to adopt the going concern

basis of accounting.

Our responsibilities and the responsibilities of the

Directors with respect to going concern are

described in the relevant sections of this report.

However, because not all future events or conditions

can be predicted, this statement is not a guarantee

as to the Group and Society’s ability to continue as a

going concern.

Audit

scope

•

We performed an audit of the complete financial information of two full scope components,

audit procedures on specific balances for a further five specific scope components.

•

We performed centralised procedures on financial control and reporting, derivative financial

instruments and hedge accounting, defined benefit pension schemes, information

technology and taxation.

Key audit

matters

• Measurement of loan impairment relating to retail and commercial mortgages

• Fair value of the equity release portfolio

• Revenue recognition in respect of estate agency income

Materiality

• Overall Group materiality of £14.6m which represents 5% of PBT, adjusted for non-recurring

items.

Overview of our audit approach

An overview of the scope of the Society and the Group audits

Tailoring the scope

In the current year our audit scoping has been updated to reflect the new requirements of ISA (UK) 600

(Revised). We have followed a risk-based approach when developing our audit approach to obtain sufficient

appropriate audit evidence on which to base our audit opinion. We performed risk assessment procedures,

with input from our component auditors, to identify and assess risks of material misstatement of the Group

financial statements and identified significant accounts and disclosures. When identifying components at

which audit work needed to be performed to respond to the identified risks of material misstatement of the

Group financial statements, we considered our understanding of the Group and its business environment, the

potential impact of climate change, the applicable financial framework, the Group’s system of internal control

at the entity level, the existence of centralised processes, applications and any relevant internal audit results.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 122

Component

Scope

Key locations

Skipton Building Society

Full

United Kingdom

Connells Limited

Full

United Kingdom

Skipton International Limited

Specific

Channel Islands

Skipton Business Finance Limited

Specific

United Kingdom

Skipton Covered Bonds Limited Liability

Partnership

Specific

United Kingdom

Darrowby No.6 PLC

Specific

United Kingdom

Jade Software Corporation Limited

Specific

New Zealand, United Kingdom

The scoping for the current year is as follows:

We determined that centralised audit procedures can be performed across the identified components in the

following key audit areas:

Significant audit area on which procedures were performed

centrally

Component subject to central procedures

Financial control and reporting

All components

Derivative financial instruments and hedge accounting

All relevant components (Skipton Building

Society, Skipton International Limited,

Skipton Covered Bonds Limited Liability

Partnership, Darrowby No.6 PLC)

Defined benefit pension schemes

Skipton Building Society and Connells

Limited (for one scheme held within the

Connells Limited component)

Information technology

All components except Connells Limited,

Skipton International Limited, Jade

Software Corporation Limited

Taxation

All components except Skipton

International Limited

Fees and commissions receivable and Administrative

expenses

Jade Software Corporation Limited

Performance & Strategy Governance

Financial Statements

Other Information

We identified two components as individually relevant

to the Group due the identified risks of material

misstatement of the Group financial statements being

associated with the reporting components and the

financial size of the component relative to the Group.

For those individually relevant components, we

identified the significant accounts where audit work

needed to be performed at these components by

applying professional judgement, having considered

the Group significant accounts on which centralised

procedures will be performed, the reasons for

identifying the financial reporting component as an

individually relevant component and the size of the

component’s account balance relative to the Group

significant financial statement account balance.

We then considered whether the remaining Group

significant account balances not yet subject to audit

procedures, in aggregate, could give rise to a risk of

material misstatement of the Group financial

statements. We selected seven components of the

Group to include in our audit scope to address these

risks.

Having identified the components for which work will

be performed, we determined the scope to assign to

each component.

Of the seven components selected, we designed and

performed audit procedures on the entire financial

information of two components (“full scope

components”). For the remaining five components, we

designed and performed audit procedures on specific

significant financial statement account balances or

disclosures of the financial information of the

component (“specific scope components”).

Skipton Group Annual Report & Accounts 2025 123

The key audit matters related to full scope

components. The audit procedures in respect of the

following key audit matters were performed by the

Group audit team:

• Measurement of loan impairment relating to retail

and commercial mortgages; and

• Fair value of the equity release portfolio.

Audit procedures over the following key audit

matters were performed by the Connells Limited

component audit team:

• Revenue recognition in respect of estate agency

income.

The Group audit team’s involvement with the

Connells Limited component team and procedures

performed included:

• Risk assessment procedures and determining the

type and extent of work to be undertaken at each

of the components;

• Regular interactions throughout the course of the

audit, including planning meetings, maintaining

regular communications on the status of the audit

work, and meetings on results and conclusions;

• Undertaking component site visits over the

course of the audit; and

• Reviewing key working papers and taking

responsibility for the scope and direction of the

audit process.

Involvement with component teams

In establishing our overall approach to the Group

audit, we determined the type of work that needed to

be undertaken at each of the components by us, as

the Group audit engagement team, or by component

auditors operating under our instruction.

The Group audit team followed a programme of

planned visits that has been designed to ensure that

the Senior Statutory Auditor visited component

teams and held meetings with them to discuss the

audit approach and any issues arising from their

work. During the current year’s audit cycle, visits

were undertaken by the Group audit team to the

component teams in the Channel Islands and United

Kingdom, as well as a schedule of planned meetings

held remotely. This schedule involved meeting with

local management, attending planning and closing

meetings, and reviewing relevant audit working

papers on risk areas. The Group audit team

interacted regularly with the component teams

during various stages of the audit, reviewed relevant

working papers and were responsible for the scope

and direction of the audit process. Where relevant,

the section on key audit matters details the level of

involvement we had with component auditors to

enable us to determine that sufficient audit evidence

had been obtained as a basis for our opinion on the

Group as a whole.

This, together with the additional procedures

performed at Group level, gave us appropriate

evidence for our opinion on the Group financial

statements.

Climate change

Stakeholders are increasingly interested in how

climate change will impact Skipton Building Society.

The Group and the Society has determined that the

most significant future impacts from climate change

on their operations will be from physical and

transitional risks. These are explained on pages 31

to 34 in the Strategic Report. The Group and Society

have also explained their climate commitments on

page 34 of that report. All of these disclosures form

part of the “Other information,” rather than the

audited financial statements. Our procedures on

these unaudited disclosures therefore consisted

solely of considering whether they are materially

inconsistent with the financial statements or our

knowledge obtained in the course of the audit or

otherwise appear to be materially misstated, in line

with our responsibilities on “Other information”.

In planning and performing our audit we assessed

the potential impacts of climate change on the

Group and Society’s business and any consequential

material impact on its financial statements.

The Group and Society have explained in Note 1 to

the Annual Report and Accounts how they have

reflected the impact of climate change in their

financial statements including how this aligns with

their commitment to long-term net zero targets.

Significant judgements and estimates relating to

climate change are included in Note 1 and Note 45.

These disclosures also explain where governmental

and societal responses to climate change risks are

still developing, and where the degree of certainty of

these changes means that they cannot be taken into

account when determining asset and liability

valuations under the requirements of UK adopted

international accounting standards.

Our audit effort in considering the impact of climate

change on the financial statements was focused on

evaluating Directors’ assessment of the impact of

climate risk, physical and transitional, the Group’s

climate commitments, the effects of material climate

risks and the significant judgements and estimates

disclosed in Note 1 and whether these have been

appropriately reflected in asset values where these

are impacted by future cash flows and associated

sensitivity disclosures, and in the timing and nature

of liabilities recognised, following the requirements

of UK adopted international accounting standards.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 124

As part of this evaluation, we performed our own risk

assessment, supported by our climate change

internal specialists, to determine the risks of material

misstatement in the financial statements from

climate change which needed to be considered in

our audit.

We also challenged the Directors’ considerations of

climate change in their assessment of going concern

and viability and associated disclosures.

Based on our work, whilst we have not identified the

impact of climate change on the financial

statements to be a standalone key audit matter, we

have considered the impact on the following key

audit matter: Measurement of loan impairments

relating to retail and commercial mortgages. Details

of the impact, our procedures and findings are

included in our explanation of key audit matters

below.

Key audit matters

Key audit matters are those matters that, in our

professional judgment, were of most significance in

our audit of the financial statements of the current

period and include the most significant assessed

risks of material misstatement (whether or not due

to fraud) that we identified. These matters included

those which had the greatest effect on the overall

audit strategy, the allocation of resources in the

audit; and directing the efforts of the engagement

team. These matters were addressed in the context

of our audit of the financial statements as a whole,

and in our opinion thereon, and we do not provide a

separate opinion on these matters.

The following risks have been identified as key audit

matters.

Measurement of loan impairments relating to retail and commercial mortgages

Risk

(Group

– 31 December 2025 £25.6m, 31 December 2024 £19.6m;

Society

– 31 December 2025 £23.5m, 31 December 2024 £17.5m)

The measurement of the loan impairment provision under IFRS 9 is subjective and requires the Directors to

exercise judgement with regards to estimating future losses that the Society may incur within the retail and

commercial mortgage books. This calculation is complex and subjective due to the high uncertainty

associated with the assumptions used. This includes the impacts of the continuing uncertain geopolitical

and economic outlook. As a result, there is a need for the Directors to exercise judgement and perform

assessments to consider whether these risks are appropriately captured through models or should be

captured through the recording of post model adjustments.

Key judgements and estimates include:

• The application of multiple economic scenarios, including the appropriate weightings for the various

scenarios.

• Completeness and valuation of post-model adjustments.

• Identifying assets that have experienced a significant increase in credit risk (SICR) since origination

(stage 2) and those that are credit impaired (stage 3).

• Accounting interpretations, collateral valuations and modelling assumptions used to build the models

and calculate the ECL.

Due to the degree of judgement that needs to be exercised by the Directors around the key assumptions into

the Society’s ECL model as well as the complexity of the calculation, this was considered a key audit matter.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 125

Measurement of loan impairments relating to retail and commercial mortgages (continued)

Our response to the risk

We gained an understanding of the Society’s processes, controls and assumptions used in the impairment

process in order to evaluate the compliance of the Society’s methodology with the requirements of IFRS 9.

Our substantive audit procedures over the residential and commercial IFRS 9 provision models included

assessing the appropriateness of model design and the calculations used, challenging and substantiating

key assumptions, such as: loss given default (LGD), significant increases in credit risk (SICR) and the staging

applied, forward looking assumptions, and the determination of lifetime PDs.

We tested the assumptions, inputs and model calculations used in a risk

-based sample of ECL models with

the involvement of our internal credit modelling specialists. This included assessing the appropriateness of

the model design, model performance and ECL replication testing.

With the support from our internal valuation specialists, we independently challenged the valuation of

collaterals for a sample of commercial loans at the balance sheet date and considered assumptions about

future recoverability.

We assessed the Society’s staging criteria and independently reperformed staging on a sample of loans in

stages 1, 2 and 3 for commercial loans and on the full population of residential loans to verify whether they

were allocated appropriately, with reference to the Society’s SICR criteria.

We assessed the base case and alternative economic scenarios adopted by the Directors utilising economic

specialists. We challenged the number of scenarios used in the models, as well as the probability weightings

ascribed to those scenarios. We compared them to other scenarios from a variety of external sources, as

well as EY’s internally developed forecasts. With the assistance of economics specialists, we assessed

whether forecast macroeconomic variables were reasonably captured within the loan loss provision.

With our credit modelling specialists, we assessed the completeness and valuation of post model

adjustments using our knowledge and experience across the UK lending sector and tested material

adjustments for reasonableness of estimation with reference to observable market data.

We assessed the valuation of specific provisions held for a sample of non

-performing loans. We also

assessed a sample of individual loans classified as performing loans, where no specific provision was held

to determine whether their stage classification was appropriate.

Our procedures included a series of “stand back” analyses, including industry benchmarking, internal

consistency checks and analytical reviews.

Key observations communicated to the Board Audit Committee

We are satisfied that the ECL provisions were reasonable and recognised in accordance with IFRS 9. We

highlighted the following matters to the Board Audit Committee that contributed to our overall conclusion:

•

Observation in respect of the controls relevant to the valuation of ECLs.

•

Results of our testing of models, model assumptions, the key data elements used for ECL calculation,

including the reasonableness of the macroeconomic variables, scenarios and weightings used.

•

Accuracy of staging and the reasonableness of management’s staging criteria, and our independent

sensitivity analysis on the staging criteria to assess appropriateness.

•

Reasonableness and adequacy of the post-model adjustments recorded to reflect risk in the portfolios.

•

Individually assessed impairments, the overall reasonableness of the provisions, including assumptions

applied.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 126

Fair value of equity release portfolio

Risk

(Group and Society

– 31 December 2025 £263.1m, 31 December 2024 £277.2m;

Net gains / (losses) on the portfolios

– 2025 £(6.4)m, 2024 £9.3m)

The Society holds three equity release mortgage portfolios that carry a no negative equity guarantee. This

guarantee limits the Society’s maximum return to the value of the relevant customer’s property on

redemption. The Society is therefore exposed to potential losses on the portfolio, albeit any loss is limited in

part by a further guarantee provided to the Society by a third party. The Society uses equity release swaps to

economically manage the interest rate risk and reduce overall income statement volatility that would

otherwise result from changes in the fair value of the equity release mortgage portfolio.

The fair value of the equity release portfolio is determined using a complex model which uses a Monte Carlo

simulation and a number of different judgmental assumptions to derive an estimated value. Two of the

equity release swaps are also valued using a Monte Carlo based model. The key assumptions used in the

models include:

• Discount rates, including illiquidity premia.

• Mortality rates.

• Future increases in house prices (‘HPI’).

• Prepayment rates

Due to the degree of judgement that needs to be exercised by the Directors around the key assumptions into

the valuation model, and the complexity of the calculation, this was considered a key audit matter.

Our Response to the risk

We gained an understanding of the Society’s processes, controls and assumptions used in the valuation of

the equity release portfolio. We assessed the Society’s accounting policies and methodologies related to the

fair value of the equity release portfolio and the corresponding swaps for compliance with applicable

accounting standards.

With support from our valuation specialists, we assessed the appropriateness of the valuation techniques

and independently calculated a range of fair values for the equity release portfolio. We compared the

modelled fair values against this range. Our valuation specialists assessed the valuation methodologies

used in relation to the swaps, and independently calculated a range of fair values.

We challenged assumptions used in the fair value models, including the discount rate, mortality rates, future

changes in house prices and prepayment rates. We compared assumptions applied in the fair value models

to the Society’s historical experience and benchmarked assumptions to observable market data where

applicable. Where observable market data was not available we used specialist judgement and internal data

to assess the reasonableness of these assumptions.

We performed testing over the completeness and accuracy of data used in the equity release models and

underlying calculations. This involved testing a sample of key data fields used in the model to source data

and corroborative evidence.

Key observations communicated to the Board Audit Committee

We consider that the valuation of the portfolio was reasonable. We highlighted to the Board Audit

Committee the following matters which were relevant to our conclusion:

• Our observations in respect of the control environment to the valuation of the equity release portfolio.

• Reasonableness of the models used to calculate the fair value of the equity release portfolio and

associated swaps.

• Reasonableness of key assumptions deployed in the valuation of the equity release portfolio and

corresponding swap models in the context of the portfolio and current market conditions.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 127

Revenue recognition in respect of estate agency income

Risk

(Group

– 31 December 2025 £1,171.8m, 31 December 2024 £1,056.2m)

There is a risk that management may override controls and post unusual journals outside the expected flow

of transactions in order to overstate revenue and achieve targets set within respective management

incentive schemes. This risk is specific to manual revenue journals posted during the financial year within

the estate agency revenue streams which are material to the Group.

Given the manual nature and volume of revenue transactions in the Connells Limited estate agency

component, this was considered a key audit matter.

Our Response to the risk

We gained an understanding of the Group’s processes and controls relevant to the recognition of estate

agency income. We assessed the Group’s accounting policy for estate agency income for compliance with

IFRS 15.

We performed cut

-off testing on a sample of transactions falling either side of the 31 December 2025 year

end date.

We performed data analysis procedures to assess the recognition of revenue throughout the year. We

performed testing over significant revenue streams using either data analysis tools or alternative

substantive procedures. Where we used data analysis tools, we tested the correlation of revenue to trade

receivables and cash receipts to verify the occurrence of revenue. Our alternative substantive procedures

included tracing each sampled transaction back to appropriate evidence to assess whether the revenue was

appropriately recorded in the correct period and at the correct value.

We performed testing over a sample of manual journal entries selected through a combination of risk

based

and random sampling techniques across these revenue streams. We substantiated these journals to

supporting documentation and validated that revenue recognition criteria had been fulfilled and that values

were materially correct.

Key observations communicated to the Board Audit Committee

We concluded that the estate agency income recognised by the Group was reasonably measured. We

communicated to the Board Audit Committee the following matters which were relevant to our conclusion:

• Our observations in respect of the control environment relevant to the recognition of estate agency

revenue.

• We identified a correlation of transactions between revenue, trade receivables and cash, evidencing the

appropriateness of the revenue recognised over the period.

•

We did not identify any evidence of material misstatements in the revenue recognised or any instances of

management override.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 128

Our application of materiality

We apply the concept of materiality in planning and

performing the audit, in evaluating the effect of

identified misstatements on the audit and in forming

our audit opinion.

Materiality

The magnitude of an omission or misstatement that,

individually or in the aggregate, could reasonably be

expected to influence the economic decisions of the

users of the financial statements. Materiality

provides a basis for determining the nature and

extent of our audit procedures.

We determined materiality for the Group to be

£14.6m (2024: £15.9m), which is 5% of adjusted

profit before tax (2024: 5% of profit before tax). We

adjusted the Group’s pre-tax profit by excluding the

loss on disposal of the Society’s Permanent Interest-

Bearing Shares and the gain from disposal of

business assets by Connells Limited.

We determined materiality for the Society to be

£10.8m (2024: £10.8m), which is 5% of adjusted

profit before tax (2024: 5% of adjusted profit before

tax). We adjusted the Society’s pre-tax profit by

excluding dividend income from shares from

subsidiary undertakings and the loss on disposal of

the Society’s Permanent Interest-Bearing Shares.

We believe that adjusted profit before tax provides

us with an appropriate basis for materiality given the

users of the financial statements (including the

Society’s members and regulators) principally focus

on pre-tax profit in assessing the Group and

Society’s performance, and that normalising pre-tax

profit results in the most useful measure for users of

the financial statements.

Performance materiality

The application of materiality at the individual

account or balance level. It is set at an amount to

reduce to an appropriately low level the probability

that the aggregate of uncorrected and undetected

misstatements exceeds materiality.

On the basis of our risk assessments, together with

our assessment of the Group’s overall control

environment, our judgement was that performance

materiality was 75% (2024: 75%) of our planning

materiality, namely £10.9m (2024: £11.9m). We have

set performance materiality at this percentage due to

our previous experience as auditors of the Group,

from which we concluded that there is a lower

expectation of material financial statement

inaccuracies due to our assessment of the overall

entity-level controls, our testing of the operating

effectiveness of certain financial reporting control

environment, and no material audit differences

resulting from our prior and current year work.

Our approach is consistent with the prior year.

Audit work was undertaken at component locations

for the purpose of responding to the assessed risks

of material misstatement of the group financial

statements. The performance materiality set for

each component is based on the relative scale and

risk of the component to the Group as a whole and

our assessment of the risk of misstatement at that

component. In the current year, the range of

performance materiality allocated to components

was £2.1m to £8.7m (2024: £2.4m to £10.3m).

Reporting threshold

An amount below which identified misstatements

are considered as being clearly trivial.

We agreed with the Board Audit Committee that we

would report to them all uncorrected audit

differences in excess of £0.7m (2024: £0.8m), which

is set at 5% of planning materiality, as well as

differences below that threshold that, in our view,

warranted reporting on qualitative grounds

We evaluate any uncorrected misstatements against

both the quantitative measures of materiality

discussed above and in light of other relevant

qualitative considerations in forming our opinion.

Other information

The other information comprises the information

included in the annual report other than the financial

statements, information of Country by Country

Reporting, information identified as “audited” within

the Directors’ Remuneration Report, and information

in the Annual Business Statement, described as

forming part of the audited Accounts, and our

auditor’s report thereon. The Directors are

responsible for the other information contained

within the annual report.

Our opinion on the financial statements does not

cover the other information and, except to the extent

otherwise explicitly stated in this report, we do not

express any form of assurance conclusion thereon.

Our responsibility is to read the other information

and, in doing so, consider whether the other

information is materially inconsistent with the

financial statements or our knowledge obtained in

the course of the audit or otherwise appears to be

materially misstated. If we identify such material

inconsistencies or apparent material misstatements,

we are required to determine whether this gives rise

to a material misstatement in the financial

statements themselves. If, based on the work we

have performed, we conclude that there is a material

misstatement of the other information, we are

required to report that fact.

We have nothing to report in this regard.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 129

Opinion on other matters prescribed by the Building

Societies Act 1986

In our opinion:

• The Annual Business Statement and the Directors’

Report have been prepared in accordance with

the requirements of the Building Societies Act

1986;

• The information given in the Directors’ Report for

the financial year for which the financial

statements are prepared is consistent with the

financial statements; and

• The information given in the Annual Business

Statement (other than the information upon which

we are not required to report) gives a true

representation of the matters in respect of which

it is given.

Matters on which we are required to report by

exception

We have nothing to report in respect of the following

matters where the Building Societies Act 1986

requires us to report to you if, in our opinion:

• Proper accounting records have not been kept by

the Group and Society; or

• The Group or Society’s

financial statements are

not in agreement with the accounting records; or

• We have not received all the information and

explanations and access to documents we

require for our audit.

Corporate Governance Statement

We have reviewed the Directors’ statement in relation

to going concern, longer-term viability and that part

of the Corporate Governance Statement relating to

the Group and Society’s voluntary compliance with

the provisions of the UK Corporate Governance Code

specified for our review by the Listing Rules.

Based on the work undertaken as part of our audit,

we have concluded that each of the following

elements of the Corporate Governance Statement

are materially consistent with the financial

statements or our knowledge obtained during the

audit:

• The Directors’ statement with regards to the

appropriateness of adopting the going concern

basis of accounting and any material

uncertainties identified set out on pages 66 and

67;

• The Directors’ explanation as to its assessment of

the Society’s prospects, the period this

assessment covers and why the period is

appropriate set out on page 67;

• The Directors’ statement on fair, balanced and

understandable set out on page 68;

• The Board’s confirmation that it has carried out a

robust assessment of the emerging and principal

risks set out on page 67;

• The section of the annual report that describes

the review of effectiveness of risk management

and internal control systems set out on pages 96

to 97; and;

• The section describing the work of the Board

Audit Committee set out on pages 84 to 90.

Directors’ Remuneration Report

The Society voluntarily prepares a Directors’

Remuneration Report in accordance with the

provisions of the Companies Act 2006. The Directors

have requested that we audit the part of the

Directors’ Remuneration Report specified by the

Companies Act 2006 to be audited as if the Society

were a quoted company.

In our opinion, the part of the Directors’

Remuneration Report to be audited has been

properly prepared in accordance with the Companies

Act 2006.

Responsibilities of Directors

As explained more fully in the Directors’

Responsibilities Statement set out on page 68, the

Directors are responsible for the preparation of the

financial statements and for being satisfied that they

give a true and fair view, and for such internal control

as the Directors determine is necessary to enable the

preparation of financial statements that are free

from material misstatement, whether due to fraud or

error.

In preparing the financial statements, the Directors

are responsible for assessing the Group and

Society’s ability to continue as a going concern,

disclosing, as applicable, matters related to going

concern and using the going concern basis of

accounting unless the Directors either intend to

liquidate the Group or the Society or to cease

operations, or has no realistic alternative but to do

so.

Auditor’s responsibilities for the audit of the

financial statements

Our objectives are to obtain reasonable assurance

about whether the financial statements as a whole

are free from material misstatement, whether due to

fraud or error, and to issue an auditor’s report that

includes our opinion. Reasonable assurance is a high

level of assurance, but is not a guarantee that an

audit conducted in accordance with ISAs (UK) will

always detect a material misstatement when it

exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the

aggregate, they could reasonably be expected to

influence the economic decisions of users taken on

the basis of these financial statements.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 130

Explanation as to what extent the audit was

considered capable of detecting irregularities,

including fraud

Irregularities, including fraud, are instances of non-

compliance with laws and regulations. We design

procedures in line with our responsibilities, outlined

below, to detect irregularities, including fraud. The

risk of not detecting a material misstatement due to

fraud is higher than the risk of not detecting one

resulting from error, as fraud may involve deliberate

concealment by, for example, forgery or intentional

misrepresentations, or through collusion. The extent

to which our procedures are capable of detecting

irregularities, including fraud is detailed below.

However, the primary responsibility for the

prevention and detection of fraud rests with both

those charged with governance of the Society and

the Directors.

• We obtained an understanding of the legal and

regulatory frameworks that are applicable to the

Group and determined that the most significant

were the regulations, licence conditions and

supervisory requirements of the Prudential

Regulation Authority (PRA), the Financial Conduct

Authority (FCA) and the Building Societies Act

1986.

• We understood how the Group is complying with

those frameworks by making enquiries of key

management, internal audit, and those

responsible for legal and compliance matters. We

also reviewed correspondence between the

relevant regulatory bodies, reviewed minutes of

the Board and Board Risk Committee meetings

and gained an understanding of the Group’s

approach to governance demonstrated by the

Board’s approval of the Group’s governance

framework and the Board’s review of the Group’s

Operational Risk Framework and internal control

processes.

• We assessed the susceptibility of the Group’s

financial statements to material misstatement,

including how fraud might occur by considering

the controls that the Group has established to

address risks identified by the entity, or that

otherwise seek to prevent, deter or detect fraud.

We also considered performance and incentive

plan targets and their potential to influence key

management to manage earnings or influence the

perceptions of investors and stakeholders.

• Based on this understanding we designed our

audit procedures to identify non-compliance with

such laws and regulations. Our procedures

involved inquiries of legal counsel, executive

management, internal audit, consideration of

whistleblowing events and focused testing as

referred to in the Key Audit Matters section

above. Our inquiries and procedures addressed

subsidiaries in the Group including those audited

by component teams. The Group audit team had

regular communication with component teams to

discuss the audit which included if there were any

instances of non-compliance with laws and

regulations and how these were responded to.

• The Group operates in the financial services

sector which is a highly regulated environment.

As such the Senior Statutory Auditor considered

the experience and expertise of the engagement

team to ensure that the team had the appropriate

competence and capabilities, which included the

use of specialists where appropriate.

A further description of our responsibilities for the

audit of the financial statements is located on the

Financial Reporting Council’s website at

https://www.frc.org.uk/auditorsresponsibilities. This

description forms part of our auditor’s report.

Other matters we are required to address

• Following the recommendation from the Board

Audit Committee, we were appointed by the

Society on 10 May 2019 to audit the financial

statements for the year ending 31 December

2019 and subsequent financial periods.

• The period of total uninterrupted engagement

including previous renewals and reappointments

is seven years, covering the years ending 31

December 2019 to 31 December 2025.

• The audit opinion is consistent with the additional

report to the Board Audit Committee.

Use of our report

This report is made solely to the Society’s members,

as a body, in accordance with Section 78 of the

Building Societies Act 1986. Our audit work has been

undertaken so that we might state to the Society’s

members those matters we are required to state to

them in an auditor’s report and for no other purpose.

To the fullest extent permitted by law, we do not

accept or assume responsibility to anyone other than

the Society and the Society’s members as a body, for

our audit work, for this report, or for the opinions we

have formed.

Blake Adlem (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory

Auditor

Edinburgh

17 February 2026

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Income Statements

132

Statements of Comprehensive Income

133

Statements of Financial Position

134

Statements of Changes in Members Interests

136

Statements of Cashflows

139

Skipton Group Annual Report & Accounts 2025 132

For the year ended 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Interest receivable and similar income:

Accounted for using effective interest rate method

1,935 .7

2,069.8

1,932.3

2,056.9

Other

21.2

32.5

24.5

26.6

Total interest receivable and similar income

1,956 .9

2,102.3

1,956.8

2,083.5

Interest payable and similar charges

(1,44 2.0)

(1,613.9)

(1,514.6)

(1,676.3)

Net interest receivable

514.9

488.4

442.2

407.2

Fees and commissions receivable

1,215 .0

1,115.5

37.9

36.0

Fees and commissions payable

(6.2)

(5.9)

(3.7)

(3.3)

Fair value (losses) / gains on financial instruments

(1.9)

18.0

1.7

12.2

mandatorily held at FVTPL

Charge on buy-back of Permanent Interest-Bearing

(27.9)

Income from shares in subsidiary undertakings

82.8

36.0

Other operating income

16.9

3.2

12.3

9.4

Total income

1,710 .8

1,619.2

545.3

497.5

Administrative expenses

(1,42 3.4)

(1,312.3)

(262.4)

(262.0)

Operating profit before impairment and provisions

287.4

306.9

282.9

235.5

Impairment and provisions

(12.2)

11.7

(10.8)

10.4

Profit before tax

275.2

318.6

272.1

245.9

Tax expense

(66.2)

(78.1)

(49.5)

(56.7)

Profit for the year

209.0

240.5

222.6

189.2

Attributable to:

Members of the Society

208.6

240.5

222.6

189.2

Non-controlling interests

0.4

Profit for the year

209.0

240.5

222.6

189.2

Segmental performance of the Group is shown in Note 47.

The accompanying Notes form part of these financial statements.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 133

For the year ended 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Profit for the year

209.0

240.5

222.6

189.2

Other comprehensive (expense) / income:

Items that will not be reclassified to Income Statement:

Remeasurement losses on net defined benefit

(18.4)

(3.7)

(17.5)

(2.7)

obligations

Income tax on items that will not be reclassified to

Income Statement

5.1

1.0

4.9

0.8

Net other comprehensive expense that will not be

reclassified to Income Statement

(13.3)

(2.7)

(12.6)

(1.9)

Items that may subsequently be reclassified to Income Statement:

Cash flow hedging reserve:

(Losses) / gains taken to equity

(3.4)

(29.6)

17.5

(35.2)

Realised (gains) / losses transferred to Income

(6.0)

45.9

(6.0)

45.9

Statement

Fair value reserve:

Gains / (losses) taken to equity

6.0

(1.7)

6.0

(1.8)

Cost of hedging reserve:

Gains / (losses) taken to equity

1.4

(1.2)

0.1

Exchange differences on translation of foreign

(0.4)

(1.4)

operations

Income tax on items that may be reclassified to

Income Statement

0.5

(3.7)

(4.9)

(2.5)

Net other comprehensive (expense) / income that may

(1.9)

8.3

12.7

6.4

subsequently be reclassified to Income Statement

Other comprehensive (expense) / income

(15.2)

5.6

0.1

4.5

Total comprehensive income

193.8

246.1

222.7

193.7

Attributable to:

Members of the Society

193.4

246.1

222.7

193.7

Non-controlling interests

0.4

Total comprehensive income

193.8

246.1

222.7

193.7

The accompanying Notes form part of these financial statements.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 134

As at 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Assets

Cash in hand and balances with the Bank of England

1,360 .2

1,930.6

1,360.2

1,930.6

Loans and advances to credit institutions

353.3

414.6

304.7

397.8

Debt securities

4,269 .4

4,349.6

4,275.4

4,340.1

Derivative financial instruments

350.8

752.1

333.1

743.0

Loans and advances to customers held at amortised

33,37 8.9

30,601.1

31,121.3

28,334.9

cost

Loans and advances to customers held at FVTPL

0.8

0.9

0.8

0.9

Equity release portfolio held at FVTPL

263.1

277.2

263.1

277.2

Current tax asset

0.2

3.0

2.3

Investments in subsidiary undertakings and joint

13.1

11.2

560.1

509.3

ventures

Assets held for sale

3.7

Property, plant and equipment

77.1

80.9

42.3

43.1

Right-of-use assets

107.0

90.4

8.0

8.3

Deferred tax asset

0.4

6.3

6.2

11.2

Other assets

177.7

181.2

26.5

22.9

Intangible assets

377.6

311.4

8.3

4.2

Loan to defined benefit pension scheme held at

FVTPL

10.9

Retirement benefit surplus

4.8

Total assets

40,74 4.2

39,015.3

38,326.9

36,628.3

Liabilities

30,52 6.3

28,268.5

30,524.3

28,254.1

Amounts owed to credit institutions

327.2

1,599.6

513.1

1,800.6

Amounts owed to other customers

2,719 .6

2,751.1

1,171.9

1,268.9

Debt securities in issue

3,361 .9

2,435.3

2,955.0

1,930.1

Derivative financial instruments

186.2

225.1

205.0

282.2

Current tax liability

2.3

2.7

1.5

2.7

Lease liabilities

110.3

92.1

8.2

8.6

Other liabilities

109.3

86.6

12.6

11.0

Accruals and deferred income

124.7

114.7

29.7

27.6

Provisions for liabilities

32.6

31.8

5.1

5.3

Deferred tax liability

0.6

Retirement benefit obligations

7.4

8.6

1.2

Subordinated liabilities

356.0

690.2

356.0

690.2

Subscribed capital

15.2

41.6

15.2

41.6

Total liabilities

37,87 9.6

36,347.9

35,798.8

34,322.9

Consolidated Statement of Financial Position continues on page 135.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 135

As at 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Members' interests

General reserve

2,855 .1

2,659.8

2,524.7

2,314.7

Fair value reserve

(6.3)

(10.6)

(6.3)

(10.6)

Cash flow hedging reserve

9.8

16.6

9.6

1.3

Cost of hedging reserve

(0.4)

(1.4)

0.1

Translation reserve

2.8

3.2

Attributable to members of the Society

2,861 .0

2,667.6

2,528.1

2,305.4

Non-controlling interests

3.6

(0.2)

Total members' interests

2,86 4.6

2,667.4

2,528.1

2,305.4

Total liabilities and members' interests

40,74 4.2

39,015.3

38,326.9

36,628.3

Gwyn Burr,

Chair, Skipton

Group

Stuart Haire,

Group Chief

Executive

Paul Chambers,

Group Chief

Financial Officer

These Accounts were

approved by the Board of

Directors on 17 February

2026 and were signed on its

behalf by:

The accompanying Notes form part of these financial statements.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 136

Group

General

Fair value

Cash flow

Cost of

Translation

Sub-

Non-

£m

reserve

hedging

reserve

total

controlling

Total

reserve

interests

For the year ended 31 December 2025

Balance at 1 January 2025

2,659 .8

(10.6)

16.6

(1.4)

3.2

2,667 .6

(0.2)

2,667 .4

Profit for the year

208.6

0.4

209.0

Other comprehensive (expense) / income net of tax:

Remeasurement losses on

defined benefit obligations

(13.3)

Net gains / (losses) from

changes in fair value

4.3

(2.5)

1.0

2.8

Realised gains transferred to

Income Statement

(4.3)

Exchange differences on

translation of foreign

(0.4)

operations

Other comprehensive

(13.3)

4.3

(6.8)

1.0

(0.4)

(15.2)

(expense) / income

Total comprehensive

income / (expense) for the

year

195.3

4.3

(6.8)

1.0

(0.4)

193.4

0.4

193.8

Non

-controlling interests

arising on recognition of

subsidiary undertakings with

less than 100% ownership

3.4

Balance at 31 December

2,855 .1

(6.3)

9.8

(0.4)

2.8

2,861 .0

3.6

2,864 .6

2025

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 137

Group

General

Fair value

Cash flow

Cost of

Translation

Sub-

Non-

£m

reserve

hedging

reserve

total

controlling

Total

reserve

interests

For the year ended 31 December 2024

Balance at 1 January 2024

2,422.0

(9.5)

4.9

(0.5)

4.6

2,421.5

(0.2)

2,421.3

Profit for the year

240.5

Other comprehensive (expense) / income net of tax:

Remeasurement losses on

defined benefit obligations

(2.7)

Net losses from changes in

fair value

(1.1)

(21.3)

(0.9)

(23.3)

Realised losses transferred to

Income Statement

33.0

Exchange differences on

translation of foreign

(1.4)

operations

Other comprehensive

(2.7)

(1.1)

11.7

(0.9)

(1.4)

5.6

(expense) / income

Total comprehensive income /

237.8

(1.1)

11.7

(0.9)

(1.4)

246.1

(expense) for the year

Balance at 31 December 2024

2,659.8

(10.6)

16.6

(1.4)

3.2

2,667.6

(0.2)

2,667.4

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 138

Society

£m

General reserve

Fair value reserve

Cash flow

hedging reserve

Cost of hedging

reserve

Total

For the year ended 31 December 2025

Balance at 1 January

2025

2,314.7

(10.6)

1.3

2,305.4

Profit for the year

222.6

Other comprehensive (expense) / income net of tax:

Remeasurement losses

on defined benefit

obligations

(12.6)

Net gains from

changes in fair value

4.3

12.6

0.1

17.0

Realised gains

transferred to Income

Statement

(4.3)

Other comprehensive

(expense) / income

(12.6)

4.3

8.3

0.1

Total comprehensive

income for the year

210.0

4.3

8.3

0.1

222.7

Balance at 31

December 2025

2,524.7

(6.3)

9.6

0.1

2,528.1

Society

£m

General reserve

Fair value reserve

Cash flow

hedging reserve

Cost of hedging

reserve

Total

For the year ended 31 December 2024

Balance at 1 January

2024

2,127.4

(9.3)

(6.4)

2,111.7

Profit for the year

189.2

Other comprehensive (expense) / income net of tax:

Remeasurement losses

on defined benefit

obligations

(1.9)

Net losses from

changes in fair value

(1.3)

(25.3)

(26.6)

Realised losses

transferred to Income

Statement

33.0

Other comprehensive

(expense) / income

(1.9)

(1.3)

7.7

4.5

Total comprehensive

income / (expense) for

the year

187.3

(1.3)

7.7

193.7

Balance at 31 December

2024

2,314.7

(10.6)

1.3

2,305.4

The accompanying Notes form part of these financial statements.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 139

For the year ended 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Cash flows from operating activities

Profit before tax

275.2

318.6

272.1

245.9

Adjustments for:

Impairment charge / (credits) on financial

39ai)

11.7

(15.9)

2.1

(16.7)

instruments

Depreciation and amortisation

22, 23,

68.2

70.0

8.7

8.5

24, 25

Impairment of property, plant and equipment, right

22, 23,

of-use assets, investment property and intangible

assets

24, 25

5.6

3.1

(0.1)

(Profit) / loss on disposal of property, plant and

equipment, investment property and intangible

assets

(0.7)

(0.1)

0.6

Fair value losses / (gains) on financial instruments

39aii)

1.9

(18.0)

(1.7)

(12.2)

held at FVTPL

Interest on subordinated liabilities and subscribed

32.1

34.1

32.1

34.1

capital

Interest on lease liabilities

4.6

3.1

0.3

Income from shares in subsidiary undertakings

(82.8)

(36.0)

Charge on buy-back of Permanent Interest-

Bearing

27.9

Shares (PIBS)

Other non-cash movements

39aiii)

(7.9)

(5.0)

(16.3)

(2.7)

418.6

389.3

242.2

221.8

Changes in operating assets and liabilities:

Movement in prepayments and accrued income

(10.0)

(3.4)

(5.8)

0.7

Movement in accruals and deferred income

10.0

6.8

2.1

(4.2)

Movement in provisions for liabilities

(15.8)

(10.1)

(0.2)

Net movement in derivatives

80.7

43.6

71.5

42.9

Movement in loans and advances to customers

(2,45 6.3)

(2,345.1)

(2,451.9)

(2,376.0)

Movement in shares

2,199 .5

2,317.2

2,199.5

2,317.2

Net movement in amounts owed to credit

(1,30 3.9)

(551.6)

(1,384.5)

(41.0)

institutions and other customers

Net movement in debt securities in issue

908.0

(5.9)

1,024.9

(312.4)

Net movement in loans and advances to credit

27.0

169.2

70.3

180.9

institutions

Net movement in other assets

(26.5)

(44.7)

(2.8)

(0.3)

Net movement in other liabilities

52.4

32.8

3.6

(7.7)

Contributions to defined benefit pension scheme

(14.4)

(26.0)

(10.7)

(23.0)

Income taxes paid

(56.4)

(68.3)

(47.8)

(50.8)

Net cash flows from operating activities

(187.1)

(96.2)

(289.4)

(52.1)

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 140

For the year ended 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Net cash flows from operating activities

(187.1)

(96.2)

(289.4)

(52.1)

Cash flows from investing activities

Purchase of debt securities

(2,27 4.6)

(4,402.0)

(1,410.3)

(3,986.6)

Proceeds from maturities and disposals of debt

2,416 .6

3,374.5

1,537.7

2,830.1

securities

Dividends received from subsidiary undertakings

82.8

36.0

Increase in loans to subsidiary undertakings

20a)

(50.8)

(31.2)

Purchase of subsidiary undertakings in the year, net of

cash acquired

(21.8)

Other investing activities

39bi)

(52.1)

(41.0)

(23.2)

(14.6)

Net cash flows from investing activities

68.1

(1,068.5)

136.2

(1,166.3)

Cash flows from financing activities

Exercise of put options held by non

-controlling

(4.2)

shareholders

Buy

-back of Permanent Interest-Bearing Shares

(52.9)

(PIBS)

Redemption of subordinated liabilities

(350.0)

Interest paid on subordinated liabilities and

subscribed capital

(34.8)

(33.5)

(34.8)

(33.5)

Interest paid on lease liabilities

(4.6)

(3.1)

(0.3)

Payment of lease liabilities

(39.3)

(2.1)

(2.3)

Net cash flows from financing activities

(485.8)

(75.9)

(440.1)

(36.1)

Net decrease in cash and cash equivalents

(604 .8)

(1,240.6)

(593.3)

(1,254.5)

Cash and cash equivalents at 1 January

2,053 .7

3,294.3

1,984.6

3,239.1

Decrease in impairment loss allowance on cash and

cash equivalents

0.1

Cash and cash equivalents at 31 December

1,449 .0

2,053.7

1,391.4

1,984.6

Analysis of the cash balances as shown within the Statement of Financial Position:

As at 31 December 2025

Group

Society

£m

Notes

2025

2024

2025

2024

Cash in hand and balances with Bank of England

1,360 .2

1,930.6

1,360.2

1,930.6

Loans and advances to credit institutions

88.8

123.1

31.2

54.0

Cash and cash equivalents at 31 December

1,449 .0

2,053.7

1,391.4

1,984.6

The accompanying Notes form part of these financial statements.

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 142

The material accounting policy information relevant to these consolidated Annual Accounts is set out below.

a) Basis of preparation

The Annual Accounts of the Group and the Society are prepared in accordance with UK-adopted International

Accounting Standards in accordance with the requirements of the Building Societies Act 1986 and with those

parts of the Building Societies (Accounts and Related Provisions) Regulations 1998 that are applicable.

The Annual Accounts have been prepared under the historical cost convention as modified by the application

of fair value measurements required or allowed by relevant accounting standards.

Governmental and societal responses to climate change risks continue to develop, and are interdependent

upon each other, and consequently financial statements cannot capture all possible future outcomes as these

are not yet known. The degree of uncertainty of these changes may also mean that they cannot be taken into

account when determining asset and liability valuations and the timing of future cash flows under the

requirements of applicable accounting standards. We have considered the impact of transitioning to a low-

carbon economy and the physical risks from climate change on key estimates in the financial statements.

Consideration was given, in particular, to the impact of climate risks on areas of estimation, and our going

concern assessment. While the Group continues to enhance its ability to assess climate-related risks and given

the uncertainties on the extent and timing of the manifestation of climate-related risks, the Group is currently

unable to determine the full future economic impact on our business model, operational plans and our

customers, and therefore the potential future impacts are not fully incorporated in these financial statements.

The Group continues to monitor emerging regulatory expectations and is assessing how to enhance its

capabilities over time, in line with material risk exposure.

In accordance with the Group’s approach to net zero, initiatives continue to be progressed across the Group to

reduce emissions and to support wider Environmental, Social and Governance (ESG) areas; progress made

against emission reduction targets is monitored by management. As set out in the Strategic Report, during

2025 the Group has continued activity to raise awareness of the need to decarbonise UK homes; this includes

our Energy Performance Certificate (EPC) Plus scheme that offers free EPC reports to Society members and

colleagues, and sharing our experiences as we completed the Big Retrofit project near our Head Office in

Skipton. Reaching the Group’s net zero target depends on many external factors, including government

policies, suppliers and customers. While these uncertainties may impact or challenge the Group in meeting its

climate-related targets, the focus remains on reducing emissions within its control. Long tail climate risk

scenarios have been considered by management and the Board and are factored into the Group’s planning.

The Annual Accounts are presented in pounds Sterling and, except where otherwise indicated, have been

rounded to the nearest one hundred thousand pounds.

b) Going Concern

The Annual Accounts are prepared on a going concern basis (see Directors’ Report).

c) Changes to material accounting policies and other prior period adjustments

There have been no changes during the year to material accounting policies.

Prior period adjustments

i) During the year ended 31 December 2025, the Group reviewed its application in prior periods of the

requirements of IFRS 7

Financial Instruments – Disclosures

with respect to the disclosure of analyses of

the carrying value of financial assets and financial liabilities into relevant maturity groupings, based on

the remaining maturity period at the reporting date to the contractual maturity. This review identified

misstatements where amounts previously reported by the Group (and Society) were not correctly

allocated to the appropriate maturity grouping. This matter impacts only the tables of maturity analysis

for the Group and Society that are presented for disclosure purposes in Note 43 Liquidity Risk. There is no

impact for affected periods on the Group or Society’s Income Statements, Statements of Financial

Position or Statements of Cash Flows. In accordance with IAS 8

Accounting Policies, Changes in

Accounting Estimates and Errors

, comparative amounts are restated as set out in the tables below.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 143

Note 43 Liquidity risk, year ended 31 December 2024

Group

Repayable

Up to 3

3 -12

1 - 5

Over 5

£m

on demand

months

years

specified

Total

maturity

Previously reported:

Debt securities in issue

5.1

0.8

1,938.7

490.7

2,435.3

Total financial liabilities

12,335.2

4,469.8

13,220.5

5,009.1

485.1

598.9

36,118.6

Net liquidity gap

(10,041.4)

(3,876.3)

(12,219.3)

(1,261.1)

30,004.7

(291.4)

2,315.2

Adjustments:

Debt securities in issue

(5.1)

5.1

(1,938.7)

1,938.7

Total financial liabilities

(5.1)

5.1

(1,938.7)

1,938.7

Net liquidity gap

(5.1)

5.1

(1,938.7)

1,938.7

Restated:

Debt securities in issue

5.9

2,429.4

2,435.3

Total financial liabilities

12,330.1

4,474.9

11,281.8

6,947.8

485.1

598.9

36,118.6

Net liquidity gap

(10,036.3)

(3,881.4)

(10,280.6)

(3,199.8)

30,004.7

(291.4)

2,315.2

Note 43 Liquidity risk, year ended 31 December 2024

Society

Repayable

Up to 3

3 - 12

1 - 5

Over 5

£m

on demand

months

years

specified

Total

maturity

Previously reported:

Debt securities in issue

5.1

1,925.0

1,930.1

Total financial liabilities

11,909.7

3,993.1

12,173.2

5,145.4

458.8

598.9

34,279.1

Net liquidity gap

(9,515.2)

(3,658.2)

(11,231.2)

(1,172.6)

27,984.5

(256.1)

2,151.2

Adjustments:

Debt securities in issue

(5.1)

5.1

(1,925.0)

1,925.0

Total financial liabilities

(5.1)

5.1

(1,925.0)

1,925.0

Net liquidity gap

(5.1)

5.1

(1,925.0)

1,925.0

Restated:

Debt securities in issue

5.1

1,925.0

1,930.1

Total financial liabilities

11,904.6

3,998.2

10,248.2

7,070.4

458.8

598.9

34,279.1

Net liquidity gap

(9,510.1)

(3,663.3)

(9,306.2)

(3,097.6)

27,984.5

(256.1)

2,151.2

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 144

ii) During the year ended 31 December 2025, the Society reviewed its application in prior periods of the

requirements of IFRS 7

Financial Instruments – Disclosures

with respect to the disclosure of interest amounts

associated with intra-Group swaps between the Society and its subsidiary undertakings. This review

determined that such amounts would most appropriately be presented within interest payable and similar

charges on financial instruments held at FVTPL, specifically within ‘Net expense on derivative financial

instruments held for hedging liabilities’. In prior periods such amounts were included by the Society within

interest payable and similar charges on financial liabilities held at amortised cost, specifically within ‘Deposits

and other borrowings - subsidiary undertakings’.

In accordance with IAS 8

Accounting Policies, Changes in Accounting Estimates and Errors

, comparative

amounts are restated as set out in the tables below. There is no impact for affected periods on the Society’s

Income Statements, Statements of Financial Position or Statements of Cash Flows.

Performance & Strategy Governance

Financial Statements

Other Information

Note 3 Interest payable and similar charges, year ended 31 December 2024

Society

£m

Previously reported:

On financial liabilities held at amortised cost:

On deposits and other borrowings – subsidiary undertakings

71.1

Total on financial liabilities held at amortised cost

1,392.1

On financial instruments held at FVTPL:

Net expense on derivative financial instruments held for hedging liabilities

138.3

Total interest payable and similar charges

1,676.3

Adjustments:

On financial liabilities held at amortised cost:

On deposits and other borrowings – subsidiary undertakings

(46.7)

Total on financial liabilities held at amortised cost

(46.7)

On financial instruments held at FVTPL:

Net expense on derivative financial instruments held for hedging liabilities

46.7

Total interest payable and similar charges

Restated:

On financial liabilities held at amortised cost:

On deposits and other borrowings – subsidiary undertakings

24.4

Total on financial liabilities held at amortised cost

1,345.4

On financial instruments held at FVTPL:

Net expense on derivative financial instruments held for hedging liabilities

185.0

Total interest payable and similar charges

1,676.3

Skipton Group Annual Report & Accounts 2025 145

d) Basis of consolidation

Subsidiary undertakings

Subsidiary undertakings are entities controlled by the Group. Control exists when the Group is exposed, or has

rights, to variable returns from its involvement with an entity and has the ability to affect those returns through

its power over the entity. In assessing control, only substantive rights (i.e. rights that can be practically

exercised) are taken into account.

Investments in subsidiary undertakings

Investments in subsidiary undertakings are recorded in the Society’s Statement of Financial Position at cost,

less any provision for impairment. The Group Accounts consolidate the financial statements of the Society and

all its subsidiary undertakings, eliminating intra-Group transactions and balances.

The Group accounts for business combinations using the acquisition method when control is transferred to

the Group. The consideration transferred in the acquisition is measured at fair value, as are the separately

identifiable net assets acquired. Any goodwill arising is accounted for in accordance with the Group’s

accounting policy for goodwill (see Note 1e)). Any gain on a bargain purchase is recognised in profit or loss

immediately. All transaction or acquisition costs are written off to the Income Statement as incurred.

In accordance with International Financial Reporting Standard (IFRS) 3

Business Combinations (2008)

goodwill is accounted for only upon the acquisition of a subsidiary undertaking or as a result of a business

combination. Subsequent changes in the Group’s interest in a subsidiary undertaking, where control is retained,

are recognised in equity. In accordance with IFRS 10

Consolidated Financial Statements (2011)

, for business

combinations which have taken place from 1 January 2010 onwards, all transactions relating to ownership

interests with non-controlling interests are recorded in equity if there has been no change in control.

When the Group loses control over a subsidiary, through disposal or other changes in circumstances, it

derecognises the assets and liabilities of the subsidiary and any associated goodwill, as well as any related

non-controlling interest and other components of equity. Any resulting gain or loss is recognised in the Income

Statement.

Put options

Within a number of subsidiary undertakings where the Group has less than 100% ownership, there is an option

for the non-controlling shareholders to require the Group to purchase their shares at some point in the future.

In accordance with IAS 32

Financial Instruments: Presentation

, the Group recognises the present value of

these options as a financial obligation, along with recognition of further goodwill on the future purchase of

remaining non-controlling interests. Under this accounting policy the Group consolidates 100% of the results of

such subsidiary undertakings to reflect the 100% implicit ownership in the recording of the future purchase of

the non-controlling interests’ shareholdings (i.e. the put option liability).

Any changes in the valuation of a put option obligation in respect of an entity acquired after 1 January 2010

are credited or charged through the Income Statement line ‘Fair value (losses) / gains on financial instruments

mandatorily held at FVTPL’. Put options issued prior to 1 January 2010 are accounted for in accordance with

IAS 27

Consolidated and Separate Financial Statements (2003)

and IFRS 3

Business Combinations (2004)

and

any adjustment to the Group’s estimation of the present value of the put option liability results in an

adjustment to goodwill. Dividends paid to the non-controlling interests are charged through the ‘Administrative

expenses’ line in the Income Statement. The change in fair value of the liability due to the accretion of the

discount of the liability is expensed through the Income Statement line ‘Interest payable and similar charges’.

Joint ventures

A joint venture is an undertaking in which the Group has joint control and has rights to the net assets of the

arrangement.

The results and assets and liabilities of joint ventures are accounted for in these consolidated financial

statements using the equity method of accounting. Investments in joint ventures are carried within the

Statement of Financial Position at cost, as adjusted by post-acquisition changes in the Group’s share of the net

assets of the joint venture, less any impairment in the value of individual investments.

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Equity share investments

An equity share investment is an investment in the share capital of a company where the Group does not have

significant influence.

Unconsolidated structured entities

The Group invests in structured entities where the principal purpose of the structured entity is to provide

investors with access to specific portfolios of assets and also provide the investor liquidity through the

securitising of financial assets. A structured entity is one that has been set up so that any voting rights or

similar rights are not the determining factor in deciding which party controls the entity, such as when any

voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual

arrangements.

A structured entity often has some or all of the following characteristics:

• Restricted activities;

• A narrow and well-defined objective;

• Insufficient equity to permit the structured entity to finance its activities without subordinated financial

support.

Third party funding entities

The Group invests in structured entities through the purchase of issued mortgage backed securities, as

disclosed in Note 14. These structured funding entities are not consolidated into the Group Accounts because

the Group does not have the ability to direct the activities of the entities in question and does not control these

entities through voting rights, contractual rights, funding agreements or any other means. The Group’s

involvement is in relation to investment activity only.

Interests in unconsolidated structured entities

The Group’s interests in unconsolidated structured entities refer to involvement that exposes the Group to

variability of returns from the performance of the structured entities.

Income derived from involvement with unconsolidated structured entities

Interest income on funding provided to unconsolidated structured entities is recognised within the Income

Statement line ‘Interest receivable and similar income’.

Special purpose funding vehicles

The Society has transferred the beneficial interest in certain portfolios of loans and advances to customers to

special purpose funding vehicles (SPVs). These SPVs enable the subsequent raising of debt, either by the SPVs

or the Society, to investors who gain the security of the underlying assets as collateral. The SPVs are fully

consolidated into the Group Accounts in accordance with IFRS 10.

The transfers of the beneficial interest in these loans to the SPVs are not treated as sales by the Society and

are not derecognised. The Society continues to recognise these assets within its own Statement of Financial

Position after the transfer because it retains substantially all the risks and rewards of these mortgage

portfolios through the receipt of interest income and deferred consideration from the SPVs for the transfer of

the beneficial interest in the mortgage loans. For securitisations, in the accounts of the Society, the proceeds

received from the transfer of mortgage loans are accounted for as a deemed loan repayable to the SPV and

are included in ‘Amounts owed to other customers’ within the Society’s Statement of Financial Position.

Where the Society issues the debt, as is the case for the covered bonds (see Note 20a)), it then lends the

proceeds on back-to-back terms to Skipton Covered Bonds Limited Liability Partnership (LLP); the proceeds

lent to the LLP are known as the ‘term advance’. Some or all of the proceeds from the term advance are then

paid to the Society from the LLP as consideration for the beneficial interest in the mortgage pool and this is

accounted for as a deemed loan repayable to the LLP. In the accounts of the Society, the term advance and the

deemed loan are not recognised separately as additional assets and liabilities; the difference between the term

advance and the deemed loan are shown net within the Society’s Statement of Financial Position as an amount

owed from subsidiary undertakings. This is to avoid the ‘grossing up’ of the Statement of Financial Position.

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To manage interest rate risk, the Society enters into interest rate swap arrangements with the LLP; the Society

receives interest payments from the LLP relating to receipts on the mortgages in the pool and pays a floating

rate of interest to the LLP. In accordance with IFRS 9 these swap arrangements are treated as part of the

deemed loan and not separately fair valued because the relevant mortgage loans to which the interest swaps

relate are not derecognised. All other derivatives relating to securitisations are treated as explained in Note 1f).

To manage currency risk arising from the Euro-denominated covered bond issuances, the LLP has entered into

a cross-currency swap transaction. The derivative is designated in a hedge accounting relationship against the

term advance, which mirrors the conditions of the debt issued, effectively hedging the debt issued by the

Society. In accordance with IFRS 9, any cost for currency basis spread priced within the cross-currency swap is

permitted to be excluded from the hedge relationship and is recognised directly in reserves (the cost of

hedging reserve). The Group has elected to apply this treatment for this hedge relationship. See Note 1f) for

further details.

Further details on the nature and amount of the beneficial interest transferred to the SPVs can be found in

Note 16 to these financial statements.

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e) Intangible assets

Goodwill

Goodwill arising on the acquisition of Group undertakings or other businesses represents the excess of the fair

value of the consideration paid over the fair value of separately identifiable net assets acquired at the date of

acquisition. Goodwill arising on the acquisition of subsidiary undertakings is included in the ‘Intangible assets’

line within the Statement of Financial Position. Goodwill arising on the acquisition of joint ventures, associates

or other businesses is included within the carrying value of the underlying investment within the Statement of

Financial Position.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated

impairment losses, and is reviewed for impairment, at least, at each reporting date. Any impairment is

recognised in the Income Statement.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash generating units

(CGUs), or groups of CGUs, that is expected to benefit from the synergies of combination. Each unit or group

of units to which the goodwill is so allocated shall a) represent the lowest level at which the goodwill is

monitored for internal management purposes and b) not be larger than an operating segment; at Skipton

Group level, the allocation of goodwill typically reflects the Group’s operating segments.

The impairment test compares the carrying value of the CGU (or group of CGUs), being its net assets plus

associated goodwill, to its associated value in use. The value in use calculations are carried out by discounting

the forecast future cash flows of the CGU (or group of CGUs) to present value (see Note 25). Future cash flows

are ordinarily based upon the corporate plans of the CGUs for the next five years and assumed growth

thereafter, generally in line with long-term growth rates. The cash flows are extrapolated for subsequent years

indefinitely (or a specific number of years where circumstances dictate), to reflect the fact that CGUs are held

for the long-term. The Group estimates discount rates based upon the weighted average cost of capital which

is adjusted to take account of the market risks associated with each CGU.

Goodwill arising on acquisitions before the transition to IFRS on 1 January 2005 has been retained at its

previous UK GAAP amount and is reviewed for impairment, at least, at each reporting date, as above.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of

any goodwill allocated to the CGU (or group of CGUs), and then to reduce the carrying amounts of the other

assets in the CGUs on a pro-rata basis.

Computer software, databases, brands and customer contracts

In accordance with IAS 38

Intangible Assets

, computer software, databases, brands and customer contracts

are recognised as an intangible asset if, and only if, the cost incurred leads to the creation of an identifiable

asset whose cost can be measured reliably and it is probable that the asset created will generate future

economic benefits which will flow to the Group. Furthermore, brands and customer contracts are only eligible

to be recognised as an intangible asset when purchased externally or when acquired as part of a business

combination; internally generated brands and customer contracts are not capitalised. Expenditure incurred to

maintain existing levels of performance is recognised as an expense as incurred.

Intangible assets are initially recognised at cost, or at fair value when acquired as part of a business

combination, and subsequently amortised from the date they are available for use using the straight-line

method over their estimated useful economic lives (unless deemed to have an indefinite economic life), which

can be up to 10 years. Amortisation methods, useful lives and residual values are reviewed at each reporting

date and adjusted if appropriate.

Intangible assets are tested for impairment at each reporting date or when there is an indication of

impairment. The Group identifies impairment by comparing the future economic benefit to the Group against

the carrying value of the asset. The assessment of future economic benefit includes value in use calculations

to determine recoverable amounts for cash generating units.

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f) Financial assets

In accordance with IFRS 9, the financial assets of the Group are each classified into one of three categories

(amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss

(FVTPL)), further details of which are provided below.

In classifying each financial asset, the Group assesses:

• The objective of the business model in which the financial asset is held; and

• Whether the contractual cash flows of the financial asset are ‘solely payments of principal and interest’

(SPPI).

Financial assets are reclassified when, and only when, the Group changes its business model for managing the

assets.

Business model assessment

The Group’s business model assessment is made at a portfolio level as this best reflects the way the business

is managed and how information is provided to management. The information considered includes:

• The stated policies and objectives for the portfolio and the operation of those policies in practice. These

include whether management’s strategy focuses on earning contractual interest income, matching the

duration of the financial assets to the duration of any related liabilities or realising cash flows through the

sale of the assets;

• How the performance of the portfolio is evaluated and reported to the Group’s management;

• The risks that affect the performance of the business model (and the financial assets held within that

business model) and how those risks are managed;

• The frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales

and expectations about future sales activity. Transfers of financial assets to third parties in transactions

that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s

continuing recognition of the assets.

Solely Payment of Principal and Interest (SPPI) assessment

For the purposes of the Group’s SPPI assessment, ‘principal’ is defined as the fair value of the financial asset

on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk

associated with the principal amount outstanding during a particular period of time and for other basic lending

risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group

considers the contractual terms of the instrument. This includes assessing whether the financial asset

contains a contractual term that could change the timing or amount of contractual cash flows such that it

would not meet this condition. In making this assessment, the Group considers:

• Terms that may adjust the contractual coupon rate, including variable-rate features;

• Contingent events that would change the amount or timing of cash flows;

• Prepayment and extension features; and

• Terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).

As a result of the assessments outlined above, the financial assets of the Group have been classified as

follows:

At amortised cost

A financial asset is measured at amortised cost only if it meets both of the following conditions and is not

designated as at fair value through profit or loss (FVTPL):

• It is held within a business model whose objective is to hold assets to collect contractual cash flows (‘held

to collect’ business model); and

• Its contractual terms give rise on specified dates to cash flows that are ‘solely payments of principal and

interest’ (SPPI) on the principal amount outstanding.

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The following have been assessed by the Group to be in a ‘held to collect’ business model and to have cash

flows that pass the SPPI test:

• Loans and advances to customers (except for a small number of loans held at FVTPL)

• Cash balances

• Loans and advances to credit institutions

• Trade receivables

• Loans to subsidiary undertakings (in the Society’s Statement of Financial Position)

The Group’s financial assets measured at amortised cost are initially recognised at fair value less any directly

attributable transaction costs. The assets are subsequently measured at amortised cost using the effective

interest method, less impairment loss allowances. The effective interest method calculates an interest rate

which exactly discounts the forecast cash flows of an asset over its expected life back to its carrying value.

For financial assets that are not credit-impaired (see Note 1h)), interest revenue is calculated by applying the

effective interest rate to the gross carrying amount of the asset. For financial assets that are credit-impaired,

interest revenue is calculated by applying the effective interest rate to the amortised cost of the asset.

In accordance with the effective interest method, directly attributable upfront costs and fees such as

cashbacks, mortgage premia paid or discounts received on acquisition of mortgage books, lending charges

paid by customers, procuration fees and completion fees are deferred and recognised over the expected life of

mortgage assets. Upfront costs that are attributable to a mortgage asset’s fixed interest rate period are

amortised over that fixed rate period (or shorter period, if deemed appropriate). Historical and forecast

mortgage redemption data and management judgement of future performance are used to estimate the

expected lives of mortgage assets.

A change to management’s estimate of expected mortgage lives results in an immediate adjustment to the

carrying amount of the mortgage asset (discounted at its effective interest rate) at the point this change is

made, which recalculates the carrying value to account for the revised assumptions.

Included in loans and advances to customers of the Society are balances which have been used to secure

funding issued by the Group’s special purpose funding vehicles which are consolidated into the Group

Accounts, further details of which are included in Note 20a). The beneficial interest in the underlying loans has

been transferred to these entities. The loans are retained within the Society’s Statement of Financial Position

as the Society retains substantially all the risks and rewards relating to the loans.

In accordance with IFRS 9, an impairment loss allowance is determined for financial assets at amortised cost

in relation to expected credit losses (ECLs; see Note 1h) for details on measurement of ECLs). The movement

in the impairment loss allowance recognised during the period is charged or credited to the Income Statement.

At fair value through other comprehensive income (FVOCI)

A financial asset is measured at FVOCI only if it meets both of the following conditions and is not designated

as at FVTPL:

• It is held within a business model whose objective is achieved by both collecting contractual cash flows and

selling financial assets (‘held to collect and sell’ business model); and

• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal amount outstanding.

The majority of the Group’s debt securities, which are held to manage liquidity requirements, have been

assessed by the Group to be in a ‘held to collect and sell’ business model and to have cash flows that pass the

SPPI test.

Financial assets held at FVOCI are initially recognised at fair value plus directly attributable transaction costs,

with subsequent changes in fair value recognised in equity. The majority of fair values of financial assets held

at FVOCI are based on quoted prices, which represent the bid price. Where debt securities held at FVOCI do not

have quoted prices available, the fair value is based on the present value of discounted cashflows using

market observable inputs.

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In accordance with IFRS 9, an impairment loss allowance is determined for debt securities measured at FVOCI

in relation to ECLs. For debt instruments measured at FVOCI, the impairment loss allowance is not deducted

from the carrying amount of the asset; instead the loss allowance is recognised through other comprehensive

income. The movement in the impairment loss allowance recognised during the period is charged or credited

to the Income Statement.

Interest income is recognised in the Income Statement on an effective interest basis. When the debt

instruments are derecognised, the accumulated gains or losses within equity are reclassified to the Income

Statement.

The premia and discounts arising on the purchase of these assets are amortised over the period to the

maturity date of the security on an effective interest basis. Any amounts amortised are charged or credited to

the Income Statement in the relevant financial periods.

At fair value through profit or loss (FVTPL)

All financial assets which are not classified as either amortised cost or FVOCI, as described above, are

measured at FVTPL. This includes all derivative financial assets. On initial recognition the Group may

irrevocably designate as FVTPL a financial asset that otherwise meets the requirements to be measured at

either amortised cost or FVOCI, if so doing eliminates or significantly reduces an accounting mismatch that

would otherwise arise.

Loans and advances to customers

A small number of loans are held at FVTPL because they contain contractual cash flows which do not pass the

SPPI test. These loans consist mainly of certain lifetime mortgages. The fair value of these loans is

determined by discounting future expected cash flows. Where the portfolio is so small that a probabilistic

methodology to estimate future cash flows is not appropriate, management assumes that voluntary

prepayments will be 100% in year one.

Equity release portfolio

The Group holds an equity release portfolio. The mortgage products within this portfolio provide the customer

with a ‘no negative equity guarantee’ (NNEG), which is an embedded derivative. Under IFRS 9, the equity

release portfolio and the NNEG are assessed together as a hybrid financial instrument. The Group assessed

the characteristics of the equity release cash flows and concluded that the contractual terms do not give rise

on specified dates to cash flows that are solely payments of principal and interest. As a result, the equity

release portfolio is classified as FVTPL.

The existence of the NNEG means that the Group’s maximum return on redemption of these loans is limited to

the value of the customer’s property at that time. The Group’s exposure to potential losses as a result of the

NNEG is limited in part by a guarantee provided to the Group by a third party for the longevity element of this

risk. Due to the structured nature of the portfolio there is no single industry pricing methodology and

assumptions for valuing these products differ by institution. Further complexity arises on a portion of the

portfolio due to the customer interest rate being linked to the Retail Price Index (RPI).

A stochastic model was chosen and devised internally for the purpose of valuing this portfolio. The model

uses inputs including mortality rates, voluntary prepayment rates, estimates of future RPI and a House Price

Index (HPI) to predict future cash flows on the portfolio. These are then discounted back to present value

using a discount curve based on a Sterling Overnight Index Average (SONIA) curve plus an illiquidity spread.

The illiquidity spread reflects the fact that no repayments are made by the customer until the product redeems

which may be many years into the future.

Where possible the inputs are market-driven or, where no market-driven data is available, based on

management judgement that is informed by observable data wherever possible. Due to the high level of

variability within these inputs, the model also runs several thousand scenarios for both the RPI and HPI inputs.

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The Group has robust control procedures in place regarding all the inputs to the valuation model.

As this valuation technique uses one or more significant inputs that are not based on observable market data,

it is classed as a Level 3 valuation technique. For further details on the different levels of the fair value

hierarchy, see Note 46b). The impact of applying reasonably possible alternative assumptions of certain inputs

into the valuation of the portfolio is found in Note 1v).

Interest income on the equity release portfolio is recognised in the Income Statement on an effective interest

basis. Fair value gains or losses on the portfolio are recognised within the Income Statement line ‘Fair value

(losses) / gains on financial instruments mandatorily held at FVTPL’. Realised losses recognised on

redemption of loans within the portfolio are recognised within the Income Statement line ‘Impairment and

provisions’.

Derivative financial instruments

The Group’s derivative financial instruments, which are held solely for hedging purposes, are measured and

held at fair value within the Statement of Financial Position. The Group has elected to adopt the hedge

accounting requirements of IFRS 9 for all hedge relationships covered by those requirements. As permitted

under IFRS 9, the Group continues to apply the requirements of IAS 39 for derivatives designated in a portfolio

fair value hedge. For all other derivatives designated in a hedging relationship, the Group applies the

requirements of IFRS 9.

The Group uses derivative financial instruments to hedge its exposure to market risks (for example, interest

rate risk) arising from operational, financing and investment activities. In accordance with its treasury policy

and the Building Societies Act 1986, the Group does not hold or issue derivative financial instruments for

trading purposes. In line with accounting standards, the changes in fair value of derivatives used to hedge

particular risks can either be offset in the Income Statement or deferred to equity.

There are two types of hedge accounting strategies that the Group undertakes and these are summarised

below:

• Fair value hedges - Where a derivative financial instrument hedges the changes in fair value of a recognised

asset or liability (or portion of a recognised asset or liability), any gain or loss on the hedging instrument is

recognised in the Income Statement. To the extent that there is an effective hedge relationship, the

associated hedged items (for example, mortgage assets) are stated at fair value in respect of the hedged

risk, with any gain or loss also recognised in the Income Statement. As a result, fair value movements in the

hedging instrument and in the hedged items offset each other and reduce income statement volatility. Any

residual fair value hedge ineffectiveness is also recognised in the Income Statement. In order to calculate

the fair value in respect of hedged risk in relation to mortgage assets and some retail savings, the Group

applies estimated prepayment assumptions using historical analysis. For fair value hedge relationships

where ineffectiveness would arise as a result of foreign currency basis spread, movements are recognised

in other comprehensive income (OCI) through the cost of hedging reserve (see below) in accordance with

IFRS 9.

• Cash flow hedges - Where a derivative financial instrument is designated as a hedge of the variability in

cash flows of a recognised asset or liability (or portion of a recognised asset or liability) or a highly

probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is

recognised in OCI and deferred in a separate reserve. The effective portion recognised in OCI is limited to

the cumulative change in fair value of the hedged item, determined on a present value basis, from inception

of the hedge. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the

Income Statement immediately.

In accordance with IFRS 9, where foreign currency basis spread arises in fair value hedge relationships, this is

separated and excluded from the designation of a financial instrument as the hedging instrument; movements

relating to the foreign currency basis spread are recognised in OCI through the cost of hedging reserve. The

Group calculates the value of the foreign currency basis spread by comparing the change in value of the actual

foreign currency hedging instrument (excluding fees not relating to the hedge relationship) and the value of a

hypothetical instrument derived and valued using market data excluding foreign currency basis spread.

Hedge accounting relationships within the scope of IFRS 9 require hedge accounting to only be discontinued

when the qualifying criteria are no longer met. Additionally, if the hedge no longer meets the qualifying criteria

due to a mismatch in the hedge ratio, the relationship must be rebalanced if possible, rather than discontinuing

hedge accounting.

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Fair values are determined by the three tier valuation hierarchy as defined in IFRS 13

Fair Value Measurement

and Amendments to IFRS 7

Financial Instruments: Disclosures

and as described in Note 46b). All derivatives

are carried as assets when their fair value is positive and as liabilities when their fair value is negative.

In valuing derivatives used to hedge our mortgage and savings portfolios, the Group has not valued them as

one net pool for market risk and credit risk management purposes as permitted under IFRS 13, but has valued

each derivative individually.

Interest on derivatives is included within interest receivable where the derivative economically hedges an asset

and within interest expense where the derivative economically hedges a liability, to align the recognition with

its economic purpose.

Fair value gains and losses on derivatives and hedged items that are posted to the Income Statement are

recognised in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held

at FVTPL’.

To the extent that the hedge is effective, unrealised fair value gains and losses on cash flow hedging

derivatives are recognised in the cash flow hedging reserve.

Where the Group enters into a cross-currency swap, as is the case for the issuance of Euro-denominated

covered bonds (see page 147), the Group recognises the movement in the fair value of these derivatives as

follows:

• Foreign exchange movements are recognised in the Income Statement line ‘Interest payable and similar

charges’;

• Movements due to interest rate risk are recognised in the Income Statement line ‘Fair value (losses) / gains

on financial instruments mandatorily held at FVTPL’; and

• Movements due to foreign currency basis spread are recognised directly in the cost of hedging reserve as

permitted by IFRS 9.

Equity share investments

Under IFRS 9 equity share investments are measured at FVTPL, except where an election is made at initial

recognition to irrevocably designate an equity share investment that is not held for trading to be classified as

FVOCI. The FVOCI election can be made on an instrument-by-instrument basis. The Group has made no FVOCI

elections in respect of its existing equity share investments; the Group’s equity share investments are therefore

held at FVTPL. They are initially recognised at fair value, with subsequent changes in fair value being

recognised in the Income Statement. Transaction costs are expensed to the Income Statement.

Share warrants

Within other assets of the Group are amounts recognised in respect of share warrants held, or vested, in

unlisted entities. Amounts are also recognised, where appropriate, for certain put options associated with

these share warrants; these put options contain conditional contractual rights for the Group to put the

warrants back to the counterparty at a future date in exchange for cash. The Group assessed for these assets

the characteristics of the related cash flows and concluded that the contractual terms fail the SPPI test; these

assets are therefore classified by the Group as FVTPL. The fair value of share warrants is determined by

reference to information included in independent third-party valuations. The fair value of related put options is

based on management’s assessment of the likelihood that criteria to receive payment will be met and is

discounted for the weighted average cost of capital.

Loan to defined benefit pension scheme

The Group holds a loan to the Skipton Building Society (2015) Group Pension Scheme. The loan is held at

FVTPL because it fails the SPPI test due to prepayment features that are contractually linked to the maturity

and value of specific illiquid assets held by the scheme. The fair value of this loan is determined by discounting

future expected cash flows. See Note 1v) for further details.

Debt securities

The Society holds in its Statement of Financial Position residential mortgage backed securities that were

issued in previous periods by the Group’s securitisation vehicles. Junior tranches of these securities are held at

FVTPL because they fail the SPPI test due to an elevated level of credit risk relative to other tranches.

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g) Financial liabilities

In accordance with IFRS 9, the financial liabilities of the Group are classified as measured at either amortised

cost or FVTPL. A financial liability is classified as at FVTPL if it meets the definition of ‘held for trading’, which

includes derivatives (except for derivatives that are financial guarantee contracts or which are designated and

effective hedging instruments). On initial recognition the Group may irrevocably designate as FVTPL a financial

liability that otherwise meets the requirements to be measured at amortised cost if so doing results in more

relevant information; this can be either because it eliminates or significantly reduces an accounting mismatch

that would otherwise arise, or because a group of financial liabilities is managed and evaluated on a fair value

basis.

Financial liabilities at FVTPL are measured at fair value. Gains and losses, including any interest expense, are

recognised in profit or loss unless the financial liability is one that was designated as FVTPL, in which case fair

value changes are presented as follows:

• The amount of fair value change that is attributable to changes in the credit risk of the liability is presented

in other comprehensive income (except where this would create or enlarge an accounting mismatch in

profit or loss); and

• The remaining amount of fair value change is presented in profit or loss.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method,

with any interest expense being recognised in profit or loss. Any gain or loss on derecognition is also

recognised in profit or loss.

The financial liabilities of the Group have been classified as set out below:

Borrowings, comprising shares, deposits and debt securities in issue, and subordinated liabilities are

recognised initially at fair value, being the amounts deposited or proceeds issued, net of premia, discounts and

transaction costs incurred. Borrowings and subordinated liabilities are subsequently measured at amortised

cost using the effective interest method. Derivative liabilities and the fair value of the put option obligation are

measured at fair value through profit or loss.

Permanent Interest-Bearing Shares (PIBS) with no fixed maturity are classified as financial liabilities as

opposed to equity instruments since their terms do not permit the Directors discretion to avoid the payment of

interest, as the only instance where interest could not be paid on these instruments would be where capital

levels are insufficient to allow such a payment to be made. PIBS are carried at amortised cost.

Where financial liabilities are hedged, the Group elects to use fair value hedging for those hedged financial

liabilities. This treatment has been adopted to reduce the volatility that would otherwise exist given that the

interest rate risk element of the underlying liabilities is economically hedged by derivatives which are held at

fair value through profit or loss.

Within the Society’s Statement of Financial Position, the deemed loan to the Society from Darrowby No. 6 plc is

measured at amortised cost; management considers that amortised cost best reflects the economic value of

the deemed loan, which is based on the value of the pool of mortgages that is used as collateral for the

securitisation transaction (and this pool is also held at amortised cost).

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h) Impairment of financial assets

Under IFRS 9, impairment of financial assets is assessed using a forward-looking expected credit loss (ECL)

model. This model applies to financial assets measured at either amortised cost or FVOCI (except any equity

share investments held as such, as set out in Note 1f)). The Group recognises impairment loss allowances for

ECLs on the following financial assets that are not measured at FVTPL:

• Loans and advances to customers;

• Loan commitments (where a firm offer has been made to the customer);

• Trade receivables;

• Treasury assets, which comprise debt securities held at FVOCI, cash in hand and balances with the Bank of

England and loans and advances to credit institutions; and

• Loans to subsidiary undertakings (within the Society’s Statement of Financial Position) and firm

commitments made in relation to such loans.

Measurement of Expected Credit Losses (ECLs)

ECLs are an unbiased probability-weighted estimate of the present value of credit losses, taking account of

forward-looking information that includes a range of possible economic outcomes. ECLs are measured as the

difference between contractual cash flows and expected cash flows, discounted at the asset's effective

interest rate. The assessment of impairment requires a number of estimates and assumptions, details of

which are included in Note 1v). The maximum period considered when estimating ECLs is the maximum

contractual period over which the Group is exposed to credit risk. The Group typically assesses ECLs on an

individual asset basis.

IFRS 9 requires an impairment loss allowance to be recognised at an amount equal to either 12-month ECLs

(‘stage 1’ ECLs) or lifetime ECLs. Lifetime ECLs are ECLs that result from all possible default events over the

expected life of a financial instrument. 12-month ECLs are ECLs that result from default events that are

possible within the 12 months after the reporting date.

The Group measures impairment loss allowances at an amount equal to lifetime ECLs, except for the following

which are measured as 12-month ECLs:

• treasury assets that are determined to have low credit risk at the reporting date. The Group considers a

treasury asset to have low credit risk when its credit rating is equivalent to the globally understood

definition of 'investment grade'; and

• other financial assets on which credit risk has not increased significantly since their initial recognition

(except trade receivables, for which the Group will always recognise lifetime ECLs in accordance with the

simplified approach in IFRS 9).

Lifetime ECLs are required where the credit risk on a financial asset has increased significantly since initial

recognition (except for investment grade treasury assets, as noted above).

For the measurement of ECLs relating to residential mortgages and to treasury assets, the Group typically

assesses the probability of default, the expected exposure at the time of default, and the loss that is expected

to arise on default. The probabilities of default are adjusted to take account of expected customer

redemptions.

For commercial mortgages, the Group applies an average loss rate approach. A lifetime coverage ratio is

calculated, based on cumulative losses to date divided by the total value of loan balances redeemed over that

period. The lifetime coverage ratio is applied to accounts held in stage 2 and stage 3, discounted at each

account’s EIR, to determine expected lifetime losses. For stage 1 accounts, a 12-month coverage ratio is

applied, discounted at each account’s EIR, to determine expected 12-month losses. For accounts held in stage

3, additional account-specific impairment is typically held based on management judgement. Due

consideration is given to the impact of forward-looking information, including a range of possible future

economic scenarios; where appropriate, the level of impairment held is adjusted accordingly.

For debt factoring advances, stage 1 ECLs are based on an average 12-month loss rate as adjusted for

forward-looking assessments and other pertinent factors. For accounts held in stage 2 / stage 3, account-

specific allowances are held based on management judgement.

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For trade receivables, the Group typically applies a simplified approach whereby, as permitted by IFRS 9, the

level of impairment held is always based on lifetime ECLs. This approach includes the use of provision

matrices based on historical credit loss experience, as adjusted for forward-looking factors.

For loan commitments where a firm offer has been made, ECLs are measured by the Group at 12-month losses

for the percentage of such commitments expected to convert from an outstanding customer offer into a

completed customer loan. The conversion factors applied are based on actual trends observed for the Group

and are aligned with the Group’s Internal Ratings-Based (IRB) approach for regulatory capital purposes.

Financial assets that are subject to the impairment requirements of IFRS 9 are described according to their

ECL ‘stage’ as follows:

• ‘Stage 1’ - Assets for which a 12-month ECL is recognised;

• ‘Stage 2’ - Assets for which a lifetime ECL is recognised where there has been a ‘significant increase in credit

risk’ but which are not credit-impaired;

• ‘Stage 3’ - Assets for which a lifetime ECL is recognised and which are ‘credit-impaired’.

The Group’s definitions of ‘significant increase in credit risk’ and ‘credit-impaired’ are detailed below. IFRS 9

includes specific requirements for financial assets that are credit-impaired when initially purchased or

originated (POCI assets). For POCI assets, an entity recognises only the cumulative change in lifetime ECLs

since initial recognition, discounted by the credit-adjusted effective interest rate. For POCI assets, interest

revenue is accounted for using the credit-adjusted effective interest rate. The Group had no POCI assets during

the current or prior period.

Forward-looking information

The Group incorporates forward-looking information into both its assessment of whether the credit risk of a

financial asset has increased significantly since initial recognition and its measurement of ECLs. The time

period over which the Group assesses forward-looking information is the maximum period over which the

Group is exposed to credit risk. The Group determines a range of representative scenarios for the possible

future direction of key economic variables; this includes forecasts of quarterly movements in these variables

for years one to five, followed by phased transition assumptions for years six to ten, arriving at a view of long-

run averages from year eleven onwards. The scenarios are derived by reference to external information where

this is publicly available and appropriate, together with internally generated views. A probability-weighting,

based on management judgement, is assigned to each scenario.

The Group’s 'central' scenario represents a view of the most likely outcome and is aligned with information

used by the Group for other purposes such as strategic planning and budgeting. The selection of alternative

scenarios is intended to model the non-linear impact of economic factors on ECLs for the Group’s financial

assets.

For UK mortgage impairment, including SIL’s UK buy-to-let portfolio, the Group typically considers three

scenarios; this includes the central scenario, together with an upside scenario (more optimistic than the central

scenario) and a downside scenario (more pessimistic than the central scenario). For non-UK mortgage

impairment and for treasury asset impairment, the Group typically considers a central scenario and a downside

scenario. Further details are included in Note 1v).

Significant increase in credit risk

The Group monitors all financial assets and loan commitments that are subject to IFRS 9’s impairment

requirements to assess whether there has been a significant increase in credit risk since initial recognition of

the asset. IFRS 9 includes a rebuttable presumption that credit risk has significantly increased when

contractual payments are more than 30 days past due.

For relevant models, the Group uses internal credit risk metrics that reflect its assessment of the probability of

default (PD) of individual counterparties. The credit risk of each exposure is assessed at initial recognition,

based on the available information about the counterparty. For loans and advances to customers, the credit

risk at initial recognition is typically assessed by reference to information as at the loan drawdown date; this

information is not always held by the Group for loans drawn down prior to 2007, in which case the Group uses

the earliest available information as a proxy (which is typically January 2007 data for pre-2007 loans that were

originated by the Society). Exposures are monitored and the credit risk assessment is updated to reflect

current information on an ongoing basis.

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Skipton Group Annual Report & Accounts 2025 157

For residential mortgages, the Group considers that credit risk has significantly increased if one or more of the

following criteria are met:

• the remaining lifetime PD as at the reporting date, as compared to the remaining lifetime PD for this point in

time that was estimated on initial recognition of the asset, exceeds pre-determined thresholds which are set by

the Group and reviewed periodically. The thresholds applied will depend on the credit quality at initial

recognition, with a lower percentage change in PD being required for higher risk accounts. The use of an

absolute lifetime PD hurdle for residential mortgages is also applied where lifetime PD goes above 25%.

Further details are included in Note 1v);

• the account is forborne (page 158);

• the account is in arrears (no minimum);

• the account term has expired; or

• the account has a temporary arrangement in place, arranged via the Mortgage Charter Scheme, to repay

interest only.

For commercial mortgages, the Group considers that credit risk has significantly increased when an account is

in arrears (no minimum) or is forborne.

For residential and commercial mortgages, the above criteria for assessing significant increase in credit risk

ensures compliance with IFRS 9’s backstop of more than 30 days past due.

For debt factoring advances, the Group considers that credit risk has significantly increased when an account

is placed on a watchlist.

For treasury assets, the Group applies criteria that consider the relative increase in the asset’s lifetime PD, by

reference to external credit ratings where available. Notwithstanding these criteria, the Group considers that

credit risk has not increased significantly for any treasury asset that is determined to have 'low' credit risk at

the reporting date. The Group considers a treasury asset to have low credit risk when its credit rating is

equivalent to the globally understood definition of ‘investment grade’.

The Society’s Statement of Financial Position includes loans to subsidiary undertakings that are repayable on

demand. For these loans, the Society considers that credit risk has significantly increased when the subsidiary

undertaking no longer has sufficient liquid assets to repay the loan if demanded at the reporting date or where

other factors indicate that, in the judgement of management, a significant increase in credit risk has occurred;

this assessment takes into account the specific characteristics of each subsidiary loan and the subsidiary’s

own business.

Definition of default

For residential mortgages, the Group’s definition of default is aligned with its existing IRB definition of default

for regulatory capital purposes. For IFRS 9 accounting purposes, stage 3 loans which no longer meet any of

the default criteria are subject to a six month minimum probation period before they become eligible for

transfer out of stage 3. Default occurs when one or more of the following criteria is met:

• The borrower is 90 days or more past due on their contractual payments.

• The borrower meets unlikeliness to pay criteria, which indicates the borrower is in significant financial

difficulty. The instances are:

• the loan is in repossession;

• the borrower has filed for bankruptcy;

• at least two payments are in arrears and forbearance activity has been applied; or

• other evidence is available that the customer is not going to be able to meet their loan

commitments.

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For commercial mortgages, stage 3 loans which no longer meet any of the default criteria are subject to a

three month minimum probation period before they become eligible for transfer out of stage 3. Default occurs

when one or more of the following criteria is met:

• The borrower is 90 days or more past due on their contractual payments;

• The loan is in repossession;

• A receiver has been appointed;

• The mortgage term has expired; or

• Other evidence is available that the customer is not going to be able to meet their loan commitments.

For debt factoring advances, the Group considers that an account is in default when there is no reasonable

expectation of recovery, typically due to financial difficulties of the customer.

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets (other than those held at FVTPL) are

credit-impaired. For those assets that have become credit-impaired, interest revenue is subsequently

calculated by applying the effective interest rate to the amortised cost of the asset.

A financial asset is 'credit-impaired' when one or more events have occurred that have a detrimental impact on

the estimated future cash flows of the financial asset. Evidence that a financial asset is credit-impaired

includes the following:

• a breach of contract such as a default; or

• the disappearance of an active market for a security because of financial difficulties.

For residential and commercial mortgages, the Group considers that a loan that meets the definition of default

is credit-impaired. For loans to no longer be considered credit-impaired, consistently good repayments must be

demonstrated over a period of time, being not less than six months for residential loans and not less than

three months for commercial loans.

For debt factoring advances, the Group considers that an account is credit-impaired when there is no

reasonable expectation of recovery, typically due to financial difficulties of the customer.

To assess whether sovereign and corporate debt instruments are credit-impaired, the Group considers factors

such as bond yields, credit ratings and the ability of the borrower to raise funding.

To assess whether trade receivables are credit-impaired, the Group considers factors such as the ageing

profile, historical default rates and specific case knowledge.

Forbearance

In certain circumstances, the Group renegotiates loans to customers in financial difficulties (referred to as

forbearance activities) to maximise collection opportunities and minimise the risk of default whilst ensuring

the best outcome for the customer. Under the Group’s forbearance policy, loan forbearance is granted on a

selective basis if the customer is currently in default on their loan or if there is a high risk of default, there is

evidence that the customer made all reasonable efforts to pay under the original contractual terms and the

customer is expected to be able to meet the revised terms.

The revised terms typically include extending the maturity of the loan, changing the timing of interest payments

or amending the terms of loan covenants. Both retail and commercial loans are subject to the forbearance

policy. The Retail Credit Committee regularly reviews reports on forbearance activities.

For the purposes of disclosures in these financial statements, loans with renegotiated terms are defined as

loans that have been restructured due to a deterioration in the borrower’s financial position, for which the

Group has made concessions by agreeing to terms and conditions that are more favourable for the borrower

than the Group had provided initially and that it would not otherwise consider.

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Write-offs

A financial asset is written off (in full or in part) when the Group judges there to be no reasonable expectation

that the asset can be recovered (in full or in part). This is typically the case when the Group determines that the

borrower does not have assets or sources of income that could generate sufficient cash flows to repay the

amounts subject to the write-off. This assessment is performed at the individual asset level. The related

impairment loss allowance is also written off once all the necessary procedures have been completed and the

loss amount has crystallised. Financial assets that are written off could still be subject to enforcement

activities and subsequent recoveries of amounts previously written off decrease the amount of impairment

losses recorded in the Income Statement.

i) Financial assets and liabilities – modification, derecognition and offsetting

Modification

The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers.

When this happens, the Group assesses whether or not the new cash flows are substantially different to the

original cash flows.

If the cash flows are substantially different, then the contractual rights to cash flows from the original loan are

deemed to have expired. In this case, the original loan is derecognised (as discussed below) and a new loan is

recognised initially at fair value. Where impairment is held against the original loan (i.e. the loan is not held at

FVTPL), the original loan is derecognised from its existing impairment stage (which may be stage 1, stage 2 or

stage 3) and the new loan is initially recognised in stage 1 with its new origination date. Thereafter, the

assessment of whether there has been a significant increase in credit risk is made by reference to changes in

credit risk for the new loan starting from the new origination date. Examples of loan modification events for

which the Group typically applies derecognition include an existing borrower switching to a new mortgage

product and an existing borrower porting their loan to a new property.

If the cash flows of a modified loan carried at amortised cost are not substantially different, then the

modification does not result in derecognition of the loan (an example of a loan modification event for which

the Group typically does not apply derecognition is the application of forbearance strategies). In this case, the

Group recalculates the gross carrying amount of the loan and recognises the amount arising from adjusting

the gross carrying amount as a modification gain or loss in the Income Statement. If such a modification is

carried out because of financial difficulties of the borrower, the gain or loss is presented together with

impairment losses. In other cases, it is presented within interest income. For residential mortgages, the Group

assesses whether there has been a significant increase in credit risk by comparing the remaining lifetime PD

as at the reporting date (based on the modified contractual terms) to the remaining lifetime PD for this point in

time that was estimated at initial recognition (based on the original, unmodified contractual terms).

Derecognition

The Group derecognises a financial asset when the contractual rights to receive the asset’s cash flows expire

(including deemed expiry arising from a modification with substantially different terms as discussed above), or

when the contractual rights have been transferred and either i) the Group transfers substantially all the risks

and rewards of ownership, or ii) the Group neither transfers nor retains substantially all the risks and rewards

of ownership and the Group has not retained control.

On derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of

i) the consideration received (including any new asset obtained less any new liability assumed) and ii) any

cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or

loss.

The Society has not derecognised the loans transferred to the Group’s special purpose funding vehicles

because substantially all the risks and rewards are retained by the Society as detailed in Note 1d).

Financial liabilities are derecognised only when the obligation is discharged, cancelled or has expired.

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Skipton Group Annual Report & Accounts 2025 160

Offsetting

Financial assets and financial liabilities are offset and the net amount presented within the Statement of

Financial Position when, and only when, the Group has a legally enforceable right to offset the amounts and it

intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRS. With the exception of

bank balances included within ‘Loans and advances to credit institutions’, there are no other financial assets or

liabilities which are offset within the Statement of Financial Position and all other financial assets and liabilities

are presented on a gross basis. The Group has a cash-pooling arrangement in place with one of its banking

counterparties between its subsidiaries and the Society. At the reporting date, the Group has a legally

enforceable right to offset balances in these bank accounts and so, in accordance with IAS 32, the net

presentation more appropriately reflects the substance of the arrangement. At 31 December 2025 the Group

has offset £20.0m (31 December 2024: £18.0m) of balances against ‘Loans and advances to credit

institutions’ that would otherwise be shown within ‘Amounts owed to credit institutions’ within the Statement

of Financial Position.

j) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group entities

using the exchange rates prevailing at the dates of the transactions. At the reporting date, monetary assets

and liabilities denominated in foreign currencies are translated into the functional currency at the closing rate

of exchange. Exchange differences are taken to the Income Statement as they arise.

On consolidation, the income statements of subsidiary undertakings with non-Sterling functional currencies

are translated into Sterling (the Group’s presentational currency) at the monthly average rates for the period

and their assets and liabilities are translated into Sterling at the closing rate of exchange at the reporting date.

Any exchange differences arising on the translation of net assets of overseas subsidiary undertakings are

taken to reserves as a separate component of equity and disclosed in the Statement of Comprehensive

Income, except to the extent that the translation difference is allocated to the non-controlling interests.

Where a foreign operation is disposed of in its entirety, or partially disposed of such that control is lost, the

cumulative amount of translation differences recognised as a separate component of equity is reclassified to

the Income Statement as part of the gain or loss on disposal.

k) Taxation

The income tax expense or credit on the profit or loss for the year comprises current tax and deferred tax.

Income tax is recognised in the Income Statement except to the extent that it relates to items recognised

directly in equity, in which case it is recognised in equity and disclosed in the Statement of Comprehensive

Income.

Current tax is the expected tax payable or receivable on the taxable income or expenditure for the year, using

tax rates in force during the period, and any adjustments to tax payable in respect of previous years. Current

tax assets and current tax liabilities are offset within the Statement of Financial Position if, and only if, the

Group has a legally enforceable right to offset the recognised amounts and intends either to settle the taxes in

question on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax recognises temporary differences between the carrying amounts of assets and liabilities for

accounting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the

following temporary differences: the initial recognition of goodwill, the initial recognition of assets and

liabilities in a transaction that is not a business combination and that affects neither accounting nor income

and expenditure, and differences relating to investments in subsidiary undertakings, associates and joint

arrangements to the extent that it is probable they will not reverse in the foreseeable future. Deferred tax is

measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which

temporary differences reverse, based on tax rates and laws enacted or substantively enacted at the reporting

date.

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A deferred tax asset is only recognised to the extent that it is probable that future taxable profits will be

available against which the asset can be utilised. Deferred tax assets are reviewed at least annually and are

reduced to the extent that it is no longer probable that the related tax benefit will be realised; in making this

assessment, consideration is given to the likelihood of recovery within a reasonably foreseeable timeframe,

typically the Group’s five year corporate planning period. Deferred tax assets and deferred tax liabilities are

offset if, and only if, the deferred tax assets and deferred tax liabilities relate to income taxes levied by the

same taxation authority and the Group has a legally enforceable right to offset the related current tax assets

against the related current tax liabilities.

Pillar Two Model Rules

In December 2021 the Organisation for Economic Co-operation and Development (OECD) published detailed

rules to assist in the development of a landmark reform to the international tax system, including ‘Pillar Two’

tax rules which apply to multinational enterprises with consolidated annual revenues of more than €750m and

which seek to impose a minimum effective tax rate of 15% on each tax jurisdiction in which those enterprises

operate.

IAS 12

Income Taxes

does not offer specific guidance on accounting for Pillar Two income taxes; it is unclear

whether the Pillar Two model rules create additional temporary differences, whether to remeasure deferred

taxes for the Pillar Two model rules and which tax rate to use to measure deferred taxes. Further, the tax rate

that will apply to an entity’s excess profit in future periods depends on a number of factors that are difficult to

forecast reliably.

In May 2023 the IASB published

International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12)

The Amendments introduced a temporary mandatory exception from accounting for deferred taxes that arise

from the Pillar Two model rules and a requirement to disclose that the exception has been applied. The Group

has, for the years ended 31 December 2025 and 31 December 2024, applied the aforementioned exception

from accounting for deferred taxes that arise from the Pillar Two model rules.

l) Leases

Definition of a lease

Under IFRS 16 a contract is a lease, or contains a lease, if the contract conveys a right to control the use of an

identified asset for a period of time in exchange for consideration.

On transition to IFRS 16, the Group elected to apply the following practical expedient permitted by the

standard:

• For the purposes of identifying leases held by the Group, the Group elected to retain the assessments

previously made by the Group under IAS 17 and IFRIC 4; IFRS 16 was therefore initially applied at 1 January

2019 only to those contracts that were previously identified as leases under IAS 17 and IFRIC 4. Contracts

existing at 1 January 2019 that were not previously identified as leases under IAS 17 and IFRIC 4 were not

reassessed. The new IFRS 16 definition of a lease is therefore applied by the Group only to contracts

entered into, or changed, on or after 1 January 2019.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying

asset becomes available for use). Right-of-use assets are measured at cost, less any accumulated

depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities.

The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred

and lease payments made at or before the commencement date, less any lease incentives received. Where an

obligation is incurred by the Group, the cost also includes an estimate of costs for dismantling and removing

the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition

required by the terms and conditions of the lease.

If the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the

recognised right-of-use asset is depreciated over the useful life of the underlying asset. Otherwise, the right-of-

use asset is depreciated on a straight-line basis over the shorter of the estimated useful life of the right-of-use

asset and the lease term. In accordance with IAS 36

Impairment of Assets

, right-of-use assets are regularly

reviewed, at least annually, for indications of impairment. Any impairment identified is charged to the Income

Statement.

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Skipton Group Annual Report & Accounts 2025 162

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value

of lease payments to be made over the lease term. The lease payments for this purpose include fixed

payments (including in-substance fixed payments but deducting lease incentives receivable), variable lease

payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees.

The lease payments also include the exercise price of a purchase option where reasonably certain to be

exercised by the Group, and payments of penalties for terminating a lease (if the lease term reflects the Group

exercising the option to terminate). Variable lease payments that do not depend on an index or a rate are

recognised as an expense in the period in which the event or condition that triggers the payment occurs.

The present value of lease payments is determined using an appropriate discount rate. The Group uses the

interest rate implicit in the lease where this can be readily determined; otherwise (and generally), the Group

uses its incremental borrowing rate at the lease commencement date.

After the commencement date, the lease liability is increased to reflect the accretion of interest and is reduced

for lease payments made. In addition, the lease liability is remeasured if there is a modification, a change in

lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the

underlying asset.

Exempt leases

The Group has elected to take the recognition exemption for short-term leases, except for property leases that

are short-term by virtue of being under renegotiation. Short-term leases are those which, at the

commencement date, have a lease term of not more than twelve months and do not contain a purchase

option.

Except for leases of motor vehicles, the Group has elected to take the recognition exemption for leases for

which the underlying asset is of low value when new. The Group considers an underlying asset to be of low

value where its value, when new, is not more than approximately £4,000.

For exempt leases, the Group expenses lease rentals to the Income Statement on a straight-line basis over the

lease term.

Other practical expedients

Certain of the Group’s lease contracts contain non-lease components (e.g. service charges). Except for

property leases, the Group has elected not to separate out the non-lease components and therefore to account

for these as part of the lease component. For property leases, the Group accounts separately for lease

components and non-lease components.

m) Employee benefits

Defined contribution pension arrangements

Obligations for contributions to defined contribution pension arrangements are recognised as an expense in

the Income Statement as incurred.

Defined benefit schemes

The Group currently operates three defined benefit pension schemes. Each scheme is administered by a

corporate Trustee and the funds of these schemes are separate from those of the Group.

Included within the Statement of Financial Position are the Group’s net obligations in respect of the defined

benefit pension schemes. The obligation of each scheme is calculated separately by estimating the amount of

future benefit that employees have earned in return for their service in the current and prior periods.

That benefit is discounted to determine its present value, and the fair value of any scheme assets is deducted.

The discount rate is based on the average yield available from AA-rated corporate bonds of appropriate

duration. The calculation is performed by a qualified actuary using the projected unit credit method.

Net interest income for the defined benefit schemes comprises interest income on plan assets, less the

interest cost on the scheme liabilities, and interest on the effect of the asset ceiling. Net interest income

relating to the defined benefit pension schemes is recognised in ‘Other operating income’ in the Income

Statement.

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Skipton Group Annual Report & Accounts 2025 163

Remeasurements of retirement benefit obligations, which comprise actuarial gains or losses (arising from the

differences between previous actuarial assumptions and actual experience), the return on plan assets

(excluding interest) and the effect of the asset ceiling (if any, excluding interest) are recognised in the

Statement of Comprehensive Income.

Service costs are recognised immediately in the Income Statement. When a plan is curtailed, the resulting gain

or loss on settlement is also recognised immediately in the Income Statement. The Group recognises gains or

losses on the settlement of a retirement benefit obligation when the settlement occurs.

Contributions are transferred to the schemes on a regular basis to secure the benefits provided under the rules

of the schemes. Pension contributions are assessed in accordance with the advice of a professionally-

qualified actuary.

n) Fees and commissions

The Group recognises fees and commissions receivable in accordance with IFRS 15

Revenue from Contracts

with Customers

. Revenue is measured based on the consideration specified in a contract with a customer.

Financial advice fees and commissions

Fees and commissions receivable from financial advice are recognised when both the customer has formally

accepted and all of the advice within their case has been contracted in the financial markets. A provision for

future clawbacks is made for repayment in the event of early termination by the customer.

Estate agency services

Estate agency commissions earned on the sales of properties and land and auction income are recognised on

the date contracts are exchanged unconditionally. Property management income is typically recognised when

the cash is received, which reflects the point at which income is earned and contractual obligations have been

fulfilled; an element of lettings income has been assessed as transferred over time, in line with the

performance obligations in the contract. Insurance commission is recognised upon fulfilment of contractual

obligations with a provision for future clawback repayment in the event of early termination by the customer.

Survey and valuation revenue is recognised on the date the survey or valuation report is completed, which

reflects the point at which all contractual obligations have been fulfilled; revenue and costs are recognised

gross of sub-contracted panel fees. Mortgage origination income is typically recognised on completion of the

mortgage transaction; an element of this income has been assessed as transferred over time, in line with the

performance obligations in the contract. Asset management commission is recognised on exchange of

contracts and additional services are recognised upon completion of work, both of which reflect the point at

which all performance obligations are considered to have been fulfilled.

Commercial property services

Income from commercial property services includes consultancy and advisory services, property management

and valuation services. Income is recognised either at a point in time when services have been fully provided,

or over a period of time as activity progresses and reflecting the satisfaction of performance obligations.

Under certain service contracts, the Group manages client expenditure and is obliged to purchase goods and

services from suppliers that are recharged to the customer at cost; such items are excluded from the amounts

reported by the Group for revenue and for expenses.

Software products and services

Revenue from software licence fees is recognised when access to the software has been made available to

the customer to enable implementation. Revenue from implementation and consulting services is recognised

in proportion to the stage of completion, typically in accordance with the achievement of contract milestones

or days expended. Customer support revenue and systems management revenue are recognised on a straight-

line basis over the period of the service rendered. The amount of revenue recognised is adjusted for expected

returns. Fees and commissions payable are generally recognised on an accruals basis as services are

received.

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Skipton Group Annual Report & Accounts 2025 164

o) Property, plant and equipment

Property, plant and equipment is measured at historical cost less accumulated depreciation and accumulated

impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of those

items.

Depreciation is calculated to write down the cost of items of property, plant and equipment to their estimated

residual values over their estimated useful lives as set out below on a straight-line basis unless stated

otherwise.

Land is not depreciated. Major items of property, plant and equipment purchased are depreciated on a monthly

basis from the date the asset is available for utilisation. Depreciation methods, useful lives and residual values

are reviewed at each reporting date and adjusted where appropriate. In accordance with IAS 36

Impairment of

Assets

, all items of property, plant and equipment are regularly reviewed, at least annually, for indications of

impairment. Any impairment identified is charged to the Income Statement.

Subsequent expenditure on items of property, plant and equipment is capitalised only if the subsequent

expenditure increases the item’s revenue generating capabilities and it is probable that future economic

benefits associated with the expenditure will flow to the Group.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in ‘Other operating

income’ in the Income Statement.

p) Segmental reporting

In accordance with IFRS 8

Operating Segments

, each operating segment is determined according to

distinguishable operating components of the Group for which discrete financial information is available. The

chief operating decision maker, the Board, regularly reviews internal reporting for each segment to

appropriately allocate resources and assess their performance. The Group does not aggregate any of its

operating segments for the purposes of financial reporting.

q) Cash and cash equivalents

For the purposes of the Statements of Cash Flows, cash comprises cash in hand and unrestricted loans and

advances to credit institutions repayable on demand; it excludes the mandatory deposit the Society is required

to place with the Bank of England. Cash equivalents comprise highly liquid unrestricted investments, typically

with original maturities of less than three months, that are readily convertible into known amounts of cash with

an insignificant risk of changes in value.

The Statements of Cash Flows have been prepared using the indirect method.

r) Investment properties

Properties held by the Group for capital appreciation or which earn rentals are recognised as investment

properties at cost less depreciation and impairment losses. The depreciation policy for investment properties

is consistent with the policy for property, plant and equipment. Investment properties are regularly reviewed for

indications of impairment and any impairment identified is charged to the Income Statement.

Rental income from investment property is recognised over the term of the lease and is included in ‘Other

operating income’ in the Income Statement.

Any gain or loss on disposal of investment property is also recognised in ‘Other operating income’.

Freehold and long leasehold buildings

50 to 100 years

Special purpose freehold head office facilities

40 years

Refurbishment of freehold and long leasehold buildings

5 to 10 years

Short leasehold buildings

Period of lease

Equipment, fixtures and fittings

2 to 10 years

Motor vehicles

25% reducing balance

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Skipton Group Annual Report & Accounts 2025 165

s) Sale and repurchase agreements

Investments and other securities may be lent or sold subject to a commitment to repurchase them (a ‘repo’).

Such securities are retained within the Statement of Financial Position when substantially all the risks and

rewards of ownership remain with the Group and the liability associated with the cash advanced is included

separately within the Statement of Financial Position.

The difference between the sale and repurchase price is accrued over the life of the agreement and recognised

within net interest income.

t) Provisions for liabilities

Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable

that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of

the obligation. The amount recognised as a provision is the best estimate of the consideration required to

settle the present obligation at the reporting date. Further details can be found in Note 33.

u) Software as a service (SaaS)

A SaaS arrangement is a type of cloud computing arrangement, in which the supplier provides the customer

with access to application software residing on the supplier’s cloud infrastructure; this infrastructure typically

comprises a collection of hardware and software, including networks, servers, operating systems and storage.

SaaS arrangements can include other services, such as technical support, implementation, data migration,

business process mapping, training and project management. The customer typically pays an all-inclusive fee

on a periodic basis. In addition, implementation costs may be incurred at inception of the arrangement.

Where the Group enters into a SaaS arrangement, the Group recognises a software asset only if such an asset

is received at commencement of the arrangement, either in the form of an intangible asset or a software lease,

and only from the date on which the Group obtains control of the software; otherwise, the arrangement is

accounted for as a service contract.

When accounting for a SaaS arrangement as a service contract, fees paid by the Group are prepaid and

amortised on a systematic basis over the period to which they relate. Subject to the terms of the arrangement,

implementation costs associated with configuration and customisation of the software may also, where

appropriate, be prepaid over the period to which they relate. All other costs associated with implementation,

including internal time and resources, are expensed to the Income Statement as incurred.

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Skipton Group Annual Report & Accounts 2025 166

v) Critical accounting judgements and estimates in applying accounting policies

Critical judgements

The Group has to make judgements in applying its accounting policies which affect the amounts recognised in

the financial statements. The key judgements management has made in applying the Group’s accounting

policies are set out below.

Impairment of mortgage loans and advances

Assessing loan impairment in accordance with IFRS 9 requires the following key judgements:

• determining whether credit risk has significantly increased since the loan was initially recognised; and

• the definition of default.

Residential mortgages

For residential mortgages, management judges that significant increase in credit risk is determined by

reference to certain quantitative and qualitative criteria. The quantitative criteria involve measuring the relative

increase in lifetime probability of default (PD) for the loan. The qualitative criteria include the loan being in

forbearance, in arrears, term expired or has a temporary arrangement in place (via the Mortgage Charter

Scheme) to repay interest only. Management has further judged that the definition of default should align with

the Group’s existing IRB definition for regulatory capital purposes. For IFRS 9 accounting purposes, stage 3

loans which no longer meet any of the default criteria are subject to a six month minimum probation period

before they become eligible for transfer out of stage 3. Further details are found in Note 1h).

Commercial loans

For commercial mortgages, management judges that credit risk has significantly increased when an account

is in arrears (no minimum) or has a live forbearance arrangement in place. When there is other evidence

available that the borrower will be unable to meet their loan commitments, the account is deemed to be in

default and thus transfers to Stage 3; in such cases, account specific impairment is held based on

management judgement. For IFRS 9 accounting purposes, stage 3 loans which no longer meet any of the

default criteria are subject to a three month minimum probation period before they become eligible for transfer

out of stage 3. Further details are found in Note 1h).

IFRS 16

When accounting for leases in accordance with IFRS 16 the Group makes the following key judgements that

have an effect on the reported amounts of assets and liabilities:

Lease term

The Group determines the lease term as the non-cancellable term of the lease, together with any periods

covered by an option to extend the lease where this is reasonably certain to be exercised, or any periods

covered by an option to terminate the lease where this is reasonably certain not to be exercised.

Many of the Group’s leases, particularly property leases, contain options for the Group to extend and / or

terminate the lease term. The Group applies judgement in evaluating whether it is reasonably certain to

exercise these options, taking account of all relevant factors that create an economic incentive for it to do so.

After the lease commencement date, the Group reassesses the lease term if there has been a significant event

or change in circumstances that is within its control and which affects its ability to exercise (or not to exercise)

the option to renew and / or to terminate (e.g. a change in business strategy).

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Skipton Group Annual Report & Accounts 2025 167

Critical estimates

The Group also makes estimates and assumptions that affect the reported amounts of assets and liabilities

within the next financial year.

Estimates and assumptions are evaluated on an ongoing basis and are based on historical experience and

other factors, including expectations of future events that are believed to be reasonable under the

circumstances. The key estimates and assumptions are set out below.

Impairment of residential mortgages

The estimation of credit exposures for risk management purposes is complex and requires the use of models,

a number of inputs into which are sources of estimation and require the Group to apply judgement. Key

sources of estimation the Group uses to measure ECLs include:

• Probability of Default (PD) – the probability at a point in time that a customer will default;

• Exposure at Default (EAD) – the expected outstanding loan amount at the time of default;

• Loss Given Default (LGD) – the loss that is expected to arise on default, taking account of expected

recoveries from collateral held;

• Thresholds to determine whether credit risk has significantly increased; and

• Use of forward-looking information.

For residential mortgages, ECLs are measured by multiplying together the PD, EAD and LGD, and are

discounted using the loan’s original effective interest rate. EAD is derived by adjusting the current outstanding

loan amount for expected cashflows to the date of default. LGD is estimated on a discounted cash flow basis

using the effective interest rate. The Group’s LGD models consider factors including historical recovery rates

and possible future property price changes.

Credit risk information is collected by the Group, based on a range of qualitative and quantitative data

considered to be predictive of the risk of default and applying experienced credit judgement. The nature of the

exposure and type of borrower are taken into account in the analysis. The Group’s PD models use the relevant

information to generate estimates of the remaining lifetime PD of exposures and how these are expected to

change over time. The PDs are adjusted to take account of expected customer redemptions and also for the

impact of forward-looking information.

The following data is typically used to monitor the Group's exposure to credit risk:

• Payment record, including payment ageing analysis;

• Forbearance activity;

• Changes in business, financial and economic conditions;

• Credit reference information supplied by external agencies; and

• Internally generated data of customer behaviour, affordability metrics etc.

For residential mortgages, the assessment of whether credit risk has significantly increased includes

assessing the degree by which the remaining lifetime PD at the reporting date has increased compared to

initial estimates. The Group determines thresholds for this purpose, expressed as a multiple of the initial PD

estimate. The thresholds vary according to the credit quality of the loan at initial recognition and they are set

with the aim of identifying accounts with significant increase in credit risk (SICR) before the borrower misses a

payment. The Group periodically reviews the effectiveness of the SICR criteria in achieving this objective. As a

result of this review, the multiples applied by the Group have been revised during the year in order to enhance

effectiveness; details of the changes, which do not materially impact these financial statements, are set out

below.

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Skipton Group Annual Report & Accounts 2025 168

The Group also applies an absolute lifetime PD hurdle for residential mortgages where lifetime PD goes above

25%. These accounts are considered to meet SICR and will automatically be migrated to Stage 2.

The review of SICR criteria also resulted in a change to the qualitative SICR criteria, to align the probation period

for forborne accounts with that used in certain regulatory reporting standards.

Impairment of commercial loans

For commercial loans, the Group applies a Loss Rate method to measure ECLs; 12-month and lifetime loss

rates are calculated based on the Group’s average commercial losses since closure of the portfolio in 2008.

Management considers the most critical estimates and assumptions to be the lifetime loss rate and any

account-specific impairment based on management judgement.

Forward-looking information

The Group incorporates forward-looking information into both its assessment of whether the credit risk of a

financial asset has increased significantly since initial recognition and its measurement of ECLs. In accordance

with IFRS 9, the Group’s estimate of ECLs is an unbiased and probability-weighted amount that reflects a range

of possible outcomes. As outlined in Note 1h), the Group determines a range of representative scenarios for the

possible future direction of key economic variables and a probability-weighting is assigned to each scenario.

The Group’s central scenario represents a view of the most likely outcome and is aligned with information used

by the Group for other purposes such as strategic planning and budgeting. In addition, the Group incorporates

an upside scenario (representing a more optimistic view than the central scenario) and a downside scenario

(representing a more pessimistic view than the central scenario); the selection of these alternative scenarios is

intended to model the non-linear impact of economic factors on ECLs for the Group’s mortgage portfolios.

The scenarios applied by the Group as at 31 December 2025 were determined with due consideration to the

significant economic uncertainties arising from continuing geopolitical tensions and conflicts.

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Multiple by which remaining lifetime PD has increased compared with initial estimate

Lifetime PD band at initial recognition

Applied at 31 December 2025

Applied at 31 December 2024

Slight risk

Initial estimate x 8

Initial estimate x 9

Low risk

Initial estimate x 4

Initial estimate x 5

Medium risk

Initial estimate x 3

Initial estimate x 4

High risk

Initial estimate x 1

Skipton Group Annual Report & Accounts 2025 169

The Group’s central scenario as at 31 December 2025 assumes minimal growth in 2026 and 2027, constrained

by increases in UK government taxation. Geopolitical tensions continue into 2026, keeping pressure on

inflation. Whilst a period of real wages growth has given some respite to households, pressures remain; UK

government policy announced in the Autumn 2025 budget will weigh further on household income.

Unemployment peaks in 2026, but by historical standards remains relatively low into the medium-term.

Businesses continue to feel the impacts of inflation and rising wage bills, including the increase to the National

Minimum / Living Wage. Inflation peaked in 2025 and continues to run generally above the 2% target until mid-

2027. After a Base Rate cut in Q2 2026, the Bank of England holds rates at 3.50% until mid-2029; rates then

increase again from late 2029. House prices grow in 2026, though UK government policies then constrain the

housing market into the medium-term.

The Group’s upside scenario as at 31 December 2025 assumes the economy grows strongly in 2026 and 2027,

allowing the UK government to reduce / remove some fiscally-constraining policies in the medium-term.

Inflation falls swiftly, aided by de-escalation of tensions in Ukraine and the Middle East; in response, the Bank

of England reduces Base Rate to 3.00% by Q2 2026 and holds into the medium-term. Consumer confidence

rises and unemployment reduces to 4.0%. There is strong house price growth into the medium-term.

The Group’s downside scenario as at 31 December 2025 assumes significant escalation of geopolitical

tensions in eastern Europe. Oil prices swiftly increase and inflation spikes, with particular impact on energy and

food prices. Further pressures come from climate change and UK government fiscal constraints. The impacts

on disposable income and investment are felt by households and businesses respectively. Unemployment

increases and remains elevated throughout the forecast period. The Bank of England swiftly increases Base

Rate and this remains higher for a sustained period. The impact on affordability is significant and house prices

fall in 2026 and 2027; recovery is slow such that the overall impact on the housing market is severe.

The key economic variables considered by the Group when developing the forecast scenarios are set out

below for the first five years of each of the Group’s scenarios. For years six to ten the Group applies phased

transition assumptions, arriving at a view of long-run averages from year eleven onwards; the Group’s view of

long-run averages can differ from the historical long-term mean and is derived by reference to both external

information, where this is publicly available and appropriate, and internally generated views. As noted above,

the assumptions assigned to each scenario have been revised during the year taking account of significant

economic uncertainties.

The graphs below show the historical and forecasted UK Bank Base Rate, unemployment rate and indexed

residential house prices for the Group’s three economic scenarios as at 31 December 2025, along with the

prior year central scenario for context (as forecasted at 31 December 2024). The indexed residential house

price graph uses a starting value of 100 in the fourth quarter of 2024 for illustrative purposes, to show how a

property value moves over time when the annual house price inflation (UK) assumptions are applied.

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Skipton Group Annual Report & Accounts 2025 170

UK Bank Base Rate (%)

Unemployment rate (%)

Indexed residential house price

Performance & Strategy Governance

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2.0

3.0

4.0

5.0

6.0

7.0

8.0

Q4 2024 Q4 2025 Q4 2026 Q4 2027 Q4 2028 Q4 2029 Q4 2030

2.00

3.00

4.00

5.00

6.00

7.00

Q4 2024 Q4 2025 Q4 2026 Q4 2027 Q4 2028 Q4 2029 Q4 2030

100

110

120

130

140

Q4 2024 Q4 2025 Q4 2026 Q4 2027 Q4 2028 Q4 2029 Q4 2030

Upside Central Downside Prior Central

Skipton Group Annual Report & Accounts 2025 171

Economic Variables

As at 31 December 2025

Notes

Scenario

2026

2027

2028

2029

2030

Upside

3.00

Bank of England Base Rate (%)

Central

3.50

3.75

4.00

Downside

6.00

5.25

5.00

4.75

4.50

Upside

4.0

Unemployment (%)

Central

5.0

4.8

4.7

4.5

Downside

7.0

6.0

Upside

4.2

UK House price inflation (%)

Central

2.5

2.0

1.5

2.5

3.0

Downside

(10.6)

(3.0)

1.0

4.0

Notes

A. The Bank of England Base Rates and unemployment rates are the position at 31 December each year.

B. House price inflation is the annual growth rate in each year. In addition to house price inflation, the Group’s residential impairment

calculations also include a ‘forced sale discount’ reflecting the likely reduction in property price when selling a repossessed property.

The forced sale discount is calculated at account level, taking into account the specific circumstances of each account and the

property in question.

As at 31 December 2024

Notes

Scenario

2025

2026

2027

2028

2029

Upside

3.50

Bank of England Base Rate (%)

Central

4.00

3.75

Downside

6.00

5.00

Upside

4.0

Unemployment (%)

Central

4.1

4.3

4.4

4.2

Downside

6.7

6.0

Upside

4.2

UK House price inflation (%)

Central

3.0

3.5

2.5

3.0

4.0

Downside

(1.0)

(11.5)

(1.0)

1.0

4.0

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Skipton Group Annual Report & Accounts 2025 172

Notes

A. Bank of England Base Rate is showing the lowest/highest rate that occurs at any time during the 5 year forecast period.

B. Unemployment is showing the highest rate that occurs at any time during the 5 year forecast period.

C. House price inflation is showing the largest cumulative growth/fall from 1 January 2026 (2024: from 1 January 2025) over the 5 year

forecast period.

The relative weightings assigned to each scenario have also been reviewed during the year taking into account

the basis of each scenario and also the level of uncertainty over the economic outlook, both domestic and

global. The Group’s scenario weightings as at 31 December 2025 are 55% for the central scenario, 15% for the

upside scenario and 30% for the downside scenario (31 December 2024: central scenario 60%, upside scenario

10%, downside scenario 30%).

Whilst actual loan cash flows and the level of losses realised are unaffected by IFRS 9’s expected credit loss

approach, the level of loan impairment accounted for by the Group under IFRS 9 can be volatile; this is due to

the inherent uncertainty when incorporating forward-looking information. IFRS 9 impairment is expected to

vary as expectations of economic conditions become either more pessimistic (which is likely to increase ECLs)

or more optimistic (which is likely to reduce ECLs).

Management assesses the performance of the Group’s ECL estimation process by comparison of actual and

expected model outputs; some component outputs are back-tested for lifetime outcomes and some

component outputs are back-tested for 12-month outcomes. Additional assurance is gained from validation of

the composite sub-models. The ECL calculation is subject to formal quarterly monitoring, with outputs

reported to the Society’s Model Risk Committee for review, challenge and approval. In addition, the ECL

calculation and all sub-components are subject to regular first-line review and independent validation.

Where necessary, judgmental adjustments are included within ECLs to reflect identified risks not captured in

model outputs; these adjustments are made through either:

• Post-model adjustments (PMAs) – adjustments to the ECL model output which are typically calculated, and

allocated, at a granular level through modelled analysis; or

• Overlays – adjustments to the ECL model output that have been made outside the detailed ECL calculation

and reporting process; overlays are likely not to meet the definition of PMAs (for example, they may not be

calculated at a granular level through modelled analysis).

Each material judgmental adjustment is subject to approval by the Retail Credit Committee and subject to

oversight by the Board Audit Committee.

Economic variables (peak or trough over 5 year forecast period)

Notes

Scenario

2025

2024

Upside

3.00 / 3.75

3.50 / 4.25

Bank of England Base Rate (%)

Central

3.50 / 4.00

3.75 / 4.75

Downside

3.75 / 6.00

4.75 / 6.00

Upside

4.8

4.1

Unemployment (%)

Central

5.2

4.4

Downside

7.5

7.0

Upside

22.6 / 0.0

UK House price inflation (%)

Central

12.1 / 0.0

17.2 / 0.0

Downside

0.0 / (13.3)

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Skipton Group Annual Report & Accounts 2025 173

With respect to mortgage loan impairment, the Group and the Society held judgmental adjustments as follows:

Notes

A. This PMA is held to address model risk in the downturn scenario where key assumptions are expected to behave differently in a

recession; there is currently insufficient data available to establish, and thus to model, robust relationships for these assumptions.

The PMA was derived by considering the reduction in redemption rates and reduction in cure rates (following default) as observed

during the global financial crisis 2007-2008; these were applied to the model, on a judgement basis, to understand the impact to

model outputs.

B. This PMA is held to reflect the risks associated with flats subject to fire safety risks such as unsuitable cladding. Due to limited

available data to identify affected properties individually, an assumption is made, in line with UK market exposure estimates, regarding

the affected proportion of flats in the Group / Society’s residential portfolio; assumptions relating to property values have also been

applied.

ECLs

– Judgmental adjustments

Group

Society

£m

Notes

2025

2024 2025

2024

Residential mortgages

Model Risk

– downturn

2.7

1.3

2.7

1.3

Flats subject to fire safety risks

2.1

1.4

2.1

1.4

4.8

2.7

4.8

2.7

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Skipton Group Annual Report & Accounts 2025 174

To give an indication of the sensitivity of ECLs to different economic scenarios, the tables below show what

the ECL would be if a 100% weighting is applied to each scenario. The tables also show for each scenario what

percentage share of gross loan exposures would be held in each of Stage 1 and Stage 2.

Scenario

ECL (£m)

Share of Gross

2025

Notes

weighting (%)

(Note A)

Exposures (%)

(Note B)

Upside

Central

Downside

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Residential

Actual probability weighted ECL

8.6

5.4

7.6

21.6

97.8

1.8

100% upside

100

2.8

2.2

6.1

11.1

98.3

1.3

100% central

100

3.8

3.3

6.9

14.0

98.0

1.6

100% downside

100

11.7

13.1

37.9

95.6

4.0

Commercial

Actual probability weighted ECL

0.4

0.3

1.9

2.6

80.9

9.9

100% upside

C, D

100

0.4

0.3

1.9

2.6

80.9

9.9

100% central

C, D

100

0.4

0.3

1.9

2.6

80.9

9.9

100% downside

C, D

100

0.4

0.3

1.9

2.6

80.9

9.9

Scenario

ECL (£m)

Share of Gross

2024

Notes

weighting (%)

(Note A)

Exposures (%)

(Note B)

Upside

Downside

Stage 1

Central

Stage 2

Stage 3

Total

Stage 1

Stage 2

Residential

Actual probability weighted ECL

4.5

2.5

6.5

13.5

98.5

1.1

100% upside

100

2.2

1.1

4.7

8.0

98.6

1.0

100% central

100

2.7

1.3

5.0

9.0

98.6

1.0

100% downside

100

8.1

5.4

8.6

22.1

98.2

1.4

Commercial

Actual probability weighted ECL

0.2

4.3

4.7

82.2

5.2

100% upside

C, D

100

0.2

4.3

4.7

82.2

5.2

100% central

C, D

100

0.2

4.3

4.7

82.2

5.2

100% downside

C, D

100

0.2

4.3

4.7

82.2

5.2

Notes

A. For the purposes of calculating each scenario’s 100% weighted ECL, each loan is allocated to a stage by considering only that

scenario. For the purposes of the actual probability-weighted ECL, each loan’s stage allocation is based on a weighted average PD

(that takes account of all scenarios) and this stage allocation is held constant across the scenarios; a probability-weighted 12-month

or lifetime ECL (which also takes account of all scenarios) is then calculated for each loan based on that stage allocation.

B. For the purposes of this analysis, gross exposures include the off-balance sheet loan commitments for which the Group holds ECLs

(see Note 1h)).

C. For the Commercial portfolio, the Group applies a Loss Rate approach to assessing impairment (see Note 1h)). Under this approach,

commercial ECLs do not vary according to scenario weightings.

D. For the Commercial portfolio, the staging of gross exposures is driven by factors that do not include scenario weightings (such as

arrears and sector factors); the share of gross exposures held in each stage does not therefore vary according to scenario weightings.

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Skipton Group Annual Report & Accounts 2025 175

The following tables outline the impact on the impairment loss allowance for the residential and commercial

loan portfolios of possible alternative assumptions of certain estimates used in calculating the ECLs. Each

sensitivity shown considers one change in isolation and the combined impact on the impairment loss

allowance of more than one sensitivity occurring would not necessarily be the sum of the impact of the

individual sensitivities. Similarly, the impacts of each sensitivity should not be extrapolated due to the likely

non-linear effects.

Notes

A. This sensitivity shows the impact of an increase of 10% to the probability weighting assigned to the downside scenario, from 30% to

40% (2024: from 30% to 40%), with a relative decrease to the probability weighting assigned to each of the central and upside

scenarios.

B. As outlined above, the assessment of whether credit risk has significantly increased since initial recognition includes the degree by

which the remaining lifetime PD at the reporting date has increased compared to initial estimates. This sensitivity shows the impact

of simultaneously reducing each multiplier threshold by 25%.

C. This sensitivity shows the impact if annual house price inflation in each future year was 0.5% higher / lower than the assumptions

applied by the Group or Society.

D. This sensitivity shows the impact if unemployment rates in each future year were 0.5% higher / lower than the assumptions applied by

the Group or Society.

Notes

A. This sensitivity shows the impact of an increase / decrease of 1% to the Lifetime Loss Rate.

B. The table above does not include a sensitivity for account-specific impairment based on management judgement (see page 168); this

element of impairment is, by nature, a discrete assessment for which there is no meaningful or representative variable. At 31

December 2025 the total commercial impairment allowance held included £1.8m (Group and Society) in respect of account-specific

impairment based on management judgement (2024: Group and Society £4.2m).

Impairment of treasury assets

The Group incorporates forward-looking information into its ECL assessment for treasury assets. In addition to

the central scenario, the Group also considers the impact of an extreme economic downturn such as a two-

notch downgrade on the entire portfolio. At 31 December 2025, the relative weightings assigned to each

scenario were 95% for the central scenario and 5% for the downside scenario (2024: central scenario 95%;

downside scenario 5%).

mpact on impairment loss allowance of changes to assumptions

Residential

Group

Society

£m

Notes

Changes to assumption

Increase / (decrease) in impairment loss allowance

2025

2024

2025

2024

Downside scenario

Absolute increase of 10%

1.6

0.7

1.5

0.7

weighting

Significant increase in credit

Relative reduction by 25%

0.4

0.1

0.4

0.1

risk criteria

Future house price inflation

+ / - 0.5% pa

(0.9) / 1.0

(0.5) / 0.6

(0.9) / 1.0

(0.4) / 0.5

Unemployment

+ / - 0.5% pa

0.9 / (0.8)

0.5 / (0.4)

0.9 / (0.8)

0.5 / (0.4)

Commercial

Group

Society

£m

Notes

Changes to assumption

Increase / (decrease) in impairment loss allowance

2025

2024

2025

2024

Lifetime Loss Rate

+ / - 1%

0.2 / (0.2)

0.1 / (0.1)

0.2 / (0.2)

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Skipton Group Annual Report & Accounts 2025 176

The following table outlines the impact on the impairment loss allowance for treasury assets of possible

alternative assumptions of certain estimates used in calculating the ECLs.

Valuation of equity release portfolio

The valuation of the equity release portfolio relies on the calculation of future cash flows. The size and timing

of these can vary depending on a number of different factors. These factors include future expected house

prices, future expected inflation, mortality rates, anticipated redemption profiles (arising due to voluntary

redemption, death or a move to long-term care) and market driven yield curves.

Some of the factors are based on market expectations (e.g. market-implied RPI swap prices are used to

construct a forward-looking inflation curve in order to forecast future expected cash flows receivable from the

portfolio), whilst others are derived from historical trends on the portfolio (e.g. anticipated future voluntary

redemptions). However, where market prices are not available and historical trends are not deemed to be

appropriate the Group uses management judgement; this is the case for future house price index (HPI) growth

and property price volatility. Management has reviewed these expectations during the year with due

consideration to the uncertainties in the current economic environment.

The expectations of the economic inputs that require management judgement are in line with the economic

environment that forms the central scenario as outlined on pages 168 and 169; further detail on the

movements in the portfolio in the year can be found in Note 18.

The Group uses an expectation of HPI growth that is aligned to that used for the central path of the ECL model

and corporate planning as set out above, reverting to a long run expectation of an average of 3% (2024: long

run average of 4%). This is considerably lower than long-term historical levels and reflects management’s view.

A volatility assumption is also used within the model, which allows for an expected range of realised growth

around the central HPI growth figure.

A property volatility assumption of 13% (2024: 13%) is used; the property volatility assumption considers index

volatility, adjustments for autocorrelation, basis risk and concentration risk, and is not used in conjunction with

a dilapidation assumption.

At 31 December 2025 the equity release portfolio is held in the Statement of Financial Position (Group and

Society) at fair value of £263.1m (2024: £277.2m). The table below outlines the impact of reasonably possible

alternative assumptions of key inputs which rely on management judgement and are not market observable.

For each of the above sensitivities there would be a corresponding charge / credit to the Income Statement

within the line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’, arising from the

decrease / increase in the fair value of the portfolio.

Impact on impairment allowance of changes to assumptions

Group (£m)

Society (£m)

Assumption

Change to current assumption

Increase in impairment allowance

2025

2024

2025

2024

Downside scenario weighting

Absolute increase of 10%

0.1

Downside scenario weighting

Increase to 100%

1.1

Impact on fair value of portfolio of changes to assumptions

Group and Society (£m)

Assumption

Change to current assumption

Increase / (Decrease) in portfolio fair value

2025

2024

Redemption rates

+ /

- 1% pa

(0.4) / 0.5

0.4 / (0.5)

Illiquidity premia

+ /

- 0.2% pa

(4.3) / 4.4

(3.7) / 3.8

HPI forecast

+ /

- 0.5% pa

4.0 / (4.3)

4.4 / (4.7)

Property volatility

+ /

- 1% pa

(2.6) / 2.6

(2.4) / 2.4

RPI volatility

+ /

- 0.5% pa

(1.0) / 0.6

(0.2) / 0.0

Performance & Strategy Governance

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Skipton Group Annual Report & Accounts 2025 177

The sensitivities are calculated by comparing the fair value of the portfolio, as reported within the Statement of

Financial Position, to the value of the portfolio at the reporting date when each input is adjusted as listed

above, as per the valuation model. Each sensitivity shown considers one change in isolation and the combined

impact on the valuation of the portfolio of all sensitivities occurring would not necessarily be the sum of the

impact of the individual sensitivities.

Analysis has been undertaken to identify the impact of climate-related risks on the Group’s equity release

portfolio. This includes scenario analysis assessing the potential impact of alternative paths for the key inputs

of the HPI forecast and yield curves. The results of these assessments did not lead to a change in carrying

amounts as at 31 December 2025 or 31 December 2024. The future impact of climate-related risks on the

Group’s equity release portfolio is uncertain, and the Group will continue to monitor developments in future

periods.

The Group holds derivative financial instruments to hedge the movements in the equity release portfolio, which

offsets to some extent the movements in the valuation of the portfolio, further details of which are found

below.

Derivative financial instruments held to hedge the equity release portfolio

The Group holds derivatives which are used to hedge the Group’s interest rate risk and inflation risk arising

from the equity release portfolio. These derivatives are valued using discounted cash flow models using

market observable benchmark rates consistent with accepted market methodologies for pricing financial

instruments. As the notional values of the derivatives are intended to match the balance of the underlying

mortgage assets, they also include estimated redemption profiles (arising where a customer voluntarily

prepays, moves permanently into long-term care or has died) that are based on historical data (reviewed

periodically against actuals) and published mortality tables. These redemption profiles are not market

observable; an element of management judgement is therefore applied based on historical performance of

redemptions.

In order to value these derivatives, the Group uses market-implied RPI swap prices to construct a forward-

looking inflation curve to forecast future expected cash flows relating to these derivatives. The model used to

value the derivatives incorporates multiple scenarios for RPI in order to take account of the uncertainty and

volatility of future RPI rates. The range of multiple scenarios used is based on management judgement and so

is not market observable. The Group has robust control procedures in place regarding the inputs to the

valuation that are based on management judgement.

The effect on the fair value of these derivatives of reasonably possible alternative assumptions is outlined

below.

Note

A. There would be a corresponding charge / credit to the Income Statement within the line ‘Fair value (losses) / gains on financial

instruments mandatorily held at FVTPL’, arising from the decrease / increase in the fair value of the derivative liabilities.

Any change in fair value of the derivative liabilities is offset to some extent by a corresponding but opposite

change in the value of the equity release portfolio. The characteristics and the valuation requirements differ

slightly between the derivatives and the equity release portfolio resulting in the changes in fair value not

offsetting completely.

Impact on liability of changes to assumptions

Group & Society (£m)

Assumption

Notes

Change to current assumption

(Decrease) / increase in liability

2025

2024

Redemption rates

+ / - 1% pa

(0.0) / 0.0

(0.6) / 0

RPI volatility

+ / - 0.5% pa

(0.9) / 0.6

(2.0) /

1.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 178

Goodwill

The carrying value of goodwill is assessed against value in use calculations. The key assumptions for the

value in use calculations are those regarding cash flows, discount rates and growth rates. These assumptions

are reviewed on a regular basis, at least at every reporting date, by senior management.

The forecasted cash flows of the cash generating units (CGUs) are based on the latest detailed five year

corporate plans available and are sensitive to, inter alia, assumptions regarding the long-term growth pattern

thereafter. The cash flows reflect management’s view of future business prospects at the time of the

assessment, which take into account management’s most recent view of key economic indicators as well as

wider prevailing circumstances. Further details regarding the key drivers of these cash flows, for each

reportable segment to which goodwill has been allocated, are included in Note 25.

The discount rate used to discount the future expected cash flows is based on the cost of capital assigned to

each reportable segment (see Note 25) and can have a significant effect on the underlying valuation. The cost

of capital is derived from a weighted average cost of capital calculation which incorporates a number of inputs

including the risk-free interest rate and a premium to reflect the inherent risk of the business being evaluated.

These variables are subject to fluctuations in external markets and economic conditions which are not within

management control; these inputs are therefore determined on the basis of management judgement.

Profit and cash flow forecasts are subject to inherent uncertainties, such as the impacts of physical and

transition risks of climate change on the creditworthiness of borrowers, asset values, and other indirect effects

including the erosion of the Group’s competitiveness, profitability, or reputation.

Sensitivity disclosures are provided in Note 25.

Other intangible assets

Other intangible assets (see Note 25) such as computer software, databases, brands and customer contracts

are regularly reviewed for indicators of impairment. Brands, which are regarded to have an indefinite life and

are therefore not amortised, are tested for impairment at the end of each reporting period (or when there is an

indication of impairment), using a similar methodology as described above for goodwill.

Brands are held by the Estate agency division (see Note 25) and are judged by management to have an

indefinite life. Management considers that the brands held have long and successful histories and have shown

their ability to adapt to changing market trends. Further, continued investment in the brands by Connells helps

to protect their value.

Where brands exist, the impairment test compares the carrying amount of the cash generating unit (CGU)

(which comprises the CGU’s net assets, plus any brands relating to that CGU and any goodwill allocated to that

CGU) against its recoverable amount. Recoverable amount is determined as the higher of its fair value less

costs to sell and its value in use.

As described above, the key assumptions for the value in use calculations are those regarding cash flows,

discount rates and growth rates. These assumptions are reviewed on a regular basis, at least at every

reporting date, by senior management and further detail on the key drivers of the underlying cash flows is

shown in Note 25.

Other intangible assets, which are regarded to have a finite life, are tested for impairment whenever there is an

indication that the intangible asset may be impaired.

An impairment charge of £2.8m (Group) and £nil (Society) was recognised against other intangible assets for

the year ended 31 December 2025 (year ended 31 December 2024: Group £0.7m; Society £nil).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 179

Loan to defined benefit pension scheme

The valuation of the loan to the defined benefit pension scheme is dependent upon the estimation of future

cash flows, the amount and timing of which can vary according to a number of different factors. These factors

include the timing of future cash flows expected from the maturities of illiquid assets held by the scheme;

estimated prepayment amounts, determined by available proceeds upon asset maturity; a credit-adjusted

discount rate, incorporating an illiquidity premium; and the Scheme’s credit characteristics.

The following table outlines the impact of reasonably possible alternative assumptions of key inputs which rely

on management judgement and are not market observable:

Note

A. There would be a corresponding charge / credit to the Income Statement within the line ‘Fair value (losses) / gains on financial

instruments mandatorily held at FVTPL’, arising from the decrease / increase in the fair value of the loan. The sensitivity is not

applicable to the comparative year shown as the loan was originated during 2025.

Retirement benefit obligations

The defined benefit pension schemes expose the Group to actuarial risks such as investment risk, interest rate

risk, inflation risk and longevity risk. In conjunction with its actuaries the Group makes key financial

assumptions that are used in the actuarial valuation of the defined benefit pension obligation and, therefore,

changes to these assumptions have an impact on the pension obligation shown within the Statement of

Financial Position. These assumptions include inflation and discount rates, life expectancy, commutation

allowances and the rate of salary growth; see Note 36 for further details on these assumptions.

A decrease in gilt / corporate bond yields, a rise in inflation or an increase in life expectancy would result in an

increase to scheme liabilities. This would impact the Statement of Financial Position adversely and may give

rise to increased charges in future years’ Income Statements. This effect would be partially offset by an

increase in the value of the schemes’ gilt and bond holdings and caps on inflationary increases also exist to

protect the schemes against high levels of inflation.

Approximate sensitivities of the principal assumptions are set out in the table below which shows the increase

or reduction in the scheme liabilities that would result. The methods used for calculating the sensitivities are

the same as those used to determine the valuation of the defined benefit obligation as set out in Note 36. Each

sensitivity shown considers one change in isolation.

The rate of salary growth has no impact on the pension liabilities as the schemes are closed to future accrual

of benefit.

Impact on liabilities of changes to assumptions

Group (£m)

Society (£m)

Assumption

Changes to assumption

(Decrease) / increase in liabilities

2025

2024

2025

2024

Discount rate

+ / -0.25% pa

(4.6) / 4.8

(5.5) / 5.7

(2.4) / 2.6

(2.5) / 2.7

Rate of inflation

+ / -0.5% pa

3.8 / (3.6)

3.9 / (3.7)

1.8 / (1.7)

1.9 / (1.8)

Commutation allowance

+ / -10% pa

0.0 / 0.1

(0.1) / 0.1

0.0 / 0.1

Life expectancy

+ / -1 year

4.6 / (4.5)

6.0 / (6.2)

2.5 / (2.4)

2.4 / (2.4)

Impact on loan fair value of changes to assumptions

Group & Society (£m)

Assumption

Notes

Change to current assumption

(Decrease) / increase in loan fair value

2025

2024

Discount rate

+ / - 1% pa

(0.1) / 0.1

N/A

Value of illiquid assets

+ / - 10% expected proceeds

1.1 / (1.1)

N/A

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 180

Group

Society

£m

2025

2024

2025

2024

On financial assets held at amortised cost:

On loans fully secured on residential property

1,399.3

1,207.2

1,291.7

1,102.0

On other loans and advances:

To subsidiary undertakings

129.9

122.6

Other

25.2

26.9

6.1

8.3

On other liquid assets

85.4

140.9

84.6

138.9

1,509.9

1,375.0

1,512.3

1,371.8

On financial assets held at FVOCI:

On debt securities

182.2

178.6

176.4

168.9

On financial instruments held at FVTPL:

Net income on derivative financial instruments held to hedge

243.6

516.2

243.6

516.2

assets in qualifying hedge accounting relationships

Interest receivable and similar income accounted for using

1,935.7

2,069.8

1,932.3

2,056.9

the effective interest rate method

On financial instruments held at FVTPL:

On loans and advances to customers

0.1

On equity release portfolio

21.8

19.4

21.8

19.4

On debt securities

3.3

4.1

On loan to defined benefit pension scheme

0.8

Net (expense) / income on derivative financial instruments held

to hedge assets in non-qualifying hedge accounting

(1.5)

13.0

(1.5)

3.0

relationships

Other interest and similar income

21.2

32.5

24.5

26.6

Total interest receivable and similar income

1,956.9

2,102.3

1,956.8

2,083.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 181

Group

Society

£m

2025

2024

2025

2024

restated*

On financial liabilities held at amortised cost:

On shares held by individuals

1,067.0

1,081.7

1,067.0

1,081.7

On shares held by others

8.7

On subscribed capital

4.3

4.5

4.3

4.5

On deposits and other borrowings:

Subordinated liabilities

27.8

29.6

27.8

29.6

Subsidiary undertakings

22.0

24.4

Wholesale and other funding

271.8

322.9

150.0

196.2

Lease liabilities

4.6

3.1

0.3

1,384.2

1,450.5

1,280.1

1,345.4

On financial instruments held at FVTPL:

Net expense on derivative financial instruments held for hedging

56.9

163.4

76.9

185.0

liabilities (note A)

Deemed loans from Group undertakings

157.5

145.9

Other

0.9

0.1

Total interest payable and similar charges

1,442.0

1,613.9

1,514.6

1,676.3

Performance & Strategy Governance

Financial Statements

Other Information

* The information shown above for the Society, for the year ended 31 December 2024, is restated to reflect the appropriate presentation

of interest associated with intra-group swaps in the Society – see Note 1c) for details. There is no impact to ‘Total interest payable and

similar charges’ for the year ended 31 December 2024.

Note

A. Net expense on derivative financial instruments held for hedging liabilities includes £23.3m (2024: £46.7m) for the Society in relation

to interest associated with intra-group swaps.

Skipton Group Annual Report & Accounts 2025 182

The tables below provide further information regarding the nature, amount and timing of fees and

commissions receivable. IFRS 15 requires that revenue is recognised by the Group in a way that depicts the

transfer of goods or services to customers; some revenue is therefore recognised at a point in time and some

revenue is recognised over a period of time. Further details as to the revenue recognition policies applied to

fees and commissions receivable by the Group are set out in Note 1n).

2025

2024

Products and

Group

services

£m

transferred

Total

transferred

Total

at a point in

over time

at a point in

over time

time

Mortgage origination fees

108.2

97.8

0.4

98.2

Other mortgage related

2.7

2.1

fees

General insurance income

80.4

0.5

80.9

77.5

1.0

78.5

Commissions earned on

property sales

350.1

320.4

Commissions earned on

property lettings

148.9

110.6

259.5

146.3

101.3

247.6

Commercial property

54.6

59.4

114.0

44.3

47.5

91.8

services fees

Survey and valuation fees

119.2

112.0

Asset management

27.2

0.2

27.4

20.8

0.2

21.0

commission

Conveyancing fees

73.5

64.6

Financial advice fees

35.6

33.9

Software and consultancy

16.9

16.8

fees

Factoring and invoice

16.9

15.5

discounting services

Other fees and

commissions

9.7

0.4

10.1

12.6

0.5

13.1

Total fees and

commissions

1,027.0

188.0

1,215.0

947.8

167.7

1,115.5

receivable

2025

2024

Products and

Society

services

£m

transferred

Total

transferred

Total

at a point in

over time

at a point in

over time

time

Time

Other mortgage related

2.5

1.9

fees

General insurance income

0.5

1.0

Financial advice fees

34.9

33.0

Other fees and

commissions

0.1

Total fees and

commissions

37.4

0.5

37.9

35.0

1.0

36.0

receivable

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 183

The table below provides a reconciliation of fees and commissions receivable by the Group to the amounts

presented by reportable segment in Note 47.

2025

Group (£m)

Society

SIL

Connells

Other^

Total

Mortgage origination fees

110.5

(2.3)

108.2

Other mortgage related fees

2.5

0.2

2.7

General insurance income

0.5

80.4

80.9

Commissions earned on property sales

350.1

Commissions earned on property lettings

259.5

Commercial property services fees

114.0

Survey and valuation fees

128.7

(9.5)

119.2

Asset management commission

27.4

Conveyancing fees

74.4

(0.9)

73.5

Financial advice fees

34.9

0.7

35.6

Software and consultancy fees

16.9

Factoring and invoice discounting services

16.9

Other fees and commissions

0.1

10.0

10.1

Fees and commissions receivable

37.9

0.3

1,155.0

21.8

1,215.0

Fees and commissions payable and other operating income

8.3

0.1

(10.8)

(2.4)

Net non

-interest income

46.2

0.3

1,155.1

11.0

1,212.6

2024

Group (£m)

Society

SIL

Connells

Other^

Total

Mortgage origination fees

100.6

(2.4)

98.2

Other mortgage related fees

1.9

0.3

(0.1)

2.1

General insurance income

1.0

77.5

78.5

Commissions earned on property sales

320.4

Commissions earned on property lettings

247.6

Commercial property services fees

91.1

0.7

91.8

Survey and valuation fees

119.4

(7.4)

112.0

Asset management commission

21.0

Conveyancing fees

65.6

(1.0)

64.6

Financial advice fees

33.0

0.9

33.9

Software and consultancy fees

16.8

Factoring and invoice discounting services

15.5

Other fees and commissions

0.1

13.0

13.1

Fees and commissions receivable

36.0

0.3

1,056.2

23.0

1,115.5

Fees and commissions payable and other operating income

7.9

(0.8)

(9.4)

(2.3)

Net non

-interest income

43.9

0.3

1,055.4

13.6

1,113.2

^ As described in Note 47, the ‘Other’ category comprises segments that are not separately reportable, together with the impact of Group

consolidation adjustments. The Other category therefore includes amounts relating to all Group entities except for the Society, SIL and

Connells. Amounts relating to Group consolidation adjustments includes intra-group adjustments in relation to intercompany trading.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 184

Group

Society

£m

2025

2024

2025

2024

Realised profits / (losses) on treasury assets held at FVOCI

0.3

(1.8)

0.3

(1.8)

Share of profits from joint ventures

2.0

1.4

Profit on disposal of subsidiary undertakings

10.8

Research and Development Expenditure Credit (RDEC)

1.8

1.5

Other

2.0

3.6

10.5

11.2

Total other operating income

16.9

3.2

12.3

9.4

Group

Society

£m

2025

2024

2025

2024

Equity release portfolio (Note 18)

(14.5)

(12.6)

(14.5)

(12.6)

Derivatives associated with equity release portfolio (Note 18)

8.1

21.9

8.1

21.9

Equity share investments (Note 20e))

0.4

1.1

Share warrants

5.6

5.9

Put options held by minority shareholders

(0.2)

(0.3)

Hedging instruments and hedged items

0.9

2.0

7.0

6.9

Loan to defined benefit pension scheme (Note 35)

(2.2)

Other financial instruments

3.3

(4.0)

Total

(1.9)

18.0

1.7

12.2

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 185

Group

Society

£m

2025

2024

2025

2024

Employee costs:

Wages and salaries

819.9

746.8

127.9

112.7

Social security costs

99.4

79.5

15.6

11.9

Pension costs:

Defined contribution arrangements (Note 36)

32.8

28.6

9.3

8.2

952.1

854.9

152.8

132.8

Other administrative expenses

471.3

457.4

114.4

134.2

Central administrative costs recharged to Group undertakings

(4.8)

(5.0)

Total administrative expenses

1,423.4

1,312.3

262.4

262.0

Other administrative expenses comprise:

Depreciation and amortisation (Notes 22, 23, 24 and 25)

68.2

70.0

8.7

8.5

Impairment losses on property, plant and equipment,

right-of-use assets, investment property and intangible assets

5.6

3.1

(0.1)

(Notes 22, 23, 24 and 25)

Impairment losses on trade receivables (Note 45c))

1.4

0.8

0.1

Lease expense – items exempt from IFRS 16:

Short-term leases

1.9

0.7

0.6

Other property and establishment costs

49.4

48.0

7.3

7.5

Postage and communications

8.3

6.9

8.0

6.6

IT costs

82.8

77.5

27.5

30.0

Marketing and advertising

75.6

69.6

17.4

15.6

Insurance

10.5

10.1

3.5

3.6

Legal, professional and consultancy

63.2

77.0

35.7

55.7

Training, recruitment and other employee related costs

61.9

59.7

5.3

5.4

Costs of Connells' management incentive scheme (Note 32)

(4.2)

Other

42.5

38.2

0.3

0.7

Total other administrative expenses

471.3

457.4

114.4

134.2

Included within legal, professional and consultancy costs above are amounts relating to external auditor

remuneration. The remuneration of the Group’s external auditor, EY, is set out below (excluding VAT).

External auditor remuneration

Group

Society

£m

2025

2024

2025

2024

Audit of the Society and Group Annual Accounts

1.2

Audit of the Group’s subsidiary undertakings’ accounts pursuant to

legislation

2.6

2.5

Audit

-related assurance services

0.2

0.1

0.2

0.1

Other non

-audit services

0.1

Total external auditor remuneration

4.0

3.9

1.4

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 186

Group

Society

£m

2025

2024

2025

2024

Impairment (losses) / credits on loans and advances to customers

(10.1)

17.1

(9.8)

17.0

(Note 17)

Impairment credits on liquid assets

0.1

Realised losses on equity release portfolio (Note 18)

(1.3)

(1.8)

(1.3)

(1.8)

Provisions for liabilities (Note 33)

(0.9)

(3.7)

0.2

(4.9)

Total

(12.2)

11.7

(10.8)

10.4

Group

Society

2025

2024

2025

2024

Society principal office

2,123

2,001

2,123

2,001

Society branches

452

423

452

423

Subsidiary undertakings

16,279

15,592

Total employee numbers

18,854

18,016

2,575

2,424

The average number of full and part-time persons employed during the year (including Executive Directors)

was as follows:

Directors’ emoluments are set out within the Directors’ Remuneration Report.

Total Directors’ emoluments for 2025 amounted to £3.1m (2024: £3.9m).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 187

A number of transactions are entered into with related parties in the normal course of business; these are

detailed below.

Key management personnel

For the purposes of these disclosures, key management personnel comprises the Executive Directors and Non-

Executive Directors of the Society, plus all other members of the Society’s Executive Committee. Executive

Committee members are, in addition to the Executive and Non-Executive Directors, responsible for ensuring the

Society meets its strategic and operational objectives.

The table below summarises the benefits awarded to key management personnel in the year:

The table below sets out the outstanding balances in relation to related party transactions with key

management personnel and persons who are connected with key management personnel:

Interest receivable and payable in relation to related party accounts during the year was as follows:

Loans and savings of key management personnel are at normal commercial rates. There are no provisions for

impairment against these loans.

Key management personnel loans and transactions

At 31 December 2025 there were two (2024: three) outstanding mortgage loans granted in the ordinary course

of business amounting in aggregate to £1,603,367 (2024: £643,129) to two (2024: three) key management

personnel or persons who are connected with key management personnel. These mortgages are provided on

the same terms and conditions applicable to other employees within the Society and SBF. No amounts

have been waived or written off.

A register is maintained at the Principal Office of the Society which shows details of all loans, transactions and

arrangements with Directors and connected persons. A statement for the current financial year of the

appropriate details contained in the register will be available for inspection at the Principal Office for a period

of 15 days up to and including the Annual General Meeting.

Contributions to pension schemes

During the year, the Group and Society paid contributions of £47.2m (2024: £54.6m) and £20.0m (2024:

£31.2m) respectively to pension schemes.

Loan to pension scheme

The Skipton Building Society (2015) Group Pension Scheme was subject to an insurer buy-in during the year,

whereby the majority of the assets in the Scheme were used to purchase an insurance policy. The policy

insures the Trustee’s obligation to provide certain benefits to members under the Scheme. In connection with

the buy-in, the Society made a loan to the Scheme – originally advanced in January 2025 in Sterling but

subsequently converted into a USD-denominated loan in September 2025. See Note 35 and Note 36 for further

details.

Group & Society

£m

2025

2024

Salary, benefits and annual performance pay

6.1

7.1

Employer pension contributions

0.6

0.3

6.7

7.4

Group & Society

£’000

2025

2024

Interest receivable

Interest payable

Group & Society

£’000

2025

2024

Mortgage loans outstanding at 31 December

1,603

643

Savings balances at 31 December

1,219

1,327

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 188

The loan’s fair value as at 31 December 2025 is calculated at £10.9m, compared to a principal and interest

balance of £13.1m, resulting in a fair value adjustment charge of £2.2m being recognised – included in the

Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’, for both

the Group and Society.

Loan to Jade

In November 2025 the Society provided a loan of NZ$25.0m to Jade in order the fund the acquisition of Contec

Group International Ltd. As at 31 December 2025, the sterling equivalent outstanding amount due from Jade to

the Society in respect of this loan was £10.7m. For 2025, the interest receivable by the Society in respect of

this loan was £0.1m; included within ‘Interest receivable’ presented in the table below.

The loan is held at amortised cost, and on consolidation at a Group level, the balance is eliminated in the

consolidated Statement of Financial Position. The loan is hedged by way of a cross-currency swap in order to

eliminate foreign exchange risk. The swap (hedging instrument) is external to the Group, but the loan (hedged

item; eliminated on consolidation) is not. See Note 20a) for further details.

Other related party transactions

During the year the Society had the following related party transactions with subsidiary undertakings:

Notes

A. Included within the Interest receivable line in the table above is an amount of £0.8m for the year ended 31 December 2025 (2024: £nil)

in relation to the loan to defined benefit pension scheme (outlined on page 187).

B. These are fees payable by the Society to Connells for the above services, which are amortised through net interest receivable in the

Society’s books on an effective interest basis.

All the above transactions were entered into on an arm’s-length basis. For details of the relationships between

the Society and its principal subsidiary undertakings see Note 20a).

In 2021, Connells Limited acquired the entire share capital of Countrywide plc. In order to fund the transaction,

enable Connells to repay existing borrowings in Countrywide and provide working capital, the Society agreed to

provide a loan of £253.0m to Connells Limited on completion of the acquisition. As at 31 December 2025, the

outstanding amount due from Connells to the Society in respect of this loan was £114.3m (2024: £118.9m).

For 2025 the interest receivable by the Society in respect of this loan was £8.4m (2024: £9.6m); included within

interest receivable presented in the table above.

At 31 December 2025 the Society owed £1,304.1m (2024: £1,413.7m) to subsidiary undertakings and was

owed £454.7m (2024: £403.9m) by subsidiary undertakings. The total amount owed by subsidiary

undertakings as at 31 December 2025 includes the £114.3m (2024: £118.9m) outstanding in respect of the

loan to Connells Limited, as described above. Interest on intra-Group borrowings is charged at an appropriate

market rate. As at 31 December 2025 the Society recognised no impairment loss allowance in respect of loans

to subsidiary undertakings, on the grounds of immateriality (2024: £nil).

Society

£m

2025

2024

Rendering and receiving of services

0.1

Recharges of central costs

4.8

5.0

Interest receivable (note A)

130.7

122.6

Interest payable

(202.8)

(217.0)

Mortgage referral, valuation and legal fees (note B)

(10.5)

(10.2)

Other operating income

9.6

8.2

Collateral transferred to funding vehicles

2,194.4

1,147.2

Collateral transferred from funding vehicles

(54.3)

(67.0)

Repayment of debt securities

(37.3)

(119.4)

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 189

A reconciliation of the tax expense on profit before tax at the standard rate of corporation tax in the UK to the

actual tax expense is as follows.

Reconciliation of tax expense

Group

Society

£m

2025

2024

2025

2024

Profit before tax

275.2

318.6

272.1

245.9

Share of profits from joint ventures, net of tax

(2.0)

(1.4)

273.2

317.2

272.1

245.9

Tax calculated at the standard rate of corporation tax in the UK of

25.0% (2024: 25.0%)

68.3

79.3

68.0

61.5

Effects of:

Expenses not deductible for tax purposes

2.3

0.7

1.0

0.5

Adjustment to tax expense in respect of prior periods

(0.2)

0.5

(0.6)

Non-taxable dividend income

(20.7)

(9.0)

Other non-taxable income

(3.5)

(1.8)

(0.4)

(0.2)

Lower tax rates in other jurisdictions

(1.7)

(4.4)

Banking surcharge

2.3

3.3

2.6

3.3

Recognition of previously unrecognised tax losses

(0.9)

Pillar Two top-up taxes

0.7

1.5

Removal of deferred tax resulting from assets reclassified to

‘Assets held for sale’

(1.8)

Other

(0.2)

(0.1)

0.3

(0.3)

Total tax expense

66.2

78.1

49.5

56.7

Group

Society

£m

2025

2024

2025

2024

Current tax:

Corporation tax on profits in the period

65.2

66.5

49.3

51.9

Adjustments in respect of previous periods

(1.5)

2.2

0.2

1.3

Pillar Two top-up taxes

0.7

1.5

64.4

70.2

49.5

54.7

Deferred tax

(Note 34):

Current year charge / (credit)

0.5

9.6

(0.3)

3.9

Adjustments in respect of previous periods

1.3

(1.7)

0.3

(1.9)

1.8

7.9

2.0

Total tax expense

66.2

78.1

49.5

56.7

Performance & Strategy Governance

Financial Statements

Other Information

As disclosed in Note 20a), the Society has for the year ended 31 December 2025 provided guarantees over the

liabilities of Jade Software Corporation UK Limited, North Yorkshire Mortgages Limited, Skipton Group

Holdings Limited, Skipton Investments Limited and Skipton Trustees Limited. As at 31 December 2025 the

financial statements of these subsidiary undertakings include aggregate liabilities of £64.8m (2024: £41.6m),

of which £57.7m (2024: £37.0m) is intra-group liabilities.

At 31 December 2025 the Group was owed £nil (2024: £nil) by joint ventures and owed £nil (2024: £nil) to joint

ventures. At 31 December 2025 the Group was owed £nil (2024: £0.1m) by entities in which the Group holds

equity share investments.

There were no provisions in respect of sales of goods and services or in respect of outstanding loans between

the Group or Society and its related parties as at 31 December 2025 or 31 December 2024.

Skipton Group Annual Report & Accounts 2025 190

The effective tax rate for the Group for the year ended 31 December 2025 is 24.2% (2024: 24.6%) compared

with the standard rate of UK corporation tax of 25.0% (2024: 25.0%). The Group’s effective rate is lower than

the standard rate due to the impacts of non-taxable income and the lower tax rates in Guernsey and Jersey

which apply to the taxable profits of SIL. This is offset by the impact of the banking surcharge (see below),

additional tax due in respect of Pillar Two top-up taxes and expenditure disallowable for tax purposes.

The effective tax rate for the Society for the year ended 31 December 2025 is 18.2% (2024: 23.1%). The

Society’s taxable profits above £100m are subject to a 3% banking surcharge. The effective rate of tax is also

impacted by non-taxable dividend income of £82.8m (2024: £36.0m) and, for 2024, additional tax due in

respect of Pillar Two top-up taxes.

OECD Pillar Two Model Rules

The Skipton Group is within the scope of the OECD Pillar Two model rules which came into effect in the UK and

Australia from 1 January 2024. The rules came into effect in Guernsey, Jersey and New Zealand from 1

January 2025. The rules are aimed at ensuring that large multinational groups are subject to a minimum

effective tax rate of 15% in each jurisdiction within which they operate. The Group has applied the mandatory

temporary exception to recognising and disclosing information about deferred tax assets and liabilities related

to Pillar Two income taxes, as provided in the amendments to IAS 12

Income Taxes

issued in May 2023.

The charge estimated by the Group in respect of Pillar Two for the year ended 31 December 2025 is £0.7m (31

December 2024: £1.5m) and this is included in the current tax expense. The estimated charge for both years

relates to top-up taxes in respect of profits of SIL. In 2025 the charge is expected to be incurred by SIL in

Guernsey and Jersey following the adoption of the Pillar Two rules in Guernsey and Jersey from 1 January

2025. The 2024 charge is expected to be incurred by the Society in the UK, due to the UK’s earlier

implementation of the rules. The charge for each of 2024 and 2025 does not include any element of deferred

tax as the Group has applied the temporary exception issued by the IASB in May 2023. Both amounts continue

to be estimates as the Group is currently engaged with external tax specialists to implement a detailed

application of the rules and guidance. The date by which the Group is required to report and pay Pillar Two top-

up taxes in the UK is 30 June 2026. A final detailed calculation will be in place by this date.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 191

As outlined in Note 1f), loans and advances to credit institutions are held at amortised cost. All amounts

shown in the table above were held in stage 1 for both the Group and Society at the end of the current and prior

year.

No amounts were written off during the current or prior year in either the Group or the Society. For further

details on the assessment of ECLs on liquid assets, see Note 1h).

The table below provides maturity information for the net carrying amounts.

Collateral

Cash is pledged and received as collateral against derivative contracts which are used by the Group to manage

its exposure to market risk. Collateral is pledged to derivative contract counterparties where there is a net

amount outstanding to the counterparty and collateral is received from derivative contract counterparties

where there is a net amount due to the Group.

Non-standardised and some legacy derivatives are collateralised based on bilateral Credit Support Annex

(CSA) agreements. Under the terms of a CSA, collateral is passed between parties to mitigate the credit risk of

counterparties which is inherent in the outstanding derivative contracts. Standardised derivatives are cleared

with a central clearing counterparty in accordance with the UK European Market Infrastructure Regulation (UK

EMIR). Under the arrangements for cleared derivatives, additional collateral is required to protect the central

clearing counterparty against credit risk of the counterparties and to cover intra-day market movements and

possible variations in the future valuations of the derivative contracts. At 31 December 2025 the Group and

Society pledged £254.6m (2024: £272.4m) of this additional collateral.

Collateral pledged and received is ring-fenced by all parties to the derivative contract for the sole purpose of

collateralisation of the contracts. All derivatives are marked to market on a daily basis, with collateral being

either returned or pledged based on the market valuation of the derivatives.

The Group’s derivative contracts have an outstanding contractual period of up to 32 years (2024: 33 years).

Group

Society

£m

2025

2024

2025

2024

Gross carrying amount

353.4

414.7

304.8

397.9

Loss allowance

(0.1)

Net carrying amount

353.3

414.6

304.7

397.8

Group

Society

£m

2025

2024

2025

2024

Repayable on demand:

Cash and cash equivalents

88.8

121.5

31.2

54.0

88.8

121.5

31.2

54.0

In not more than three months:

Cash and cash equivalents

1.6

In more than three months but not more than one year:

Other loans and advances to credit institutions

1.0

No specified maturity:

Cash pledged as collateral

264.5

290.5

273.5

342.8

264.5

290.5

273.5

342.8

Total loans and advances to credit institutions

353.3

414.6

304.7

397.8

Total included within cash and cash equivalents

88.8

123.1

31.2

54.0

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 192

In addition, cash collateral can be pledged or received as repurchase agreement contracts. Repurchase

agreements are funding arrangements which allow a party to sell a financial asset as security to raise funds

and the borrower agrees to repurchase the financial asset at a later agreed date. Where there is a movement in

valuation of the underlying financial asset used as security, the borrower is required to pledge cash (known as

‘variation margin’) to make up the shortfall in the value of the security. This valuation margin protects the

counterparty against the risk that the security changes in value over time. Cash pledged in this way is ring-

fenced for the sole purpose of collateralisation and is separate to the funds raised as part of the underlying

repurchase agreement. At 31 December 2025 the Group has no cash (2024: £nil) pledged as collateral in

repurchase arrangements.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 193

The majority of debt securities held are highly liquid assets which are used on a continuing basis in the Group’s

activities.

Group

2025

2024

£m

FVOCI and Total

Gilts

500.5

1,086.5

Fixed rate bonds

1,552.0

1,274.9

Floating rate notes

11.0

Treasury bills

773.4

598.2

Covered bonds

813.5

770.1

Residential mortgage backed securities

619.0

619.9

4,269.4

4,349.6

Debt securities have remaining maturities as follows:

In not more than three months

809.4

492.9

In more than three months but not more than one year

253.6

826.3

In more than one year but not more than five years

2,536.5

2,222.1

In more than five years

669.9

808.3

4,269.4

4,349.6

Transferable debt securities comprise:

Listed on a recognised investment exchange

4,269.4

4,349.6

4,269.4

4,349.6

Society

2025

2024

£m

FVOCI

FVTPL

Total

FVOCI

FVTPL

Total

Gilts

500.5

1,086.5

Fixed rate bonds

1,552.0

1,274.9

Treasury bills

557.0

321.2

Covered bonds

813.5

770.1

Residential mortgage backed securities

778.9

73.5

852.4

817.1

70.3

887.4

4,201.9

73.5

4,275.4

4,269.8

70.3

4,340.1

Debt securities have remaining maturities as follows:

In not more than three months

593.1

273.9

In more than three months but not more than one year

253.6

768.5

In more than one year but not more than five years

2,685.3

73.5

2,758.8

2,419.1

70.3

2,489.4

In more than five years

669.9

808.3

4,201.9

73.5

4,275.4

4,269.8

70.3

4,340.1

Transferable debt securities comprise:

Listed on a recognised investment exchange

4,201.9

73.5

4,275.4

4,269.8

70.3

4,340.1

4,201.9

73.5

4,275.4

4,269.8

70.3

4,340.1

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 194

Group

2025

2024

£m

FVOCI and Total

At 1 January

4,349.6

3,337.7

Additions

2,274.6

4,402.0

Maturities and disposals

(2,416.3)

(3,376.3)

Changes in fair value

49.2

(28.5)

Other

12.3

14.7

At 31 December

4,269.4

4,349.6

Society

2025

2024

£m

FVOCI

FVTPL

Total

FVOCI

FVTPL

Total

At 1 January

4,269.8

70.3

4,340.1

3,143.4

63.1

3,206.5

Additions

1,410.3

1,410.1

3,908.8

77.8

3,986.6

Maturities and disposals

(1,537.4)

(2,765.3)

(66.6)

(2,831.9)

Changes in fair value

49.2

3.2

52.4

(28.7)

(4.0)

(32.7)

Other

10.0

11.6

At 31 December

4,201.9

73.5

4,275.4

4,269.8

70.3

4,340.1

The tables below provide further detail on the movement in the impairment loss allowance held in respect of

debt securities during the year. There were no amounts written off by the Group or Society during the current or

prior year.

Movement in impairment loss allowance

Group

Society

£m

2025

2024

2025

2024

Loss allowance at 1 January

0.2

0.3

Increases due to origination, acquisition and additions

0.1

0.2

0.1

0.2

Decrease due to derecognition, repayments and disposals

(0.1)

(0.2)

(0.1)

(0.2)

Loss allowance at 31 December

0.2

0.3

All balances for the Group and Society included in the table above are classified as FVOCI and held in stage 1 in

both the current and prior year.

Collateral

At 31 December 2025, £166.8m (2024: £2.1m) of debt securities have been pledged by the Group, and £352.9m

(2024: £203.2m) have been pledged by the Society, as collateral in repurchase transactions. These

transactions are used to either obtain liquidity or to test the liquidity of the assets pledged as collateral. Where

debt securities are pledged as collateral in repurchase transactions, the debt securities are not derecognised

from the balance sheet and the transaction is accounted for as a secured loan.

Further detail on debt securities that have been pledged as collateral is found in the table below.

The collateral is pledged for the duration of the repurchase agreement, and is returned on maturity of the

agreement, subject to the repayment of the amount raised. The securities cannot be pledged again by the

Group until maturity of the repurchase agreement, however the recipient of the collateral is free to sell or further

repurchase the assets. As at 31 December 2025, the Group’s repurchase agreements have a contractual period

of up to three months (2024: three months).

Securities pledged as collateral

Group

Society

£m

2025

2024

2025

2024

Gilts

8.0

201.1

Fixed rate bonds

7.9

2.1

21.0

2.1

Treasury bills

150.9

323.9

Total on

-balance sheet debt securities pledged as collateral

166.8

2.1

352.9

203.2

The tables below provide further detail on the movement in debt securities during the year.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 195

There were no debt securities held by the Group or the Society at the end of 2025 or 2024 that were pledged as

collateral by counterparties (known as ‘reverse repurchase agreements’).

Residential mortgage backed securities

The Group’s investments in residential mortgage backed securities represent investments in unconsolidated

structured entities, as described in Note 1d).

The maximum exposure to losses from unconsolidated structured entities is equivalent to the book value plus

accrued interest, determined by the carrying value of these investments plus any unrealised losses / less any

unrealised gains recognised within the fair value reserve as shown below.

During the year, the Group and Society received interest income of £29.9m (2024: £30.3m) from its

investments in unconsolidated structured entities and incurred impairment charges of £nil (2024: £nil). In

addition, unrealised gains recognised through the fair value reserve were £0.6m (2024: £1.1m loss).

No collateral has been received by the Group in respect of the above third party funding entities. The total size

of unconsolidated structured entities as shown in the table above is determined by reference to the Group’s

total notional exposure to the unconsolidated structured entities in question.

The Group did not provide any non-contractual support, nor any contractual guarantees, during the current or

prior year to unconsolidated structured entities and currently has no intentions to provide any such support.

The Group is not required to absorb losses of any unconsolidated structured entities before other parties and

the Group did not act as a sponsor to any unconsolidated structured entities during the current or prior year.

The Group would, in general, be regarded as a sponsor of an unconsolidated structured entity if market

participants would reasonably associate the entity with the Group.

At 31 December 2025 the Society also held £159.9m (2024: £197.2m) of residential mortgage backed

securities held at FVOCI and £73.5m (2024: £70.3m) of residential mortgage backed securities held at FVTPL

that were issued by the Group’s securitisation vehicle Darrowby No. 6 plc.

Group & Society

£m

2025

2024

Carrying value of assets

619.0

619.9

Cumulative unrealised gains recognised in fair value reserve

(0.9)

(0.3)

Maximum exposure to loss at 31 December

618.1

619.6

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 196

Included in loans fully secured on residential property is a £23.9m adjustment for Group (2024: £16.5m) and a

£41.9m adjustment for Society (2024: £33.2m) due to applying the effective interest method of accounting for

these mortgages (see Note 1f) for further details).

Group

Society

£m

2025

2024

2025

2024

Loans fully secured on residential property

32,985.9

30,529.3

30,970.3

28,497.0

Loans fully secured on land

89.6

109.6

89.6

109.6

Other lending:

Debt factoring advances

199.2

188.6

Other loans

45.3

48.2

0.5

Fair value adjustment for hedged risk

58.9

(274.6)

60.9

(271.7)

33,378.9

30,601.1

31,121.3

28,334.9

The remaining maturity of loans and advances to customers from the reporting date is as follows:

On call and at short notice

196.8

188.5

3.0

3.2

In not more than three months

27.1

28.9

26.8

28.9

In more than three months but not more than one year

77.5

55.5

75.6

53.8

In more than one year but not more than five years

995.3

943.4

988.7

906.2

In more than five years

32,107.8

29,404.4

30,050.7

27,360.3

33,404.5

30,620.7

31,144.8

28,352.4

Less: Impairment (Note 17)

(25.6)

(19.6)

(23.5)

(17.5)

33,378.9

30,601.1

31,121.3

28,334.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 197

As outlined in Note 1d) the Society has transferred the beneficial interest in certain portfolios of loans and

advances to customers to the Group’s special purpose vehicles (SPVs) Darrowby No. 6 plc and Skipton

Covered Bonds LLP, to enable the subsequent raising of debt to investors who gain the security of the

underlying mortgage loans as collateral.

The transfers of the beneficial interest in the mortgage loans to the SPVs are not treated as sales by the

Society and are not derecognised. The Society continues to recognise these assets within its own Statement

of Financial Position because it substantially retains the risks and rewards of these mortgage portfolios. The

Society continues to operationally manage these mortgage loans in the same manner as the remainder of its

mortgage portfolio and is exposed to the rewards of these assets, primarily through the receipt of interest

income, and is exposed to the risks of these assets, which is primarily exposure to the credit risk associated

with these mortgage loans.

The underlying mortgage loans are ring-fenced and cannot be used for any purpose by the Society or the SPV

other than as security for the debt raised.

At 31 December 2025, loans and advances to customers held at amortised cost include £5,153.8m (2024:

£3,980.3m) of balances for both the Group and Society which have been used in these secured funding

arrangements, resulting in the beneficial interest in these loans being transferred to Darrowby No. 6 plc

(£627.1m; 2024: £760.7m) and Skipton Covered Bonds LLP (£4,526.7m; 2024: £3,219.6m). These loans secure

£3,339.6m (2024: £2,426.5m) of funding for the Group.

The proceeds received from the transfer of mortgage loans are accounted for in the Society’s books as a

deemed loan repayable to the SPVs. At 31 December 2025 the balance on the deemed loan repayable to

Darrowby No. 6 plc, which represents the proceeds received for the transferred financial assets, included by

the Society within ‘Amounts owed to other customers’, was £627.1m (2024: £760.7m).

At 31 December 2025 the deemed loan repayable to Skipton Covered Bonds LLP, which represents the

proceeds received for the transferred financial assets, was included by the Society within ‘Loans to subsidiary

undertakings’ and netted against the term advance between the Society and the LLP. The balance on the

deemed loan at 31 December 2025 was £2,812.1m (2024: £1,816.1m).

The Group’s accounting policies for the derecognition of financial assets held at amortised cost are set out in

Note 1i). During the year, no gains or losses arose in respect of loans and advances to customers held at

amortised cost that were derecognised by the Group or Society.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 198

2025

Group

Loans fully secured

Loans fully

Other loans

£m

on residential

secured on

and

Total

Property

land

advances

Loss allowance at 1 January 2025

13.5

4.7

1.4

19.6

Amounts written off during the year, net of

recoveries

(1.5)

(2.4)

(0.2)

(4.1)

Income statement charge for the year

9.6

0.3

0.2

10.1

Loss allowance at 31 December 2025

21.6

2.6

1.4

25.6

2024

Group

Loans fully secured

Loans fully

Other loans

£m

on residential

secured on

and

Total

Property

land

advances

Loss allowance at 1 January 2024

29.0

9.0

1.6

39.6

Amounts written off during the year, net of

recoveries

(1.0)

(1.4)

(0.5)

(2.9)

Income statement (credit) / charge for the year

(14.5)

(2.9)

0.3

(17.1)

Loss allowance at 31 December 2024

13.5

4.7

1.4

19.6

2025

Society

Loans fully secured

Loans fully

£m

on residential

secured on

Total

Property

land

Loss allowance at 1 January 2025

12.8

4.7

17.5

Amounts written off during the year, net of

recoveries

(1.4)

(2.4)

(3.8)

Income statement charge for the year

9.5

0.3

9.8

Loss allowance at 31 December 2025

20.9

2.6

23.5

2024

Society

Loans fully secured

Loans fully

£m

on residential

secured on

Total

Property

Land

Loss allowance at 1 January 2024

27.9

9.0

36.9

Amounts written off during the year, net of

recoveries

(1.0)

(1.4)

(2.4)

Income statement credit for the year

(14.1)

(2.9)

(17.0)

Loss allowance at 31 December 2024

12.8

4.7

17.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 199

Movements during the year in the equity release portfolio are outlined below.

Further details on how the valuation of the equity release portfolio is derived, including the key inputs into the

calculation, are found in Note 1f) and Note 1v).

The Group holds derivative financial instruments to economically hedge the movements in fair value of the

equity release portfolio. The movement in fair value of the derivatives held to hedge the equity release portfolio

during the year was a £8.1m gain (2024: £21.9m gain) and is included in the Income Statement line ‘Fair value

(losses) / gains on financial instruments mandatorily held at FVTPL’.

The equity release portfolio comprises loans against which collateral is held in the form of property in the UK.

As at 31 December 2025 this collateral was valued at £480.4m (2024: £506.4m).

Group & Society

£m

2025

2024

At 1 January

277.2

293.3

Redemptions

(4.0)

(4.3)

Movements in fair value

(14.5)

(12.6)

Realised losses on redemption

(1.3)

(1.8)

Accrued interest

5.7

2.6

At 31 December

263.1

277.2

As outlined in Note 1f), the above loans consist mainly of certain lifetime mortgages that are required, under

IFRS 9, to be held at FVTPL.

Collateral is held against the above loans in the form of property in the UK and is valued as at 31 December

2025 at £5.9m (2024: £6.0m).

Movements during the year are outlined below:

Group & Society

£m

2025

2024

At 1 January

0.9

Repayments

(0.2)

(0.1)

Accrued interest

0.1

At 31 December

0.8

0.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 200

a) Subsidiary undertakings

The net movement in investments in subsidiary undertakings during the year was as follows:

In respect of loans provided by the Society to its subsidiary undertakings, limits in place define the maximum

amount that can be advanced to each subsidiary and any changes to these limits are required to be pre-

approved by the Group Wholesale Credit Committee.

At 31 December 2025, a credit of £0.1m (2024: £nil) is included within ‘Loans to subsidiary undertakings’ in the

table above, in relation to the cross-currency swap (as outlined in Note 11) for the Society. This also applies to

the Group position, which comprises the external cross currency swap, being a credit of £0.1m (2024: £nil),

together with investments in joint ventures totalling £13.2m (2024: £11.2m) (see page 204), which in

aggregate totals £13.1m (2024: £11.2m) as shown per the Statement of Financial Position line ‘Investments in

subsidiary undertakings and joint ventures’.

2025

Society

£m

Shares in subsidiary

Loans to subsidiary

Total

undertakings

Cost

1 January

183.5

403.9

587.4

Additions

60.3

Repayments

(9.5)

31 December

183.5

454.7

638.2

Provisions

1 January

78.1

31 December

78.1

Net book value

at 31 December

105.4

454.7

560.1

2024

Society

£m

Shares in subsidiary

Loans to subsidiary

Total

undertakings

Cost

1 January

183.5

372.7

556.2

Additions

37.1

Repayments

(5.9)

31 December

183.5

403.9

587.4

Provisions

1 January

78.1

31 December

78.1

Net book value

at 31 December

105.4

403.9

509.3

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 201

At the end of the current and preceding financial year the Group held a controlling interest in the following

principal trading subsidiary undertakings:

The Group also continues to hold 100% (2024: 100%) in the former lending entity North Yorkshire Mortgages

Limited, which ceased active trading in 2021.

On 1 January 2025, Jade acquired Northwest Investments NZ Limited, for consideration of £0.2m, transferring

100% ownership at that date from Skipton Investments Limited. From 1 January 2025, Northwest Investments

NZ Limited is held indirectly through the Group’s investment in Jade.

All the above entities are incorporated, registered and operate in the United Kingdom except for SIL, which is

incorporated and registered in Guernsey and operates in Guernsey, Jersey and the UK; and Jade, which is

incorporated and registered in New Zealand and operates worldwide.

For the year ended 31 December 2025, the Society has provided guarantees over the liabilities of the following

subsidiary undertakings; these are thereby exempt from audit for the year ended 31 December 2025, as

permitted by Section 479A of the Companies Act 2006:

Consolidation of special purpose vehicles (SPVs)

Darrowby No. 6 plc is a securitisation vehicle formed with only nominal share capital. Skipton Covered Bonds

LLP, of which the Society is a member, was formed to guarantee payments on covered bonds that the Society

issues to the wholesale market. These SPVs are funded through loans from the Society and their activities are

carried out under the direction of the Society, in line with the transaction documentation.

Ownership Interest (%)

Name of subsidiary

Principal business activity

Registered office

2025

2024

undertaking

Connells Limited and

Estate agency and related

Cumbria House, 16

-20 Hockliffe

subsidiary undertakings

businesses

Street, Leighton Buzzard,

100

Bedfordshire, LU71GN

Darrowby No. 6 plc

Funding vehicle

Floor, 5 Churchill Place,

(See below)

London, E14 5HU

Jade Software Corporation

Provider of software

5 Sir Gil Simpson Drive,

Limited and subsidiary

development services

Christchurch 8053, New Zealand

100

undertakings

Skipton Business Finance

Provider of debt factoring

The Bailey, Skipton, North

100

Limited (SBF)

services

Yorkshire, BD23 1DN

Skipton Covered Bonds

Mortgage acquisition and

The Bailey, Skipton, North

(See below)

Limited Liability Partnership

guarantor of covered bonds

Yorkshire, BD23 1DN

Skipton Financial Services

Financial adviser

The Bailey, Skipton, North

100

Limited

Yorkshire, BD23 1DN

Skipton Group Holdings

Intermediate holding

The Bailey, Skipton, North

100

Limited (SGHL)

company

Yorkshire, BD23 1DN

Skipton International

Offshore deposit taker and

Tudor House, Le Bordage, St Peter

100

Limited (SIL)

lender

Port, Guernsey, GY1 6DS

Skipton Trustees Limited

Estate administration

The Bailey, Skipton, North

100

services

Yorkshire, BD23 1DN

• Jade Software Corporation UK Limited

• North Yorkshire Mortgages Limited

• Skipton Group Holdings Limited

• Skipton Investments Limited

• Skipton Trustees Limited

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 202

The Society is exposed to variable returns from these entities and has the ability to affect those returns in line

with the transaction documentation; these SPVs therefore pass the test of control under IFRS 10 and are fully

consolidated into the Group Accounts. The Society has no contractual arrangements or intention to provide

additional financial or other support to these SPVs.

b) Acquisitions

During the year the Group, via its subsidiaries, as part of a continued commitment to strategic expansion,

acquired the entities outlined below for total cash consideration of £48.2m. Of the total consideration, £28.8m

was paid in the year, with an element deferred / contingent. £7.6m is payable on the first anniversary of the

acquisitions, with the second and third anniversary payments totalling £11.8m, subject to certain

conditions. The fair value of the deferred / contingent consideration is not materially different to the cash

consideration payable. The acquisitions have been accounted for as a business combination under IFRS

Business Combinations

• On 2 April 2025, Connells acquired 75% membership interest in Stiles Harold Williams Partnership LLP, a

real estate advisory business; obtaining control in accordance with the LLP agreement and IFRS 10

Consolidated Financial Statements

• On 3 April 2025, Connells acquired 75% membership interest in Ryden LLP, a commercial property agency;

obtaining control in accordance with the LLP agreement and IFRS 10

Consolidated Financial Statements

• On 29 May 2025, Connells acquired the entire share capital, and took control, of Aspire Estate Agents

Limited and its subsidiary undertakings; an estate agency business based in London.

• On 28 November 2025, Jade acquired the entire share capital, and took control of, fellow Christchurch-

based dairy supply chain management software company, Contec Group International Ltd.

The table below sets out the aggregated fair values of the identifiable assets and liabilities acquired. In

accordance with IFRS 3

Business Combinations

, the acquisition accounting is subject to finalisation within 12

months of the acquisition date; the amounts shown below have been updated from the provisional values that

were reported in the Group’s half-yearly report for the period ended 30 June 2025, to reflect the best estimates

available at the reporting date.

Performance & Strategy Governance Financial Statements

Other Information

£m

Book value

Accounting

Fair value

adjustments

Assets

Loans and advances to credit institutions (note A)

8.7

Trade and other receivables (note B)

10.9

(0.2)

(0.3)

10.4

Property, plant and equipment

0.6

Right-of-use assets (note C)

3.8

Intangible assets (note D)

13.9

Total assets

20.2

13.7

3.5

37.4

Liabilities

Trade and other payables

7.7

0.3

8.0

Provisions

1.2

0.1

1.3

Deferred tax liabilities (note E)

3.7

Lease liabilities (note C)

3.7

Total liabilities

8.9

3.7

4.1

16.7

Net assets / (liabilities)

11.3

10.0

(0.6)

20.7

Fair value of net assets

20.7

Non-controlling interest (note F)

(3.3)

Goodwill arising on acquisition (note G)

30.8

Total consideration

48.2

Skipton Group Annual Report & Accounts 2025 203

Notes

A. With respect to ‘Loans and advances to credit institutions’, amounts acquired of £8.7m includes cash and cash equivalents of

£8.7m.

B. Receivables acquired were recognised at fair value based on expected recoverability.

C. The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition,

resulting in an adjustment to increase lease liabilities by £3.7m. The related right-of-use assets were measured at an amount broadly

equal to the lease liabilities, resulting in an adjustment to increase right-of-use assets by £3.8m.

D. The total fair value of intangible assets represents amounts in respect of software, brands, and customer contracts and

relationships. The fair value adjustments totalling £13.9m reflect management’s assessments, using methodologies that are in line

with industry best practice.

E. The fair value adjustment of £3.7m relates to the deferred tax impact of amounts recognised at acquisition in respect of intangible

assets (see note D above).

F. At the acquisition date, the Group recognised a non-controlling interest (NCI) representing 25% of the equity in Stiles Harold Wiliams

Partnership LLP and Ryden LLP, based on the ownership structure set out in the Share Purchase Agreement. The NCI was measured

using the ‘proportionate share of net assets’ method, resulting in a recognised NCI amount of £3.3m.

G. The goodwill reflects synergies, the acquired workforce, new geographical locations and business expertise; of which none is

deductible for tax purposes.

Pre-acquisition profits for the period up to the date of acquisition have been excluded from Group consolidated

earnings, as required under acquisition accounting.

From the date of acquisition, the acquired businesses contributed total income of £25.4m and profit before tax

of £2.9m to the Skipton Group’s consolidated Income Statement for the year ended 31 December 2025.

If the results of the acquisitions were consolidated for the full financial year, as if the acquisition had taken

place at 1 January 2025, the Skipton Group’s total income for the year ended 31 December 2025 would have

been £1,728.3m and Skipton Group profit before tax for the year ended 31 December 2025 would have been

£277.9m; these amounts have been determined assuming all other things being equal, including an

assumption that the fair values of assets acquired would not be materially different if the acquisition date had

been 1 January 2025.

Associated transaction costs of £0.7m were incurred by the Group in relation to the acquisitions. These costs

were expensed to the Income Statement as incurred and are included within ‘Administrative expenses’.

Other acquisitions

During 2025 Connells purchased a further ten minor estate agency and or/ lettings businesses, that were

individually and collectively immaterial, for total consideration of £6.5m (of which £1.2m is deferred),

generating goodwill of £2.6m. In addition, Connells also purchased non-controlling interests in an existing

subsidiary undertaking, The Asset Management Group Limited, during the year, for cash consideration of

£4.5m, taking its shareholding to 100%.

In the prior year, Connells purchased a number of small businesses for total consideration of £1.5m (of which

£0.2m was deferred), generating goodwill of £0.5m.

c) Disposals

During the year, Connells disposed of the following businesses: Mortgage Intelligence Limited; Mortgage Next

Network Limited; Life and Easy Limited; and the Just Wills group of entities*. These businesses generated

combined revenue of £7.2m (2024: £7.7m), representing 1% of Connells’ group revenue. The disposals did not

constitute a separate major line of business or geographical area and were therefore not presented as

discontinued operations under IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

. The

disposals resulted in a gain of £10.8m, which is included in the Income Statement line ‘Other operating

income’.

* The Just Wills group of entities disposed of, comprises: Allguard Legal Services Ltd; Chancery Law Services Ltd; Executry Services

Scotland Ltd; Heritage Family Estates Limited; IHLS Ltd; In Home Legal Services Ltd; Just Wills Group Limited; Just Wills Holdings Limited;

Just Wills Limited; Legal Services Probate Ltd; Legal Services UK Ltd; Redstone Wills Limited; The Universal Trust Corporation; Willcraft

Services Ltd; Willmaster Ltd; and Willmaster Storage Ltd.

Performance & Strategy Governance Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 204

d) Joint ventures

At 31 December 2025, the Group held interests in the following companies that are classed as joint ventures:

* Registered office is Bickerton House, Lloyd Drive, Ellesmere Port, Cheshire CH65 9HQ

The Group’s combined share of net assets and the Group’s combined share of profit after tax for the above

joint venture are presented within the Statement of Financial Position and the Income Statement respectively.

The Directors reviewed the carrying value of the joint venture during the year and considered that no

impairment adjustment was required (2024: £nil).

e) Equity share investments mandatorily held at FVTPL

The Group’s investments in equity shares mandatorily held at FVTPL is summarised below:

The movement during the year in the Group’s equity share investments mandatorily held at FVTPL is analysed

in Note 46.

Unlisted investments

The carrying values of the Group’s equity share investments mandatorily held at FVTPL are typically based on

the amounts invested by the Group or, where appropriate, on third party valuations.

The Statement of Financial Position includes the following amounts in respect of assets held for sale:

On 1 March 2025 the Group reclassified freehold land and buildings to ‘Assets held for sale’ under IFRS 5

Non-

current Assets Held for Sale and Discontinued Operations

. This property was previously held partly within

‘Property, plant and equipment’ and partly within ‘Investment property’.

The property is being actively marketed for sale, which management expects to complete within 12 months.

No gain or loss arose in the year as a result of this reclassification. The assets held for sale are presented

within the ‘Society’ reportable segment for segmental reporting purposes.

Group

£m

2025

2024

Unlisted investments

18.3

16.9

Total

18.3

16.9

Ownership Interest (%)

Carrying Value (£m)

Name of investment

Principle Business Activity

Class of shares held

2025

2024

2025

2024

Cybele Solutions

Conveyancing services

Ordinary

50.0

13.2

11.2

Holdings Limited*

Performance & Strategy Governance Financial Statements

Other Information

Group

Society

£m

2025

2024

2025

2024

Assets held for sale

3.7

Skipton Group Annual Report & Accounts 2025 205

2025

2024

Group

Land and

Equipment,

Land and

Equipment,

£m

buildings

fixtures

Total

buildings

fixtures

Total

and fittings

Cost

At 1 January

115.6

93.9

209.5

110.8

87.9

198.7

Additions

6.4

7.5

13.9

8.9

13.1

22.0

Disposals

(1.2)

(7.5)

(8.7)

(3.7)

(6.9)

(10.6)

Acquisition of subsidiary undertakings

0.1

0.5

0.6

Foreign exchange movements on

translation

(0.2)

Reclassification to assets held for sale

(0.8)

Reclassification to investment property

(0.1)

(0.4)

At 31 December

120.0

94.4

214.4

115.6

93.9

209.5

Depreciation

At 1 January

61.0

67.6

128.6

58.4

65.8

124.2

Charge for the year

6.4

9.0

15.4

5.9

8.4

14.3

Impairment charge

1.0

Disposals

(0.9)

(6.5)

(7.4)

(3.2)

(6.4)

(9.6)

Foreign exchange movements on

translation

(0.1)

(0.2)

Reclassification to assets held for sale

(0.2)

Reclassification to investment property

(0.1)

At 31 December

66.3

71.0

137.3

61.0

67.6

128.6

Net book value at 1 January

54.6

26.3

80.9

52.4

22.1

74.5

Net book value at 31 December

53.7

23.4

77.1

54.6

26.3

80.9

2025

2024

Society

Land and

Equipment,

Land and

Equipment,

£m

buildings

fixtures

Total

buildings

fixtures

Total

and fittings

Cost

At 1 January

57.1

21.5

78.6

55.1

17.5

72.6

Additions

3.0

3.2

6.2

4.5

6.0

10.5

Disposals

(0.6)

(0.7)

(1.3)

(2.1)

(2.0)

(4.1)

Reclassification to assets held for sale

(0.8)

Reclassification to investment property

(0.1)

(0.4)

At 31 December

58.6

24.0

82.6

57.1

21.5

78.6

Depreciation

At 1 January

23.6

11.9

35.5

22.6

11.0

33.6

Charge for the year

2.8

3.5

6.3

2.8

2.9

5.7

Disposals

(0.6)

(0.7)

(1.3)

(1.7)

(2.0)

(3.7)

Reclassification to assets held for sale

(0.2)

Reclassification to investment property

(0.1)

At 31 December

25.6

14.7

40.3

23.6

11.9

35.5

Net book value at 1 January

33.5

9.6

43.1

32.5

6.5

39.0

Net book value at 31 December

33.0

9.3

42.3

33.5

9.6

43.1

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 206

Property, plant and equipment additions (Group and Society) include £0.6m (2024: £0.5m) in land and

buildings and £nil (2024: £nil) in equipment, fixtures and fittings in relation to Capital Work in Progress (CWIP),

relating mainly to branch refurbishment projects.

As outlined in Note 21, during the year, property, plant and equipment with a total carrying value of £0.6m was

reclassified as held for sale, and therefore presented separately within the Statement of Financial Position.

The net book value of land and buildings comprises:

Group

Society

£m

2025

2024

2025

2024

Freehold

36.7

38.3

25.0

25.6

Long leasehold

2.6

2.7

2.6

2.7

Short leasehold

14.4

13.6

5.4

5.2

Total

53.7

54.6

33.0

33.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 207

The Group’s leases relate mainly to branch premises operated by the Society and by Connells. The Group’s

leases are typically negotiated on an individual basis and thus include a wide variety of terms and conditions,

including options to extend or terminate. There are no significant restrictions or covenants, residual value

guarantees or sale and leaseback transactions. As at 31 December 2025, the lease liability (see Note 31) is

considered by the Group to represent a reliable estimate of the present value of the future cash outflows to

which the Group is exposed. A number of the Group’s leased properties are sublet, in full or in part, by the

Group. For the year ended 31 December 2025, other operating income includes £0.1m (2024: £0.1m) (Group)

and £nil (2024: £nil) (Society) relating to the subleasing of properties accounted for as right-of-use assets. For

details of the Group’s lease liabilities, see Note 31. For further details of the Group’s lease expenses in the year,

see Note 7.

2025

2024

Group

Land and

Equipment,

Land and

Equipment,

£m

buildings

fixtures

Total

buildings

fixtures

Total

and fittings

Cost

Balance at 1 January

163.8

22.6

186.4

160.4

21.3

181.7

Additions

25.2

15.7

40.9

17.1

2.2

19.3

Acquisition of subsidiary undertakings

4.0

Lease modifications and

remeasurements

13.7

1.0

14.7

11.2

Disposals

(30.6)

(0.2)

(30.8)

(24.7)

(0.9)

(25.6)

Foreign exchange movements on

translation

(0.1)

(0.2)

At 31 December

176.0

39.1

215.1

163.8

22.6

186.4

Depreciation

Balance at 1 January

81.3

14.7

96.0

70.9

9.9

80.8

Charge for the year

32.3

7.0

39.3

32.1

5.6

37.7

Impairment charge

1.8

0.1

1.9

2.3

0.1

2.4

Disposals

(28.8)

(0.2)

(29.0)

(23.8)

(0.9)

(24.7)

Foreign exchange movements on

translation

(0.1)

(0.2)

At 31 December

86.5

21.6

108.1

81.3

14.7

96.0

Net book value at 1 January

82.5

7.9

90.4

89.5

11.4

100.9

Net book value at 31 December

89.5

17.5

107.0

82.5

7.9

90.4

2025

2024

Society

Land and

Equipment,

Land and

Equipment,

£m

buildings

fixtures

Total

buildings

fixtures

Total

and fittings

Cost

At 1 January

18.9

0.2

19.1

Additions

1.8

0.8

Disposals

(2.8)

(0.8)

(0.2)

(1.0)

At 31 December

17.9

18.9

Depreciation

At 1 January

10.6

9.0

0.1

9.1

Charge for the year

2.1

2.2

Disposals

(2.8)

(0.6)

(0.1)

(0.7)

At 31 December

9.9

10.6

Net book value at 1 January

8.3

9.9

0.1

10.0

Net book value at 31 December

8.0

8.3

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 208

All investment property relates to property purchased by the Society and is either unoccupied by the Society or

relates to branches where part of the property is subleased.

As outlined in Note 21, during the year, investment property with a total carrying value of £3.1m was

reclassified as held for sale, and therefore presented separately within the Statement of Financial Position.

The amount of rental income from investment property recognised in the Income Statement during the year

was £0.2m (2024: £1.9m) for the Group and Society.

The aggregate estimated market value of investment properties is set out in the table below:

The estimated market value of the investment properties has been determined by an appropriately qualified

internal valuer, supported by external valuations where appropriate, in accordance with RICS Appraisal and

Valuation Standards and is an indication of fair value. This fair value measurement is categorised as a Level 3

fair value measurement, as described in Note 46b).

For the majority of the Group’s investment properties, fair value is estimated using the market valuation

approach which uses prices and other relevant information generated by market transactions involving

comparable properties. Where comparable transactions may not be available, the Group may also consider a

discounted cash flow technique which considers the present value of the net cash flows to be generated from

the property, taking into account expected rental growth, void periods and rent-free periods. The expected net

cash flows are discounted using risk-adjusted discount rates.

The Directors have assessed the carrying value of the investment properties compared to their fair value and

have concluded that no impairment charge should be recognised for the year (2024: £nil).

Group & Society

£m

2025

2024

Cost

At 1 January

25.1

Additions

0.1

Disposals

(0.1)

(0.4)

Reclassification to assets held for sale

(22.8)

Reclassification from property, plant and equipment

0.1

0.4

At 31December

2.4

25.1

Depreciation

At 1 January

20.6

20.0

Charge for the year

0.3

0.6

Impairment credit

(0.1)

Disposals

(0.1)

Reclassification to assets held for sale

(19.7)

Reclassification from property, plant and equipment

0.1

At 31 December

1.0

20.6

Net book value at 1 January

4.5

5.1

Net book value at 31 December

1.4

4.5

Group & Society

£m

2025

2024

Market value of investment property

2.1

5.4

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 209

Goodwill acquired in a business combination is allocated at acquisition to the cash generating unit (CGU), or

group of CGUs, that is expected to benefit from that business combination (as further described in Note 1e));

at Skipton Group level, the allocation of goodwill typically reflects the Group’s operating segments. The Group’s

reportable segments are currently assessed and presented at the operating entity level and goodwill held by

the Group is allocated accordingly; when testing goodwill held by the Group for impairment at the consolidated

level, amounts relating to CGUs within the Connells business are therefore aggregated.

The carrying value of goodwill held by the Group has been allocated as follows:

Group

Society

£m

2025

2024

2025

2024

Goodwill

249.9

218.5

Other intangible assets

127.7

92.9

8.3

4.2

Total intangible assets

377.6

311.4

8.3

4.2

Goodwill

Group

£m

2025

2024

Cost, less amortisation to 1 January 2004

At 1 January

231.0

230.2

Acquisitions of subsidiary undertakings and business units (Note 20b))

33.2

0.5

Revaluation of put options

0.8

0.3

Disposal of subsidiary undertakings

(2.6)

At 31 December

262.4

231.0

Impairment losses

At 1 January

12.5

At 31 December

12.5

Net book value at 1 January

218.5

217.7

Net book value at 31 December

249.9

218.5

Carrying value of goodwill

2025 (£m)

2024 (£m)

Operating Segment

Cost of

Accumulated

Carrying

Cost of

Accumulated

Carrying

goodwill

impairment

value

goodwill

impairment

value

Connells

244.9

7.5

237.4

219.7

7.5

212.2

Other

17.5

5.0

12.5

11.3

5.0

6.3

Total goodwill

262.4

12.5

249.9

231.0

12.5

218.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 210

Based upon the Directors’ assessment of recoverable amounts, the Directors have concluded that no

impairment of goodwill or brands is required to be recognised in 2025 (2024: £nil). Sensitivity disclosures are

provided below.

The recoverable amounts of the operating segments are determined by consideration of value in use

calculations. The key assumptions for the value in use calculations are those regarding cash flows, discount

rates and growth rates.

The cash flows are derived from the most recent corporate plans for the next five years, which take into

account the risks inherent in each of the segments. The cash flows are extrapolated for subsequent years

indefinitely (or a specific number of years where circumstances dictate), to reflect that the underlying

businesses are held for long-term investment, based on a long-term growth rate of 3.0% (2024: 3.0%) or

specific growth rates where circumstances dictate.

The cash flows from the corporate plans are based upon the following key drivers:

In addition to the key drivers outlined above, the preparation of the corporate plan of Connells, the segment to

which the majority of goodwill held by the Group is allocated, requires the Directors to take into account

various other factors underpinning the UK housing market. These include, but are not limited to, expectations

of Connells’ future market share and projected average fees achievable in relation to second hand house sales.

Connells’ corporate plan is subject to robust scrutiny and challenge by the Connells and Society boards.

The Group estimates discount rates based upon the weighted average cost of capital which is adjusted to take

account of the market risks associated with each segment.

The pre-tax discount rates are as follows:

Sensitivity disclosures

For goodwill and brands held by the Group, the impairment assessment is typically carried out at the operating

segment level (as described in Note 1e)). For each segment to which goodwill and brands are allocated, the

impairment test compares the carrying value against the segment’s recoverable amount. The segment’s

recoverable amount is determined as the higher of a) its fair value less costs to sell and b) its value in use;

value in use is determined by discounting the forecast future cash flows of the segment to present value.

There is significant headroom in relation to all the CGUs and no reasonably possible alternative assumptions in

relation to any of the key inputs used would result in impairment.

Operating Segment

Key drivers

Connells

Volume of UK property transactions, house price inflation, level of unemployment and

interest rates

Other

Volume of new business, arrears levels, level of unemployment and interest rates

Operating Segment

2025 (%)

2024 (%)

Connells

Other

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 211

Other intangible asset additions include £23.2m (2024: £7.8m) for the Group and £3.1m (2024: £4.0m) for the

Society in relation to Capital Work in Progress (CWIP), relating to the ongoing Digital Transformation project

for the Society, specifically App and portal enhancements, and in relation to various projects to upgrade IT

capability within Connells. The net book value of other intangible assets comprises:

The following table provides a breakdown of the carrying value of brands (which are deemed to have an

indefinite useful life) within the Connells and Other operating segments:

Other intangible assets

Group

Society

£m

2025

2024

2025

2024

Cost

At 1 January

272.8

260.1

5.3

1.3

Acquisition of subsidiary undertakings

16.0

Acquisition of other business assets

1.4

1.1

Additions

33.8

14.9

4.1

4.0

Foreign exchange movements on translation

(1.4)

(3.1)

Disposals

(0.8)

(0.2)

Disposal of subsidiaries

(1.7)

At 31 December

320.1

272.8

9.4

5.3

Amortisation and impairment

At 1 January

179.9

164.6

1.1

Amortisation charge for the year

13.2

17.4

Impairment charge

2.8

0.7

Foreign exchange movements on translation

(1.0)

(2.6)

Disposals

(0.8)

(0.2)

Disposal of subsidiaries

(1.7)

At 31 December

192.4

179.9

1.1

Net book value at 1 January

92.9

95.5

4.2

0.2

Net book value at 31 December

127.7

92.9

8.3

4.2

Group

Society

£m

2025

2024

2025

2024

Brands

65.7

61.2

Customer contracts and relationships

11.0

10.5

Computer software and databases

51.0

21.2

8.3

4.2

Total

127.7

92.9

8.3

4.2

£m

2025

2024

Aspire Estate Agents Limited

1.5

Contec Group International Ltd

0.3

Countrywide Estate Agents Limited

42.6

Gascoigne Halman Group Limited

3.0

Lambert Smith Hampton Group Limited

12.1

Peter Alan Limited

2.3

RMS Estate Agents Limited

1.2

Ryden LLP

1.1

Stiles Harold Williams Partnership LLP

1.4

Tylers Property Partnership Limited

0.2

Total brands

65.7

61.2

Goodwill

249.9

218.5

Total goodwill and brands

315.6

279.7

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 212

A maturity analysis of shares is included in Note 43.

A maturity analysis of amounts owed to credit institutions is included in Note 43.

In the year, the remaining £1.0bn of the Bank of England’s ‘Term Funding Scheme with additional incentives for

SMEs’ (TFSME) was repaid (2024: £0.35bn repaid). The Society no longer has any outstanding TFSME payable

(2024: £1.0bn).

A maturity analysis of amounts owed to other customers is included in Note 43.

Amounts owed to other customers by the Group relate primarily to retail deposits accepted through the

Group’s Channel Islands based subsidiary, SIL. At 31 December 2025 the amount of such deposits included

above is £2,368.5m (2024: £2,417.7m).

Group

Society

£m

2025

2024

2025

2024

Trade receivables (Note 45c))

73.6

68.8

1.5

1.9

Prepayments

40.4

33.6

19.7

16.2

Accrued income

27.9

24.7

2.4

0.1

Equity share investments mandatorily held at FVTPL

18.3

16.9

(Note 20e))

Share warrants

21.9

Investment property (Note 24)

1.4

4.5

1.4

4.5

Other

16.1

10.8

1.5

0.2

177.7

181.2

26.5

22.9

Group

Society

£m

2025

2024

2025

2024

Held by individuals

30,167.9

27,943.5

30,167.9

27,943.5

Other shares

301.9

326.8

301.9

326.8

Fair value adjustment for hedged risk

56.5

(1.8)

54.5

(16.2)

30,526.3

28,268.5

30,524.3

28,254.1

Group

Society

£m

2025

2024

2025

2024

Amounts owed to subsidiary undertakings

186.0

201.0

Other

327.2

1,599.6

327.1

1,599.6

327.2

1,599.6

513.1

1,800.6

Group

Society

£m

2025

2024

2025

2024

Amounts owed to subsidiary undertakings

1,118.1

1,212.7

Other

2,719.6

2,751.1

53.8

56.2

2,719.6

2,751.1

1,171.9

1,268.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 213

A maturity analysis of debt securities in issue is included in Note 43.

During 2025 the Society issued covered bonds of £500m in both May and September.

Group debt securities in issue include £3,339.6m (2024: £2,426.5m) of funding secured on certain loans and

advances to customers through the Group’s securitisation vehicle Darrowby No. 6 plc and the special purpose

vehicle Skipton Covered Bonds LLP.

Group

Society

£m

2025

2024

2025

2024

Certificates of deposit

5.1

Covered bonds

2,941.3

1,934.9

2,955.0

1,925.0

Securitisation

398.3

491.6

Fair value adjustment for hedged risk

22.3

3.7

3,361.9

2,435.3

2,955.0

1,930.1

A maturity analysis of lease liabilities is included in Note 43.

For details of the Group’s right-of-use assets, see Note 23. For further details of the Group’s lease expenses in

the year, see Note 7.

Group

Society

£m

2025

2024

2025

2024

1 January

92.1

103.0

8.6

10.3

Additions

40.7

18.1

1.7

0.7

Acquisition of subsidiary undertakings

4.0

Modifications / remeasurements of existing lease

14.7

11.2

Liabilities

Interest charged

4.6

3.1

0.3

Lease payments (including interest)

(43.9)

(42.4)

(2.4)

(2.6)

Disposals

(1.9)

(0.9)

(0.1)

31 December

110.3

92.1

8.2

8.6

Performance & Strategy Governance

Financial Statements

Other Information

Amounts owed to subsidiary undertakings by the Society include £627.1m (2024: £760.7m) in respect of a

deemed loan from the special purpose vehicle Darrowby No. 6 plc which is held at amortised cost, in line with

the accounting policy outlined in Note 1g). The deemed loan is an agreement to pay over the income received

by the Society on the mortgage pool to the SPV and the only credit risk that arises is from the Society; however,

the Society is not required to make up any shortfall (i.e. any bad debts from customers within the mortgage

pool) as per the deemed loan contract, and therefore the credit risk on cash flows owed to Darrowby No. 6 plc

is considered very low.

Skipton Group Annual Report & Accounts 2025 214

Put option obligation

The movement in the fair value of the put option obligation is summarised below:

Group

£m

2025

2024

At 1 January

4.1

3.5

Additions

0.1

Exercise of put options by non-controlling shareholders

(4.2)

Revaluation of market values and changes to future exercise dates

1.0

0.6

At 31 December

1.0

4.1

Group

Society

£m

2025

2024

2025

2024

Trade payables

14.4

11.0

3.4

2.8

Fair value of put option obligation

1.0

4.1

VAT and employment taxes

50.0

39.5

3.9

3.0

Other

43.9

32.0

5.3

5.2

109.3

86.6

12.6

11.0

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 215

The movements in provisions for liabilities during the year were as follows:

Notes

A. The charge / (credit) for the year is recognised within the Income Statement line ‘Impairment and provisions’.

B. The provision for commission clawbacks include an expected future clawback on insurance commissions in the event of early

termination by the customer. Insurance commission income is recognised net of these provisions, and therefore the charge for the

year of £15.5m (2024: £8.8m charge) has been recognised against ‘Fees and commissions receivable’ in the Income Statement.

2025

Provision for

Survey and

Group

the costs of

Commission

valuation

Customer

Other

Total

£m

surplus

clawbacks

claims

compensation

provisions

properties

At 1 January

4.0

17.9

3.7

0.6

5.6

31.8

Acquired on acquisition of

subsidiaries

0.1

0.2

0.3

Disposal of subsidiary

(0.1)

undertakings

Charge for the year

0.3

15.5

0.5

0.1

16.4

Utilised during the year

(0.5)

(14.5)

(0.6)

(0.2)

(15.8)

At 31 December

3.9

18.8

3.8

0.6

5.5

32.6

2024

Provision for

Survey and

Group

the costs of

Commission

valuation

Customer

Other

Total

£m

surplus

clawbacks

claims

compensation

provisions

properties

At 1 January

5.6

17.0

5.2

0.3

1.3

29.4

(Credit) / charge for the year

(0.5)

8.9

(0.8)

0.4

4.5

12.5

Utilised during the year

(1.1)

(8.0)

(0.7)

(0.1)

(0.2)

(10.1)

At 31 December

4.0

17.9

3.7

0.6

5.6

31.8

2025

Society

Provision for the

Commission

Customer

Other

£m

costs of surplus

clawbacks

compensation

provisions

Total

properties

At 1 January

0.5

4.8

5.3

Credit for the year

(0.2)

At 31 December

0.5

4.6

5.1

2024

Society

Provision for the

Commission

Customer

Other

£m

costs of surplus

clawbacks

compensation

provisions

Total

properties

At 1 January

0.1

0.3

0.2

0.6

(Credit) / charge for the year

(0.1)

0.1

0.3

4.6

4.9

Utilised during the year

(0.1)

(0.2)

At 31 December

0.5

4.8

5.3

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 216

Provision for the costs of surplus properties

This provision was booked prior to the introduction of IFRS 16 for properties with non-cancellable leases where

the Group no longer occupies the property. The provision represents the rent to the end of the lease, less any

rental income from subletting the properties. The provision for the costs of surplus properties is expected to

reverse over the remaining life of the leases or period to anticipated date of disposal, if sooner.

Commission clawbacks

The commission clawback provision represents an estimate of the repayment of commission to suppliers as a

result of cancelled policies sold by Connells and the financial advice activities of the Group. These are

estimated based upon anticipated cancellation rates and arise in the normal course of business.

Survey and valuation claims

Provision is made for professional indemnity claims and potential claims that arise during the normal course

of business in relation to surveys and valuations carried out by Connells. The provision is based upon the

expected level of future professional indemnity claims relating to services already provided and the value

provided on each claim is the lower of the professional indemnity insurance excess per claim or the estimated

exposure. To assess the level of future claims, analysis is performed on the number of preliminary

notifications expected to turn into future claims and on historical claim trends to forecast the number of future

claims where a notification is yet to be received. Historical data on claims success frequency and value is also

used to estimate the size of the liability.

The professional indemnity claim provision is stated at the Directors’ best estimate of the eventual liability,

based on the information available at the time. Whilst the level of future claims is uncertain, the Group has

robust processes in place that aim to restrict the number and magnitude of these.

Due to the nature of the professional indemnity claims it is difficult to indicate approximate payment

timescales or claims received in future years. The provision will be utilised as individual claims are settled.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 217

Deferred tax is calculated on temporary differences between the carrying amounts of assets and liabilities for

financial reporting purposes and the amounts used for taxation purposes, using the enacted tax rate expected

to apply in the relevant tax jurisdiction for the period when these differences are expected to reverse, which is

28.0% (2024: 28.0%) for the Society and 25.0% (2024: 25.0%) for most other Group companies. The rate for the

Society is higher than for most other Group companies as the Society’s taxable profits over £100m are subject

to a 3% banking surcharge.

The movement during the year in the overall net deferred tax (liability) / asset was as follows:

Deferred tax assets and liabilities are individually attributable to the following items:

Group

Society

£m

2025

2024

2025

2024

Net deferred tax asset at 1 January

6.3

20.9

11.2

16.7

Income Statement charge (Note 12)

(1.8)

(7.9)

(2.0)

Items taken directly to other comprehensive income

(0.2)

(6.5)

(5.1)

(3.5)

Acquired on acquisition of subsidiaries

(4.1)

Acquired on acquisition of other business assets

(0.3)

(0.2)

Other movements

(0.1)

0.1

Net deferred tax (liability) / asset at 31 December

(0.2)

6.3

6.2

11.2

Deferred tax assets (net of associated deferred tax liabilities

–

see note A)

Group

Society

£m

2025

2024

2025

2024

Fixed asset temporary differences

3.8

(1.6)

(3.0)

Intangible asset temporary differences

(1.9)

(15.7)

Derivatives and loans (note B)

6.0

3.1

4.6

Pension obligations

5.6

3.3

3.5

Provisions

0.2

6.8

2.7

2.5

Corporation tax losses (note C)

2.1

Financial assets held at FVOCI

4.2

2.4

4.1

Cash flow hedges

(6.4)

(3.7)

(0.5)

Cost of hedging reserve

0.6

Gain deferred by rollover relief

(0.7)

Total

0.4

6.3

6.2

11.2

Performance & Strategy Governance

Financial Statements

Other Information

Deferred tax liabilities (net of associated deferred tax assets

–

see note A)

Group

Society

£m

2025

2024

2025

2024

Fixed asset temporary differences

(4.1)

Intangible asset temporary differences

22.8

Derivatives and loans (note B)

(7.3)

Pension obligations

(4.8)

Provisions

(6.9)

Corporation tax losses (note C)

(0.2)

Financial assets held at FVOCI

(2.5)

Cash flow hedges

3.8

Cost of hedging reserve

(0.2)

Total

0.6

Overall net deferred tax (liability) / asset

(0.2)

6.3

6.2

11.2

Skipton Group Annual Report & Accounts 2025 218

Notes

A. Deferred tax assets and liabilities relating to the same taxation authority are offset within the Statement of Financial Position where

there is a legally enforceable right of offset and the intention is to settle tax liabilities and assets on a net basis.

B. The Society amount above is in relation to the adoption of IFRS 9 in 2018; this resulted in an initial adjustment to the deferred tax

asset in the Society of £13.3m which, as permitted by relevant accounting standards, is being released to the Income Statement over

a 10 year period.

C. The deferred tax assets shown above relating to corporation tax losses include £0.2m in respect of certain Connells entities (2024:

£0.2m), together with £2.1m in respect of certain Jade entities (2024: £1.9m). These deferred tax amounts were assessed by

reference to the Group’s five-year corporate planning period. For Jade, management also considered the recent trading history of

relevant Jade entities.

D. As noted above, deferred tax assets and liabilities are offset within each jurisdiction where these criteria are met. The totals in the

final two tables on page 217 therefore represent the net deferred tax position after relevant offsetting on a jurisdictional basis, with

the total deferred tax asset of £0.4m comprising those jurisdictions in a net deferred tax asset position and the total deferred tax

liability of £0.6m comprising those jurisdictions in a net deferred tax liability position.

The deferred tax charge in the Income Statement comprises the following:

Deferred tax has not been recognised in relation to certain losses carried forward at 31 December 2025, which

comprise the following:

• Trading losses of £1.3m for the Group (2024: £1.5m) and £nil for the Society (2024: £nil);

• Capital losses of £65.2m for the Group (2024: £56.7m) and £8.5m for the Society (2024: £nil); and

• Other tax losses of £0.2m for the Group (2024: £0.2m) and £nil for the Society (2024: £nil).

Trading losses relate to certain Jade entities and are based on the Group’s five-year corporate plan as well as

the recent trading history of those entities. Capital losses relate primarily to Countrywide entities; in

determining the amounts to be unrecognised, management considered the likelihood of future capital gains

materialising against which these losses could be offset and recognised.

The majority of deferred tax assets are anticipated to be recoverable after one year. The Group’s plans indicate

that the Group and Society will generate sufficient taxable profits over its five-year planning period to absorb

the corporation tax losses included within deferred tax at the reporting date, together with those other

temporary differences that are expected to reverse during that period.

Group

Society

£m

2025

2024

2025

2024

Fixed asset temporary differences

0.1

3.0

(1.3)

1.2

Intangible asset temporary differences

4.2

(1.8)

Provisions

(0.3)

(0.4)

(0.2)

(0.7)

Derivatives and loans

(1.3)

1.6

1.5

Corporation tax losses

(0.2)

3.9

Tax losses on IFRS 16 transitional adjustments

1.7

Other

(0.7)

(0.1)

Total

1.8

7.9

2.0

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 219

On 31 January 2025, as part of a strategy to de-risk the Society’s exposure to its defined benefit obligation, the

Skipton Building Society (2015) Group Pension Scheme was subject to an insurer buy-in (further detailed in

Note 36).

In connection with the buy-in, the Society made a loan to the Scheme – originally advanced in January 2025 in

Sterling but subsequently converted into a USD-denominated loan on 24 September 2025. In addition, the

maturity date of the loan was extended from 31 December 2027 to 30 November 2028.

The purchase of the insurance policy used the assets of the Scheme, except for £14.6m of illiquid assets held

by the Scheme (as of 31 January 2025) which were not acquired by the insurer and thus remain in the Scheme.

A loan of £14.6m was advanced by the Society to the Scheme in January 2025, to be repaid using the

proceeds from the illiquid assets as they mature.

Due however to the illiquid assets being entirely denominated in USD (through hedging arrangements within

the fund itself), the GBP loan was repaid and replaced with one denominated in USD on 24 September 2025, to

eliminate any foreign exchange risk arising from the USD-denominated proceeds from the fund. The Society

sourced the USD required to fund this lending through utilising the existing repo agreement with SIL.

At 31 December 2025 the fair value of the loan was £10.9m, which includes a £2.2m fair value loss recognised

within the Income Statement line ‘Fair value (losses)/gains on financial instruments mandatorily held at

FVTPL’. The valuation reflects management’s estimate of the expected asset realisation profile, discounted

using a rate that reflects credit and liquidity risk. The loan is categorised as a Level 3 instrument within the

IFRS 13

fair value hierarchy, due to the use of unobservable inputs.

a) Defined contribution schemes

The amount charged to the Income Statement in respect to the Group’s defined contribution arrangements is

the amount payable in the year. The total pension cost charged to the Income Statement amounted to £32.8m

for the Group (2024: £28.6m) and £9.3m for the Society (2024: £8.2m).

b) Defined benefit schemes

During 2025 the Group sponsored the schemes set out below:

• The Skipton Building Society (2015) Group Pension Scheme (the ‘Skipton (2015) Scheme’) – a funded

defined benefit arrangement;

• The Connells (2014) Group Pension Scheme (the ‘Connells (2014) Scheme’) – a funded defined benefit

arrangement; and

• The Countrywide plc Pension Scheme (the ‘Countrywide Scheme’) – a funded defined benefit arrangement.

The schemes are separate trustee administered funds holding the pension scheme assets to meet long-term

liabilities for current and past employees as follows:

• Skipton (2015) Scheme – 719 members

• Connells (2014) Scheme – 908 members

• Countrywide Scheme – 176 members

Skipton Pension Trustees Limited, a company that acts as the sole Trustee, is appointed to manage the

Skipton (2015) Scheme and the Connells (2014) Scheme.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 220

For all three schemes the level of retirement benefit is based on salary earned in each year of employment

prior to leaving active service as follows:

Skipton (2015) Scheme

There are two separate benefits sections within the scheme, as a result of the merger of two former pension

schemes into the Skipton (2015) Scheme, where members’ benefits in the former pension schemes were

preserved. The benefits are based on the following:

• Old Skipton Scheme – the highest annual average salary earned over three consecutive years in the last 10

years of employment prior to leaving active service or, for members previously employed by Skipton

Financial Services, the annual average salary earned in the last five years of employment prior to leaving

active service; and

• Scarborough Scheme – the highest (prior to 2003) or the average (post 2003) annual salary earned in the

last three years of employment prior to leaving active service.

Connells (2014) Scheme

There are three separate benefit sections within the scheme, as the Connells (2014) Scheme is a result of three

previous schemes merged into one scheme in 2014. The benefits are based on the following:

• Scheme 1 – the highest annual average salary earned over three consecutive years in the last 10 years of

employment prior to leaving active service;

• Scheme 2 – the annual average salary earned in the last three years of employment prior to leaving active

service; and

• Scheme 3 – the greater of the annual average salary earned in the last three years and the highest annual

average salary earned over three consecutive years in the last 10 years of employment prior to leaving

active service.

Countrywide Scheme

The benefits are based on the following:

• the highest annual average salary earned over three consecutive years in the last 10 years of employment

prior to leaving active service or, if higher, the highest annual salary in the last five years of employment

prior to leaving active service.

The defined benefit schemes are all closed to new members and to the future accrual of benefits, with the

exception of the Scarborough section of the Skipton (2015) Scheme where active members retain a link to

salary (capped at 5% per annum). The Scarborough Scheme closed to the future accrual of benefits, subject to

the exception noted above, on 1 May 2007, the Connells (2014) Scheme on 1 January 2009, the Skipton (2015)

Scheme on 31 December 2009 and the Countrywide Scheme on 31 December 2003. Following the closure of

all the schemes, all active members left pensionable service and became entitled to deferred benefits.

The schemes are subject to the funding legislation outlined in the Pensions Act 2004 which came into force on

30 December 2005. This, together with documents issued by the Pensions Regulator and guidance notes

adopted by the Financial Reporting Council, sets out the framework for funding defined benefit occupational

pension schemes in the UK.

The Trustee of each scheme is required to act in the best interests of the scheme’s beneficiaries. The

appointment of the Trustee is determined by the scheme’s trust documentation.

BlackRock act as fiduciary manager to set and deliver the investment strategy on behalf of the Trustee of the

Skipton (2015) Scheme and the Connells (2014) Scheme.

Full actuarial valuations were carried out as at the dates set out below in accordance with the scheme funding

requirements of the Pensions Act 2004 and the funding of each scheme is agreed between the Group and the

Trustee in line with those requirements. This legislation requires the deficit to be calculated using prudent, as

opposed to best estimate, actuarial assumptions.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 221

The most recent complete actuarial valuations for each of the schemes showed the following:

The actuarial valuations of the above schemes each showed a deficit. At the time, the Group agreed with the

Trustees of each scheme that it will aim to eliminate the deficit over a specified period by the payment of

annual contributions as agreed by the Group and the Trustees. As part of the 31 December 2022 Skipton

(2015) Scheme actuarial valuation, the Group agreed a one-off payment of £22,999,000 to reduce the expected

ongoing contributions into this scheme to £nil; therefore, the current best estimate of contributions to be paid

by the Group to the schemes for the year commencing 1 January 2026 is £3.0m (see page 227 for further

details).

On 31 January 2025, as part of a strategy to de-risk the Society’s exposure to its defined benefit obligation, the

Skipton Building Society (2015) Group Pension Scheme was subject to an insurer buy-in. The majority of the

Scheme’s defined benefit obligations to members are now insured under a policy held by the Scheme,

significantly reducing exposure to investment and longevity risk; certain obligations are not insured, for

example any future impact of the application of Guaranteed Minimum Pension (GMP) equalisation

requirements to historical transfers out of pension schemes. The insurance policy qualifies as a plan asset

under IAS 19 and is measured at fair value.

During the year, the Countrywide defined benefit pension scheme was subject to a full insurer buy-out. As a

result, all major obligations and associated assets were transferred to an insurance provider. There is only a

small portion of assets and liabilities remaining in the balance which is expected to be settled in 2026. No

settlement gain/loss has been recognised in the Income Statement following the buyout.

In light of the court appeal decision in July 2024, which upheld the High Court ruling in the Virgin Media v NTL

case, management acknowledges its obligations under Section 37 of the Pension Schemes Act 1993.

Management welcomes the decision of the Department for Work and Pensions (DWP) made in its recent draft

legislation which permits this issue to be resolved by the Actuary applying retrospective certification. This

legislation is set to become law in the middle of 2026.

Management has continued to liaise with the Scheme lawyers and Independent Trustee throughout the period

of uncertainty. Having reflected on the information received, management is awaiting the certainty of this

wording and will work with the Scheme Actuary to ensure that any retrospective assessments can be provided

to conclude this issue.

For the Countrywide scheme, documentation for the period 1997-2002 is unavailable. Management considers

the risk of non-compliance during the period to be low, based on reasonable assumptions about historical

benefit structures. For the Skipton Scheme, three Section 37 certificates have not been located. Legal advice

has been obtained, and management similarly considers the risk of material non-compliance to be low.

Based on initial assessments, management does not anticipate a material impact on the Group’s financial

position, and therefore, no adjustments have been made to the schemes’ valuations at this time. Management

is not aware of any immediate implications from this ruling that would affect the Group’s schemes and has a

reasonable expectation that Section 37 requirements have been met accordingly. Due to the complexity of

implementing the relevant legislation, it is currently not possible to determine the exact impact on the financial

statements and pension obligations.

Valuation

Deficit

Recovery

Annual

Scheme

date

£m

period

contribution 2026

(estimate) £m

Skipton (2015)

31 December 2022

(24.5)

Connells (2014)

30 April 2023

(18.4)

6 years and 9

3.0

months

Countrywide

4 April 2021

(4.5)

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 222

The pension obligations are valued separately for accounting and funding purposes. For the purposes of IAS

Employee Benefits

, the actuarial valuations, which were carried out by a qualified independent actuary, have

been updated on an approximate basis to 31 December 2025. The actuarial valuation amounts shown in the

table above will always be different to the IAS 19 accounting amounts as, in addition to the different dates of

each valuation, accounting standards require best estimate assumptions to be used whereas the funding

valuation uses more prudent assumptions. There have been no material changes in the valuation methodology

adopted for this year's disclosures compared to the previous year's disclosures.

Scheme expenses and levies to the Pension Protection Fund are payable by the Group as and when they are

due and are accounted for within the Group’s administrative expenses.

The aggregate costs of the three schemes are recognised in accordance with IAS 19.

The main financial assumptions used in the actuarial valuation are as follows:

Group & Society

2025

2024

Retail Price Inflation (RPI)

3.00

3.20

Consumer Price Inflation (CPI)

2.55

2.75

Discount rate

5.60

5.55

Increases to pension payment:

in line with RPI, subject to a max of 5% pa

2.85

3.03

in line with RPI, subject to a min of 3% and max of 5% pa

3.53

3.69

in line with RPI, subject to a max of 2.5% pa

2.02

2.00

in line with CPI, subject to a max of 5% pa

2.48

2.69

in line with CPI, subject to a min of 3% and max of 5% pa

3.38

3.52

in line with CPI, subject to a max of 3% pa

2.07

2.13

in line with CPI, subject to a max of 2.5% pa

1.85

1.87

Fixed 4.00% pa

4.00

Rate of increase for deferred pensions (in line with CPI, subject to a max of 5% pa)

2.55

2.75

Allowance for commutation of pension for cash at retirement

82% of post A

day maximum

All the schemes’ deferred pensions accrue inflationary increases based on CPI rather than RPI, unless the

scheme rules specifically refer to RPI.

The most significant non-financial assumption is the assumed rate of longevity. For the year ended 31

December 2025, these have been based on mortality rates that are 96% - 98% (male) and 96%-97% (female) of

the standard S3PMA and S3PFA_M tables respectively, with an allowance for projected improvements in

mortality in line with CMI_2023 improvements, with a 1.25% per annum long-term rate of convergence. The

tables adopted imply the following life expectancy:

Group & Society

2025

2024

Male retiring in the current year

21.5 – 21.7

21.6 - 21.7

Female retiring in the current year

23.6 – 23.7

23.6

Male retiring in 15 years' time

22.4 – 22.5

22.4 - 22.6

Female retiring in 15 years' time

24.7 – 24.8

24.6 - 24.7

When determining the financial and non-financial assumptions, consideration was given to the potential

impact of climate related risks. Based on the evidence available at this time, it was concluded that no explicit

allowances were required in this respect.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 223

As at 31 December 2025 the Statement of Financial Position includes amounts relating to defined benefit

schemes as set out below:

Group

Society

£m

2025

2024

2025

2024

Within assets

Retirement benefit surplus

4.8

Within liabilities

Retirement benefit obligations

(7.4)

(8.6)

(1.2)

Retirement benefit surplus/obligations

For the Group and Society, amounts presented within ‘Retirement benefit surplus’ as at 31 December 2024

relate to the Skipton (2015) Scheme. For the Group, the amounts presented within ‘Retirement benefit

obligations’ as at 31 December 2024 include the Connells (2014) Scheme and the Countrywide scheme.

The table below shows the net pension (liability) / asset recognised within the Statement of Financial Position:

The present value of scheme liabilities is measured by discounting the best estimate of future cash flows to be

paid out by the schemes using the projected unit credit method. The value calculated in this way is reflected in

the net (liability) / asset within the Statement of Financial Position as shown above.

The projected unit credit method is a valuation method in which each potential cash flow from the schemes

(for example, annual pension payment or potential lump sum payment on death) is multiplied by an assumed

probability of payment and discounted between the valuation date and the time the payment is needed.

All remeasurements are recognised in the year in which they occur in the Statement of Comprehensive Income.

As all remeasurements and assets are recognised, the deficits shown above are those recognised within the

Statement of Financial Position.

2025

2024

Group

Retirement

£m

Benefit

Total

Benefit

Total

Obligation

Surplus

Obligation

Fair value of plan assets

158.5

91.9

103.5

195.4

Fair value of defined benefit obligation

(165.9)

(87.1)

(112.1)

(199.2)

Net pensions (liability) / asset

(7.4)

4.8

(8.6)

(3.8)

2025

2024

Society

Retirement

£m

Benefit

Total

Benefit Surplus

Total

Obligation

Fair value of plan assets

85.2

91.9

Fair value of defined benefit obligation

(86.4)

(87.1)

Net pensions (liability) / asset

(1.2)

4.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 224

The actual return on the scheme assets, including interest income on plan assets, over the year ended 31

December 2025 was as follows:

• Group £(8.2)m (2024: £(11.5)m)

• Society £(12.4)m (2024: £(6.2)m)

The table below sets out the fair value of the scheme assets by each major category:

Group

Society

£m

2025

2024

2025

2024

At 1 January

195.4

191.1

91.9

79.2

Interest income

10.8

10.0

5.5

4.8

Return on plan assets (excluding amounts included

(19.0)

(21.5)

(17.9)

(11.0)

in interest income)

Contributions by employer

14.4

26.0

10.7

23.0

Benefits paid

(11.6)

(10.2)

(5.0)

(4.1)

Settlements paid

(31.5)

At 31 December

158.5

195.4

85.2

91.9

Group

Society

£m

2025

2024

2025

2024

Diversified growth fund (note A)

24.0

28.2

12.0

14.4

Insured pensioners (annuities) (note B)

85.6

31.3

85.6

Liability driven investments (note C)

52.1

125.0

76.2

Equities

5.5

5.4

Cash (note D)

(10.9)

2.9

(12.4)

1.3

Corporate bonds

1.9

1.3

Government bonds

0.3

1.3

Total

158.5

195.4

85.2

91.9

The table below sets out a reconciliation of the present value of the defined benefit obligation for the year:

Group

Society

£m

2025

2024

2025

2024

At 1 January

199.2

217.3

87.1

95.1

Interest expense

10.3

9.9

4.7

4.4

Remeasurement losses / (gains) arising from changes in:

Scheme experience

0.3

0.2

Demographic assumptions

1.7

(0.5)

0.8

(0.2)

Financial assumptions

(2.5)

(17.6)

(1.4)

(8.1)

Actual benefit payments

(11.6)

(10.2)

(5.0)

(4.1)

Settlement payments

(31.5)

At 31 December

165.9

199.2

86.4

87.1

The £31.5m settlement payment relates to the Countrywide scheme buy-out (see page 229 for further

details).

The estimated average duration of the defined benefit obligation as at 31 December 2025 is 12 years (2024:

13 years).

The table below sets out the reconciliation of the fair value of scheme assets for the year:

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 225

It is the policy of the Trustee and the Group to review the investment strategy at the time of each funding

valuation. The Trustee’s investment objectives and the processes undertaken to measure and manage the

risks inherent in the scheme investment strategy are documented in the scheme’s Statement of Investment

Principles.

The schemes are exposed to the following investment risks:

• Credit risk: this is the risk that one party to a financial instrument will cause a financial loss for the other

party by failing to discharge an obligation.

• Market risk: this comprises currency risk, interest rate risk and other price risk.

• Currency risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate

because of changes in foreign exchange rates.

• Interest rate risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate

because of changes in market interest rates.

• Longevity risk: The liabilities are very sensitive to unexpected changes in future mortality. If longevity

increases by more than assumed, then the liabilities will increase at future calculations.

• Inflation risk: Elements of the pensions in payment under the Scheme increase at an inflation-linked rate,

albeit there are caps applying to the indexation. In addition, the rules of the Scheme require that some

pensions are increased in the period up until payment commences in line with increases in inflation, again

up to a certain cap.

• Other price risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate

because of changes in market prices (other than those arising from interest rate risk or currency risk),

whether those changes are caused by factors specific to the individual financial instrument or its issuer, or

factors affecting all similar financial instruments traded in the market.

The main investment objective for the Trustee of the schemes is to maintain a portfolio of suitable assets to

meet, together with future contributions, the benefits payable under the Trust Deed and Rules as they fall due.

Each scheme has exposure to investment risks because of the investments it makes to implement its

investment strategy, as detailed in the Statement of Investment Principles.

The Trustee manages investment risks, including credit risk and market risk, within agreed risk limits which are

set taking into account the scheme’s strategic investment objectives. These investment objectives and risk

limits are implemented through the investment management agreements in place with the scheme’s

investment managers and are monitored by the Trustee by regular reviews of the investment portfolios.

Notes

A. Diversified growth funds (DGF) target equity-like returns with lower volatility which is achieved through dynamic diversification.

Funds are invested in a diversified range of assets, including equities, bonds, property and cash and the allocation between these

asset classes is actively managed by a fund manager reflecting the changing correlations and risk characteristics.

B. An insured pensioner annuity is a type of annuity that is purchased by the scheme to provide a guaranteed income to its members.

The insurer takes on the risk of paying the income, rather than the pension scheme.

C. Liability driven investments (LDI) are investments in assets which are expected to behave in a similar manner to liabilities and

therefore aim to provide a better match against liability movements than conventional bonds or gilts.

D. The negative balance of cash is due to inclusion of the loan to defined benefit pension scheme held at FVTPL (see Note 35), in line

with the provisions of IAS 19

Employee Benefits

Each of the schemes invests in an LDI fund which aims to provide protection against interest rate and inflation

movements. The Trustee has an approach to asset-liability matching where the level of coverage of interest

rate sensitivity and inflation sensitivity are set based on a series of funding ratio triggers. This applies to both

the Skipton (2015) Scheme and the Connells (2014) Scheme.

None of the fair values of the assets shown above include any of the Group’s own financial instruments or any

property occupied by, or other assets used by, the Group. The schemes’ assets that are invested in exchange

traded funds have a quoted market price. The remainder use either the price of a recent transaction for an

identical asset (where quoted prices for the asset are unavailable) or valuation techniques using non-

observable data.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 226

Interest rate risk

The schemes’ assets are subject to indirect interest rate risk through their LDI pooled investment vehicles, as

well as DGF pooled investment vehicles due to the bond holdings within these funds.

The schemes’ liabilities are exposed to a significant level of interest rate movement and for this reason it is

desirable for the assets to also be exposed to interest rate risk. The schemes manage interest rate risk by

considering the net risk when taking account of the liabilities valued.

Other price risk

Other price risk arises principally in relation to the schemes’ return seeking portfolio which includes DGFs held

in pooled investment vehicles, as well as the LDI pooled investment vehicles due to the inflation sensitive

elements of the fund. The scheme manages this exposure to other price risk by constructing a diverse

portfolio of investments across various markets.

In addition to the above, the Countrywide scheme has mitigated risks associated with longevity risk, inflation

risk and interest rate risk by securing a proportion of the Scheme’s benefits for members with insurance

companies.

The table below sets out the amounts which have been recognised within the Income Statement. The service

costs are recognised within ‘Administrative expenses’, whilst the net interest expense is recognised within

‘Other operating income’.

Group

Society

£m

2025

2024

2025

2024

Net interest expense

(0.5)

(0.1)

(0.8)

(0.4)

Total recognised in Income Statement

(0.5)

(0.1)

(0.8)

(0.4)

Credit risk

The schemes invest in pooled investment vehicles and are therefore directly exposed to credit risk in relation

to the pooled investment vehicles and are indirectly exposed to credit risks arising on the financial instruments

held by the vehicles.

The schemes’ holdings in pooled investment vehicles are unrated. Direct credit risk arising from pooled

investment vehicles is mitigated by the underlying assets of the pooled arrangements being ring-fenced from

the pooled manager, the regulatory environments in which the pooled managers operate and diversification of

investments amongst a number of pooled arrangements. The investment manager carries out its own due

diligence checks before a new pooled fund is invested in, and on an ongoing basis monitors any changes to

the regulatory and operating environment of the underlying pooled investment managers.

Indirect credit risk arises in relation to underlying investments held in the LDI pooled investment vehicles, as

well as DGF pooled investment vehicles due to the bond holdings within these funds.

The LDI funds use robust collateralisation management procedures so as to mitigate the impact of credit risk.

Market risk

Currency risk

The schemes do not take explicit unhedged positions in overseas investments through their investment

strategy, either directly or indirectly via pooled investment vehicles.

The DGF managers’ default position is that any investment in overseas assets is hedged back to Sterling in

order to reduce currency risk. The DGF managers may from time to time take unhedged overseas investment

positions in pursuit of growth opportunities or to reduce overall fund risk. Overall, however, their neutral

position is considered to be 100% Sterling.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 227

The table below sets out the Group’s estimate of the aggregate contributions expected to be paid into the

schemes during the year ending 31 December 2026, based on the most recent actuarial valuations:

In line with UK pensions legislation, a formal actuarial valuation (‘triennial valuation’) of the assets and

liabilities of each scheme is carried out at least every three years by an independent actuary. The results of the

most recent triennial valuations are set out on page 221. Following completion of the most recent actuarial

valuations carried out, a new schedule of deficit contributions payable by the Group was agreed with the

Trustees. The Group continues to make contributions in line with this schedule.

Group

Society

£m

2026

Estimated employer contributions

Ongoing

3.0

Estimated total contributions

3.0

The table below sets out the remeasurements of retirement benefit obligations which have been recognised

within the Statement of Comprehensive Income:

Group

Society

£m

2025

2024

2025

2024

Remeasurements of retirement benefit obligations:

Actuarial (losses) / gains arising from:

Experience adjustments

(0.3)

(0.2)

Demographic assumptions

(1.7)

0.5

(0.8)

0.2

Financial assumptions

2.6

17.6

1.4

8.1

Return on plan assets (excluding amounts included in net

(19.0)

(21.5)

(17.9)

(11.0)

interest expense)

Total amount recognised in Other Comprehensive Income

(18.4)

(3.7)

(17.5)

(2.7)

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 228

The fixed rate reset notes are denominated in Sterling. Coupons are paid on a fixed basis semi-annually.

The subordinated liabilities listed above were issued under the Society’s £2.0bn Euro Medium Term Note

Programme. The £350m Senior non-preferred (SNP) notes due 2026 were called and redeemed at the optional

redemption date of 2 October 2025. The £350m Senior non-preferred (SNP) notes due 2029 have a maturity

date of 25 April 2029 and an optional redemption date of 25 April 2028.

The optional redemptions, at 100% of the principal amount plus accrued and unpaid interest up to (but

excluding) the date of redemption, are subject to certain conditions.

The notes are junior in right of payment to all Senior Claims, pari passu with all other Senior Non-Preferred

Claims, and in priority to all Subordinated Claims.

Amounts shown in the above table represent the nominal value plus accrued interest, except for ‘Unamortised

discount on issue’ which is the difference between face values and current book values.

Senior non-preferred notes contribute to meeting the Society’s MREL requirements.

Group & Society

£m

2025

2024

Fixed rate reset notes:

Senior non-preferred (SNP) notes due 2026

351.7

Senior non-preferred (SNP) notes due 2029

354.1

705.8

Unamortised discount on issue:

Senior non-preferred (SNP) notes due 2026

(0.2)

Senior non-preferred (SNP) notes due 2029

(1.2)

(1.4)

(1.2)

(1.6)

Fair value adjustment for hedged risk

3.1

(14.0)

356.0

690.2

In December 2025, the Society undertook a liability management exercise to buy back the 12.875% legacy Tier

2 eligible Permanent Interest-Bearing Shares (PIBS). The decision to redeem the PIBS resulted in a one-off

charge of £27.9m recognised in the Income Statement line ‘Charge on buy-back of Permanent Interest-Bearing

Shares’, but will save £3.2m in interest payments per year into perpetuity.

All remaining PIBS are unsecured and rank pari passu with each other. They are deferred shares of the Society

and rank behind the claims against the Society of all subordinated note holders, depositors, payables and

investing members of the Society. These shares are measured at amortised cost.

Group & Society

£m

2025

2024

8.500% Sterling Permanent Interest

-Bearing Shares

15.2

12.875% Sterling Permanent Interest

-Bearing Shares

26.4

15.2

41.6

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 229

a) Cash flows from operating activities

i) Impairment charge / (credits) on financial instruments

For the purposes of the Statements of Cash Flows, amounts presented within the line ‘Impairment charge /

(credits) on financial instruments’ include the following:

ii) Fair value losses / (gains) on financial instruments held at FVTPL

For the purposes of the Statements of Cash Flows, amounts presented within the line ‘Fair value losses /

(gains) on financial instruments held at FVTPL’ include the following:

Group

Society

£m

2025

2024

2025

2024

Fair value gains on hedging instruments and hedged items

(0.9)

(2.0)

(7.0)

(6.9)

Fair value gains on derivatives associated with the equity release

(8.1)

(21.9)

(8.1)

(21.9)

portfolio

Fair value losses on equity release portfolio (Note 18)

14.5

12.6

14.5

12.6

Fair value gains on share warrants

(5.6)

(5.9)

Fair value losses on put options held by minority shareholders

0.2

0.3

Fair value gains on equity share investments at FVTPL (Note 20e))

(0.4)

(1.1)

Fair value (gains) / losses on debt securities at FVTPL

(3.3)

4.0

Fair value losses on loan to defined benefit pension scheme

2.2

1.9

(18.0)

(1.7)

(12.2)

Group

Society

£m

2025

2024

2025

2024

Impairment charge / (credit) on loans and advances to customers

10.1

(17.1)

6.0

(17.0)

(net of recoveries) (Note 17)

Loans and advances recovered

0.4

0.5

(3.8)

0.4

Impairment credit on liquid assets

(0.1)

Impairment charge on trade receivables (Note 45c))

1.3

0.8

11.7

(15.9)

2.1

(16.7)

iii) Other non-cash movements

For the purposes of the Statements of Cash Flows, amounts presented within the line ‘Other non-cash

movements’ include the following:

Group

Society

£m

2025

2024

2025

2024

(Profit) / loss on disposal of treasury assets

(0.3)

1.8

(0.3)

1.8

Realised losses on equity release portfolio (Note 18)

1.3

1.8

1.3

1.8

Income Statement credit for fair value of subsidiary management

(4.2)

incentive scheme liability (Note 7)

Share of profits from joint ventures

(2.0)

(1.4)

Profit on disposal of subsidiary undertakings

(10.8)

Other

3.9

(3.0)

(17.3)

(6.3)

(7.9)

(5.0)

(16.3)

(2.7)

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 230

b) Cash flows from investing activities

i) Other investing activities

For the purposes of the Statements of Cash Flows, amounts presented within the line ‘Other investing

activities’ include the following:

c) Cash flows from financing activities

For the purposes of the Statements of Cash Flows, put option obligations, the subsidiary management

incentive scheme, lease liabilities, subordinated liabilities and subscribed capital are classified as liabilities

arising from financing activities. The tables below provide a reconciliation of movements in liabilities arising

from financing activities:

Group

Society

£m

2025

2024

2025

2024

Purchase of property, plant and equipment and investment property

(14.0)

(22.0)

(6.3)

(10.5)

(Notes 22, 24)

Purchase of intangible assets

(33.8)

(14.9)

(4.1)

Proceeds from disposal of property, plant and equipment,

investment property and intangible assets

2.0

1.9

0.1

Dividends received from joint ventures

0.5

Investment in equity share investments (Note 20e))

(1.0)

(5.6)

Purchase of other business units

(1.7)

(1.2)

Proceeds on disposal of subsidiary undertakings in the year, net of

cash disposed

9.3

Proceeds from disposal of equity share investments

0.3

Loan advanced to defined benefit pension scheme

(14.6)

Repayment of loan to defined benefit pension scheme

1.7

(52.1)

(41.0)

(23.2)

(14.6)

2025

Group

Put option

Lease liabilities

Subordinated

Subscribed

Total

£m

obligation

liabilities

capital

At 1 January 2025

4.1

92.1

690.2

41.6

828.0

Cash flow items:

Lease payments (excluding

(39.3)

interest)

Interest paid

(4.6)

(29.1)

(5.7)

(39.4)

Exercise of put options by non-

controlling shareholders

(4.2)

Redemption of subordinated

(350.0)

liabilities

Buy-back of Permanent Interest-

Bearing Shares (PIBS)

(52.9)

Non

-cash flow items:

Put option additions

0.1

Changes in fair values

1.0

17.1

18.1

Interest expense

4.6

27.8

4.3

36.7

Lease additions

44.7

Lease disposals

(1.9)

Lease modifications /

14.7

remeasurements

Charge on buy-back of PIBS

27.9

At 31 December 2025

1.0

110.3

356.0

15.2

482.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 231

2024

Liability of

Group

Put option

subsidiary

Lease

Subordinated

Subscribed

£m

obligation

management

liabilities

capital

Total

incentive

scheme

At 1 January 2024

3.5

4.2

103.0

685.3

41.6

837.6

Cash flow items:

Lease payments (excluding

(39.3)

interest)

Interest paid

(3.1)

(29.0)

(4.5)

(36.6)

Non

-cash flow items:

Changes in fair values

0.6

0.3

4.3

5.2

Interest expense

3.1

29.6

4.5

37.2

Lease additions

18.1

Lease disposals

(0.9)

Lease modifications /

11.2

remeasurements

Release of liability

(4.5)

At 31 December 2024

4.1

92.1

690.2

41.6

828.0

2025

Society

Lease

Subordinated

Subscribed

Total

£m

liabilities

capital

At 1 January 2025

8.6

690.2

41.6

740.4

Cash flow items:

Lease payments (excluding interest)

(2.1)

Interest paid

(0.3)

(29.1)

(5.7)

(35.1)

Redemption of subordinated liabilities

(350.0)

Buy-back of Permanent Interest-Bearing Shares (PIBS)

(52.9)

Non

-cash flow items:

Changes in fair values

17.1

Interest expense

0.3

27.8

4.3

32.4

Lease additions

1.7

Charge on buy-back of PIBS

27.9

At 31 December 2025

8.2

356.0

15.2

379.4

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 232

2024

Society

Lease

Subordinated

Subscribed

Total

£m

liabilities

capital

1 January 2024

10.3

685.3

41.6

737.2

Cash flow items:

Lease payments (excluding interest)

(2.4)

Interest paid

(0.3)

(29.0)

(4.5)

(33.8)

Non

-cash flow items:

Changes in fair values

4.3

Interest expense

0.3

29.6

4.5

34.4

Lease additions

0.7

Lease disposals

(0.1)

Other

0.1

31 December 2024

8.6

690.2

41.6

740.4

The Society has confirmed it will provide continuing support to its subsidiary undertakings that have net

liabilities or which rely on it for ongoing funding.

SIL continues to undertake a review exercise following feedback from the Guernsey Financial Services

Commission (GFSC) in 2023 as part of the latter’s PRISM (Probability Risk and Impact SysteM) approach to

supervision. As at 31 December 2025, SIL has assessed that it is probable that further costs may be incurred in

relation to this matter. However, at this stage, it is not possible to make a reliable estimate of the amount or

timing of any cost. Accordingly, no provision has been recognised in the financial statements.

2025

2024

Group

Before-tax

Tax (expense)

Net-of-tax

Before-tax

Tax benefit /

Net-of-tax

£m

amount

/ benefit

amount

(expense)

amount

Financial assets held at FVOCI

6.0

(1.7)

4.3

(1.7)

0.6

(1.1)

Cash flow hedges

(9.4)

2.6

(6.8)

16.3

(4.6)

11.7

Cost of hedging reserve

1.4

(0.4)

1.0

(1.2)

0.3

(0.9)

Remeasurements of defined

(18.4)

5.1

(13.3)

(3.7)

1.0

(2.7)

benefit obligations

Translation of foreign operations

(0.4)

(1.4)

Other comprehensive income

(20.8)

5.6

(15.2)

8.3

(2.7)

5.6

2025

2024

Society

Before-tax

Tax (expense)

Net-of-tax

Before-tax

Tax benefit /

Net-of-tax

£m

amount

/ benefit

amount

(expense)

amount

Financial assets held at FVOCI

6.0

(1.7)

4.3

(1.8)

0.5

(1.3)

Cash flow hedges

11.5

(3.2)

8.3

10.7

(3.0)

7.7

Cost of hedging reserve

0.1

Remeasurements of defined

(17.5)

4.9

(12.6)

(2.7)

0.8

(1.9)

benefit obligations

Other comprehensive income

0.1

6.2

(1.7)

4.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 233

The Group uses derivative financial instruments (derivatives) to manage the risks arising from its operations.

The Board has authorised the use of derivatives by the Group to reduce the risk of loss arising from changes in

market risks in accordance with Section 9A(4) of the Building Societies Act 1986 and derivatives are used by

the Group for economic hedging purposes only. The Group does not run a trading book.

The principal derivatives used by the Group are interest rate swaps, index swaps and cross currency swaps

that are used to hedge Group exposures arising from fixed rate lending and savings products, funding and

investment activities. The accounting policies for derivatives are described in Note 1f) to the Accounts.

For the purpose of assessing hedge effectiveness, the Group determines the economic relationship between

the hedged item and the hedging instrument by comparing the terms of each item, including reference rate,

notional amount and maturity.

Risk management strategy

The Group has a formal structure for managing risk, including established risk limits, reporting requirements,

mandates and other control procedures. This structure is reviewed regularly by the Asset & Liability Committee

(ALCO).

Interest rate risk

The main market risk faced by the Group is interest rate risk. Interest rate risk is the risk that the fair values of

financial assets or financial liabilities, or future cash flows receivable or payable on financial assets or

financial liabilities, fluctuate as a result of changes in market interest rates.

Interest rate risk predominantly arises on the fixed rate mortgages and savings products offered by the Group.

Further detail on the Group’s exposure to interest rate risk is found in Note 44.

The Group uses the following derivatives to hedge its exposure to interest rate risk:

Fair value hedges of interest rate risk

Portfolio hedging

The Group manages the interest rate risk arising from fixed rate mortgages and savings by entering into swaps

on a frequent basis. The level of exposure from the mortgage portfolio frequently changes due to new loans

being originated, contractual customer repayments and early customer repayments. As a result, the Group

adopts a dynamic hedging strategy to hedge the interest rate risk component within the exposure profile by

entering into new swap agreements each month. The Group uses a portfolio of fair value hedges of interest

rate risk to recognise fair value changes related to changes in interest rate risk on fixed rate mortgages and

savings products, to therefore reduce the profit or loss volatility that would otherwise occur from changes in

the fair value of the interest rate swaps alone.

The hedge relationship is reassessed prospectively each month in order that the hedging ratio is recalibrated

to be close to 100%, thereby reducing hedge ineffectiveness. The hedging ratio is the level of hedged items

designated in the portfolio against hedging instruments, taking into consideration the maturities of the hedge.

Occasionally hedge ineffectiveness can arise, i.e. the derivative fails to hedge the interest rate risk to the extent

that is expected. The Group assesses hedge ineffectiveness on an ongoing basis. Where the Group assesses

that the hedge relationship has changed to such an extent that the existing hedge ratio is no longer suitable,

the hedging relationship would be rebalanced to ensure hedge effectiveness.

The main sources of ineffectiveness in fair value hedges of interest rate risk are:

• Differences between the expected and actual volume of customer prepayments, as the Group hedges to the

expected repayment date taking into account expected prepayments based on past experience;

• Differences in the timing of cash flows from the mortgage loans and the interest rate swaps; and

• Differences in the maturities of the interest rate swap and the mortgage loans.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 234

Micro hedging

Fair value hedge relationships are also designated for hedging the interest rate risk component arising from

the Group’s liquidity portfolio, Medium Term Note (MTN) liabilities and wholesale deposits. For these items, a

hedge is taken out specifically for the individual asset or liability, and therefore critical terms of the hedged

item and hedging instrument match. Where critical terms match, the fair value adjustment on the hedged item

offsets exactly the change in fair value of the hedging instrument.

The Group assesses all of its micro fair value hedges of interest rate risk to have a hedge effectiveness ratio of

100%, as all derivatives hedge an amount of underlying instrument equal to the notional amount.

Hedge ineffectiveness could potentially arise if critical terms do not exactly match, amendments were made to

either the hedged item or the hedging instrument, or if there were significant changes in the credit rating of the

hedged item or hedging instrument’s counterparties; the Group has assessed the likelihood of this to be low.

Cash flow hedges of interest rate risk

The Group also has exposure to interest rate risk arising from its free reserves portfolio, which is composed of

reserves held in excess of required reserves. The Group uses derivatives to hedge this risk component and

accounts for these derivatives as cash flow hedges against variable rate instruments. The aim of cash flow

hedging is to reduce the exposure to variability in cash flows arising from a financial asset or liability. The

variable rate on the hedging instrument, i.e. the swap, offsets the hedged items, which are SONIA-linked

financial assets or liabilities.

Hedge ineffectiveness for cash flow hedges is assessed using the ‘hypothetical derivative’ method and

ineffectiveness has been assessed as £nil (2024: £nil) for the Group’s cash flow hedges.

Hedge ineffectiveness could potentially arise if amendments were made to either the hedged item or the

hedging instrument, or if there were significant changes in the credit rating of the hedged item or hedging

instrument’s counterparties; the Group has assessed the likelihood of this to be low.

Currency risk

Fair value hedges of currency risk

The Group has entered into two (2024: one) cross-currency swap agreements to hedge the foreign currency

risk and interest rate risk components arising from: the Society’s Euro covered bond issuances: and loans to

overseas subsidiaries.

Currency risk on covered bond issuances

Fixed rate Euro-denominated receipts are swapped to floating rate Sterling payments through these

derivatives. The derivative is entered into by the LLP, with the hedged item being the term advance from the

Society to the LLP, which mirrors the bond issued by the Society, effectively hedging the debt issued by the

Society. Foreign currency basis spread is priced into the derivative but is excluded from the hedging

relationship and any gain or loss arising from this is recognised directly in reserves in the cost of hedging

reserve, as permitted by IFRS 9.

Currency risk on loans to overseas subsidiaries

Fixed rate receipts from the subsidiary are denominated in New Zealand dollars, these are swapped to sterling

through this derivative. The derivative is entered into by the Society, with the hedged item being the intragroup

loan to the subsidiary. Foreign currency basis spread is priced into the derivative but is excluded from the

hedging relationship and any gain or loss arising from this is recognised directly in reserves in the cost of

hedging reserve, as permitted by IFRS 9. The society receives 90% of the interest cash flows from the

subsidiary with the remainder reclaimed from NZ Tax Authority due to double taxation treaties with New

Zealand. As a result, only 90% of the cash flows on the hedged item is included in the hedge accounting

relationship, resulting in some ineffectiveness in the income statement.

Equity release portfolio

In addition to the above, the Group holds derivative financial instruments to economically hedge the equity

release portfolio which do not qualify as being in a designated hedging relationship for accounting purposes.

As the derivatives held to hedge the equity release portfolio are not in a hedge accounting relationship, they are

not included in the tables on pages 235 to 239. Further information on the derivatives held to hedge this

portfolio can be found in Note 18.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 235

2025

2024

Group

Up to 3

3 - 12

1 – 5

Over

Up to 3

3 - 12

1 – 5

Over

months

years

5 years

Months

months

years

5 years

Cash flow hedges

Interest rate swaps

Notional (£m)

2,152.0

760.0

2,291.5

571.5

Weighted average fixed

3.6%

3.7%

3.8%

interest rate (%)

Fair value hedges

Interest rate swaps

Notional (£m)

3,376.3

11,414.5

20,293.2

1,087.3

3,988.3

13,699.0

16,872.2

1,538.5

Weighted average fixed

3.9%

3.3%

3.6%

3.1%

4.3%

3.7%

3.2%

interest rate (%)

Cross currency swaps

Notional (£m)

431.9

421.3

Weighted average fixed

3.3%

interest rate (%)

2025

2024

Society

Up to 3

3 - 12

1 – 5

Over

Up to 3

3 - 12

1 – 5

Over

months

years

5 years

months

years

5 years

Cash flow hedges

Interest rate swaps

Notional (£m)

40.2

325.0

2,936.3

776.7

23.0

145.0

3,214.3

571.5

Weighted average fixed

1.9%

2.6%

3.6%

3.7%

3.6%

2.6%

3.6%

3.8%

interest rate (%)

Fair value hedges

Interest rate swaps

Notional (£m)

3,416.8

11,530.8

20,695.2

1,087.3

4,110.7

13,813.2

17,205.5

1,538.5

Weighted average fixed

3.9%

3.3%

3.6%

3.1%

4.2%

3.6%

3.1%

3.2%

interest rate (%)

Cross currency swaps

Notional (£m)

10.7

Weighted average fixed

5.9%

interest rate (%)

Performance & Strategy Governance

Financial Statements

Other Information

Other derivatives not held in an accounting hedge

Certain other derivatives cannot be accounted for in a fair value or cash flow hedge as the economic hedging

relationship does not meet the criteria set out by IFRS 9. These derivatives are held at FVTPL and their change

in fair value is included within the Income Statement line ‘Fair value gains on financial instruments mandatorily

held at FVTPL’.

Hedging instruments

The following tables set out the maturity profile and average price and rate of the hedging instruments used in

the Group’s and Society’s hedge accounting strategies.

Skipton Group Annual Report & Accounts 2025 236

The tables below provide further detail on the Group’s and Society’s fair value hedges used in hedge

accounting relationships:

Notes

A. The Statement of Financial Position lines that include these items are ‘Derivative financial instruments’.

B. The change in fair value during the period that was used as the basis for calculating hedge ineffectiveness and which was

recognised in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’.

C. The amount of hedge ineffectiveness recognised in the Income Statement during the year. The Income Statement line that includes

the hedge ineffectiveness recognised during the period is ‘Fair value (losses) / gains on financial instruments mandatorily held at

FVTPL’.

D. In addition, £1.4m of fair value gains (2024: £1.2m losses) for the Group, and £0.1m of fair value gains (2024: £nil) for the Society,

were recognised directly in the cost of hedging reserve of the Group and Society respectively, due to ineffectiveness arising as a

result of foreign currency basis spread as described in Note 1f).

The tables below provide further detail on the Group’s and Society’s cash flow hedges used in hedge

accounting relationships.

Notes

A. The Statement of Financial Position lines that include these items are ‘Derivative financial instruments’.

B. The change in fair value during the period that was used as the basis for calculating hedge ineffectiveness and is recognised within

the ‘Cash flow hedging reserve: (Losses) / gains taken to equity’ line of the Statement of Comprehensive Income.

There was no hedge ineffectiveness recognised during either 2025 or 2024 in respect of the Group or Society’s

cashflow hedges.

Carrying amount (note A)

Change in fair value

Losses reclassified from

£m

Notional

Assets

Liabilities

(charge) / credit

OCI to Income Statement

(note B)

2025

Group

Interest rate swaps

2,912.0

4.0

(22.1)

(13.5)

(6.0)

2025

Society

Interest rate swaps

4,078.2

10.6

(30.2)

15.7

(6.0)

2024

Group

Interest rate swaps

2,863.0

17.5

(22.1)

52.8

45.9

2024

Society

Interest rate swaps

3,953.8

20.1

(55.4)

47.0

45.9

Performance & Strategy Governance

Financial Statements

Other Information

Carrying amount (note A)

Change in fair value

Hedge ineffectiveness

(charge) / credit

(credit) / charge

£m

Notional

Assets

Liabilities

(note B)

(note C)

2025

Group

Interest rate swaps

36,171.3

296.4

(150.6)

(380.3)

(2.1)

Cross currency

431.9

29.0

19.3

0.1

swaps

2025

Society

Interest rate swaps

36,730.1

298.7

(161.4)

(366.2)

(2.1)

Cross currency

10.7

0.2

swaps

2024

Group

Interest rate swaps

36,068.0

697.4

(171.3)

(124.0)

5.7

Cross currency

421.3

8.3

33.1

(0.8)

swaps

2024

Society

Interest rate swaps

36,667.9

699.0

(195.5)

(105.1)

6.3

Skipton Group Annual Report & Accounts 2025 237

2024

Carrying amount

Amount

Fair value

Change in fair

remaining on

adjustment on

value credit /

items de-

Group

Assets

Liabilities

hedged item

SoFP line

(charge)

designated

£m

(note A)

(note B)

from hedge

relationship

(note C)

Cash flow hedges

Floating rate assets

1,667.3

n/a

note D

n/a

37.6

Floating rate liabilities

1,195.7

n/a

note E

n/a

(10.0)

Fair value hedges

Fixed rate mortgages

21,210.0

(274.6)

note F

76.3

Debt securities

2,206.9

(79.2)

note D

(26.9)

Fixed rate savings

12,445.7

(1.8)

note G

1.5

Covered bonds

418.6

3.7

note E

26.5

Subordinated liabilities

705.8

(14.0)

note H

4.2

Performance & Strategy Governance

Financial Statements

Other Information

Hedged items

The tables below provide further detail on the Group’s and Society’s hedged items:

2025

Carrying amount

Amount

Fair value

remaining on

adjustment on

Change in fair

items de-

Group

Assets

Liabilities

hedged item

SoFP line

value credit

designated

£m

(note A)

(note B)

from hedge

relationship

(note C)

Cash flow hedges

Floating rate assets

670.5

n/a

note D

n/a

32.5

Floating rate liabilities

2,241.5

n/a

note E

n/a

(2.0)

Fair value hedges

Fixed rate mortgages

21,024.8

58.9

note F

333.5

Debt securities

2,049.9

(36.0)

note D

43.2

Fixed rate savings

11,617.6

56.5

note G

58.3

Covered bonds

442.7

22.3

note E

18.6

Due from Group companies

(0.1)

note I

(0.1)

Subordinated liabilities

354.1

3.1

note H

17.1

Skipton Group Annual Report & Accounts 2025 238

Notes

A. Fair value adjustments on hedged items are included within the Statement of Financial Position (SoFP) as adjustments to the relevant

SoFP line; see below notes for details.

B. The change in fair value during the period that is used as the basis for calculating hedge ineffectiveness and is recognised within the

Income Statement line ’Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented within Note 5 line

‘Hedging instruments and hedged items’.

C. The accumulated amount of fair value hedge adjustments remaining (in the cash flow hedging reserve for cash flow hedges) for any

hedged items that have ceased to be adjusted for hedging gains and losses.

D. The SoFP lines that include these items are ‘Debt securities’ and ‘Investments in subsidiary undertakings and joint ventures’.

E. The SoFP line that includes these items is ‘Debt securities in issue’.

F. The SoFP line that includes these items is ‘Loans and advances to customers held at amortised cost’.

G. The SoFP lines that include these items are ‘Shares’ (Group and Society) and ‘Amounts owed to other customers’ (Group only).

H. The SoFP line that includes these items is ‘Subordinated liabilities’.

I. The SoFP line that includes these items is ‘Investments in subsidiary undertakings and joint ventures’.

2024

Carrying amount

Amount

Fair value

Change in fair

remaining on

adjustment on

value credit /

items de-

Society

Assets

Liabilities

hedged item

SoFP line

(charge)

designated

£m

(note A)

(note B)

from hedge

relationship

(note C)

Cash flow hedges

Floating rate assets

1,775.3

n/a

note D

n/a

37.6

Floating rate liabilities

2,178.5

n/a

note E

n/a

(10.1)

Fair value hedges

Fixed rate mortgages

21,325.2

(271.7)

note F

75.7

Debt securities

2,206.9

(79.3)

note D

(26.9)

Fixed rate savings

12,930.5

(16.2)

note G

14.6

Subordinated liabilities

705.8

(14.0)

note H

4.2

Performance & Strategy Governance

Financial Statements

Other Information

2025

Carrying amount

Amount

Fair value

Change in fair

remaining on

adjustment on

value credit /

items de-

Society

Assets

Liabilities

hedged item

SoFP line

(charge)

designated

£m

(note A)

(note B)

from hedge

relationship

(note C)

Cash flow hedges

Floating rate assets

1,597.8

n/a

note D

n/a

32.5

Floating rate liabilities

2,480.4

n/a

note E

n/a

(4.2)

Fair value hedges

Fixed rate mortgages

21,024.8

60.9

note F

332.6

Debt securities

2,049.9

(36.1)

note D

43.2

Fixed rate savings

12,176.4

54.5

note G

70.7

Due from Group companies

10.7

(0.1)

note I

(0.1)

Subordinated liabilities

354.1

3.1

note H

17.1

Skipton Group Annual Report & Accounts 2025 239

2025

2024

Group

Cash flow

Cost of

Cash flow

Cost of

£m

hedging

Total

hedging

Total

reserve

Balance at 1 January

16.6

(1.4)

15.2

4.9

(0.5)

4.4

Change in fair value of derivatives in effective hedging relationships:

Held to hedge interest rate

(6.3)

1.4

(4.9)

6.3

(1.2)

5.1

risk

Net amounts reclassified to profit or loss from derivatives:

Held to hedge interest rate

(3.1)

10.0

risk

Tax on movements in reserves

2.6

(0.4)

2.2

(4.6)

0.3

(4.3)

during the year

Balance at 31 December

9.8

(0.4)

9.4

16.6

(1.4)

15.2

2025

2024

Cash flow

Cost of

Cash flow

Cost of

Society

hedging

Total

hedging

Total

£m

reserve

Balance at 1 January

1.3

(6.4)

Change in fair value of derivatives in effective hedging relationships:

Held to hedge interest rate

16.7

0.1

16.8

0.9

risk

Net amounts reclassified to profit or loss from derivatives:

Held to hedge interest rate

(5.2)

9.8

risk

Tax on movements in reserves

(3.2)

(3.0)

during the year

Balance at 31 December

9.6

0.1

9.7

1.3

Performance & Strategy Governance

Financial Statements

Other Information

Carrying amount

Change in fair value

recognised in OCI:

Amount reclassified from

£m

Notional

Assets

Liabilities

credit / (charge)

OCI to Income Statement

(note A)

2025

Group

Cross currency

431.9

29.0

1.4

swaps

2025

Society

Cross currency

10.7

0.2

0.1

swaps

2024

Group

Cross currency

421.3

8.4

(1.2)

swaps

Note

A. The change in fair value during the period is recognised within the ’Cash flow hedging reserve: (Losses) / gains taken to equity’ line of

the Statement of Comprehensive Income.

Skipton Group Annual Report & Accounts 2025 240

Liquidity risk is the risk that the Group is unable to meet its current and future financial obligations as they fall

due, or is only able to do so at excessive cost. It is an inherent part of the Group’s business as long-term

mortgages are funded mainly by shorter term retail customer balances. Mortgages can have a contractual

maturity date of, for example, 25 years but in practice are frequently repaid early; conversely retail deposits,

nominally repayable on demand or with short notice periods, frequently remain with the Group beyond their

contractual notice. It is this mismatch in the maturity profiles of retail assets and liabilities that creates liquidity

risk.

The Group’s liquidity policy is designed to ensure the maintenance of sufficient liquid assets to cover statutory,

regulatory and operational requirements. This is achieved through maintaining a sufficient level of liquid

assets in realisable form to ensure the Group is able to meet its liabilities as they arise and to absorb potential

cash flow requirements created by the maturity mismatches referred to above or by a liquidity stress scenario.

ALCO manages liquidity under delegated authority, within risk appetite limits established by the Board, and

also monitors the composition of liquidity in line with risk management objectives.

The Group’s liquidity is managed as follows:

• the Board establishes limits over the quantity and quality of the Group’s portfolio of liquid assets. The

portfolio is monitored and managed by the Treasury function and overseen by ALCO under a series of

delegated authorities;

• the Treasury function conducts a series of weekly and monthly stress tests that are designed to ensure that

the Group’s liquidity is sufficient to meet its cash flow needs under any one of a number of adverse

scenarios should they arise. The scenarios include both Group specific and general market events, and

incorporate both severe retail savings outflows and the unavailability of wholesale funding; and

• under the Regulatory liquidity regime, the Group is required to hold highly liquid assets (such as government

and supranational debt securities and cash) to satisfy the Liquidity Coverage Ratio (LCR).

There are two measures that the Group considers key to monitoring its liquidity position:

• LCR – which analyses the amount of high quality liquidity that it is necessary to hold to survive a 30 day

regulatory stress scenario; and

• liquidity stress tests – whereby, as noted above, the Group models how far its liquid asset holdings would

fall under a number of different stress scenarios.

The tables below analyse the carrying value of financial assets and financial liabilities into relevant maturity

groupings based on the remaining maturity period at the reporting date to the contractual maturity. In practice,

customer deposits, i.e. shares, amounts owed to credit institutions and amounts owed to other customers, are

likely to be repaid later than on the earliest date on which repayment can be required.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 241

2025

Group

Repayable

Up to 3

3 - 12

1 - 5

Over 5

£m

on demand

months

years

specified

Total

maturity

Assets

Cash in hand and balances with the

Bank of England

1,360.2

Loans and advances to credit

88.8

264.5

353.3

institutions

Debt securities

809.4

253.6

2,536.5

669.9

4,269.4

Derivative financial

17.3

75.6

179.9

78.0

350.8

instruments

Loans and advances to customers

196.6

27.1

77.4

994.5

32,083.3

33,378.9

held at amortised cost

Loans and advances to

customers held at FVTPL

0.8

Equity release portfolio at FVTPL

6.3

18.6

76.4

161.8

263.1

Equity share investments at FVTPL

18.3

Trade receivables

31.0

42.6

73.6

Total financial assets

1,677.4

902.7

425.2

3,787.3

32,993.0

282.8

40,068.4

Liabilities

13,614.8

2,843.4

8,787.9

5,193.4

86.8

30,526.3

Amounts owed to credit institutions

9.7

167.9

6.4

143.2

327.2

Amounts owed to other customers

820.3

559.9

1,229.5

109.9

2,719.6

Debt securities in issue

0.5

3,361.4

3,361.9

Derivative financial instruments

5.6

27.5

138.6

14.5

186.2

Lease liabilities

7.9

21.9

64.8

15.7

110.3

Trade payables

14.4

Fair value of put option obligation

0.7

0.3

1.0

Subordinated liabilities

356.0

Subscribed capital

15.2

Total financial liabilities

14,444.8

3,599.6

10,073.9

9,224.4

117.0

158.4

37,618.1

Net liquidity gap

(12,767.4)

(2,696.9)

(9,648.7)

(5,437.1)

32,876.0

124.4

2,450.3

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 242

2024 (restated*)

Group

Repayable

Up to 3

3 - 12

1 - 5

Over 5

£m

on demand

months

years

specified

Total

maturity

Assets

Cash in hand and balances with the

Bank of England

1,930.6

Loans and advances to credit

121.5

1.6

1.0

290.5

414.6

institutions

Debt securities

492.9

826.3

2,222.1

808.3

4,349.6

Derivative financial

25.2

99.2

513.0

114.7

752.1

instruments

Loans and advances to customers

188.4

28.9

55.5

942.8

29,385.5

30,601.1

held at amortised cost

Loans and advances to

customers held at FVTPL

0.9

Equity release portfolio at FVTPL

6.6

19.2

70.1

181.3

277.2

Equity share investments at FVTPL

16.9

Trade receivables

30.5

38.3

68.9

Share warrants

21.9

Other assets

0.1

Total financial assets

2,293.8

593.5

1,001.2

3,748.0

30,489.8

307.5

38,433.8

Liabilities

11,415.2

3,715.1

9,162.4

3,889.0

86.8

28,268.5

Amounts owed to credit institutions

19.0

6.1

1,017.2

557.3

1,599.6

Amounts owed to other customers

895.9

715.4

1,018.2

121.6

2,751.1

Debt securities in issue

5.9

2,429.4

2,435.3

Derivative financial instruments

14.3

60.7

115.3

34.8

225.1

Lease liabilities

7.1

19.5

52.2

13.3

92.1

Trade payables

11.0

Fair value of put option obligation

3.8

0.3

4.1

Subordinated liabilities

340.0

350.2

690.2

Subscribed capital

41.6

Total financial liabilities

12,330.1

4,474.9

11,281.8

6,947.8

485.1

598.9

36,118.6

Net liquidity gap

(10,036.3)

(3,881.4)

(10,280.6)

(3,199.8)

30,004.7

(291.4)

2,315.2

* The information shown above for the year ended 31 December 2024 is restated to reflect the appropriate presentation of financial

liabilities, specifically in relation to Debt securities in issue (see Note 1c) for details).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 243

2025

Society

Repayable

Up to 3

3 - 12

1 - 5

Over 5

£m

on demand

months

years

specified

Total

maturity

Assets

Cash in hand and balances with the

Bank of England

1,360.2

Loans and advances to credit

31.2

273.5

304.7

Institutions

Debt securities

593.1

253.6

2,758.8

669.9

4,275.4

Derivative financial

17.4

75.9

159.3

80.5

333.1

Instruments

Loans and advances to customers

3.0

26.8

75.5

988.0

30,028.0

31,121.3

held at amortised cost

Loans and advances to

customers held at FVTPL

0.8

Equity release portfolio at FVTPL

6.3

18.6

76.4

161.8

263.1

Loans to subsidiary undertakings

454.7

Trade receivables

1.5

Total financial assets

1,851.4

643.6

423.6

3,982.5

30,940.2

273.5

38,114.8

Liabilities

13,614.8

2,843.4

8,787.9

5,193.4

84.8

30,524.3

Amounts owed to credit institutions

9.7

353.8

6.4

143.2

513.1

Amounts owed to other customers

508.3

32.4

14.3

616.9

1,171.9

Debt securities in issue

2,955.0

Derivative financial instruments

8.2

34.1

148.2

14.5

205.0

Lease liabilities

0.5

1.4

5.2

1.1

8.2

Trade payables

3.4

Subordinated liabilities

356.0

Subscribed capital

15.2

Total financial liabilities

14,132.8

3,241.7

8,844.1

9,274.7

100.4

158.4

35,752.1

Net liquidity gap

(12,281.4)

(2,598.1)

(8,420.5)

(5,292.2)

30,839.8

115.1

2,362.7

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 244

* The information shown above for the year ended 31 December 2024 is restated to reflect the appropriate presentation of financial

liabilities, specifically in relation to Debt securities in issue (see Note 1c) for details).

With respect to loans and advances to customers presented within the tables above, each outstanding loan

balance is allocated in full to a single maturity grouping according to that loan’s contractual maturity date

(regardless of any scheduled repayments that may be receivable prior to the contractual maturity date). Loans

and advances to customers presented as repayable on demand represent those loans and advances that are

on call and at short notice.

With respect to the equity release portfolio, contractual maturity arises in the event of the borrower’s voluntary

redemption, death or move to long-term care. For the purposes of the tables above, amounts have been

allocated to maturity groupings based on the anticipated redemption profiles applied in the Group’s equity

release portfolio valuation model (see Note 1f) and Note 1v) for further details).

Group debt securities in issue include £398.3m (2024: £491.6m) of funding obtained through the Group’s

securitisation issuances carried out through Darrowby No. 6 plc. The final maturity dates of the securitisation

notes are significantly out into the future however the Group can exercise a call option to repurchase the

outstanding Darrowby No. 6 notes at a date within the next five years. As a result, all such amounts have been

shown within 1 to 5 years in the tables above.

2024 (restated*)

Society

Repayable

Up to 3

3 - 12

1 - 5

Over 5

£m

on demand

months

years

specified

Total

maturity

Assets

Cash in hand and balances with the

Bank of England

1,930.6

Loans and advances to credit

54.0

1.0

342.8

397.8

Institutions

Debt securities

273.9

768.5

2,489.4

808.3

4,340.1

Derivative financial

25.5

99.5

507.7

110.3

743.0

Instruments

Loans and advances to customers

3.2

28.9

53.8

905.6

27,343.4

28,334.9

held at amortised cost

Loans and advances to

customers held at FVTPL

0.9

Equity release portfolio at FVTPL

6.6

19.2

70.1

181.3

277.2

Loans to subsidiary undertakings

403.9

Trade receivables

1.9

Total financial assets

2,394.5

334.9

942.0

3,972.8

28,443.3

342.8

36,430.3

Liabilities

11,415.2

3,715.1

9,162.4

3,889.0

72.4

28,254.1

Amounts owed to credit institutions

19.0

207.1

1,017.2

557.3

1,800.6

Amounts owed to other customers

470.4

49.9

748.6

1,268.9

Debt securities in issue

5.1

1,925.0

1,930.1

Derivative financial instruments

17.7

67.1

162.6

34.8

282.2

Lease liabilities

0.5

1.5

5.2

1.4

8.6

Trade payables

2.8

Subordinated liabilities

340.0

350.2

690.2

Subscribed capital

41.6

Total financial liabilities

11,904.6

3,998.2

10,248.2

7,070.4

458.8

598.9

34,279.1

Net liquidity gap

(9,510.1)

(3,663.3)

(9,306.2)

(3,097.6)

27,984.5

(256.1)

2,151.2

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 245

The following table is an analysis of undiscounted gross contractual cash flows payable on financial liabilities:

Note

A. With respect to subscribed capital, gross contractual cash flows represent interest payable on the Group’s Permanent Interest-

Bearing Shares (PIBS) (see Note 38). Following buy-back of the 12.875% legacy Tier 2 eligible PIBS in the year, as described in Note

38, the undiscounted gross interest payable each year by the Group going forwards is £1.3m per annum (2024: £4.5m per annum).

As the PIBS have no specified contractual maturity (as shown on pages 241 and 242), it is not possible to calculate the total amount

of undiscounted gross interest that is payable beyond 5 years (i.e. into perpetuity). Also, as the PIBS have no specified contractual

maturity, the amounts shown in the tables above do not anticipate any future repurchase of the PIBS by the Group.

The undiscounted gross contractual cash flows of debt securities in issue that have been issued as

securitisation funding in the tables above have been calculated on the assumption that the call options

referred to on page 244 are exercised.

The Group has off-balance sheet exposure from commitments to lend where a mortgage has been offered but

not yet completed. The total amount of such loan commitments at 31 December 2025 is £2,197.8m (2024:

£1,885.1m) which are due within 3 months.

2025

Group

Up to 3

3 - 12

1 - 5

Over 5

Total

£m

months

years

16,471.6

9,003.6

5,592.3

87.9

31,155.4

Amounts owed to credit institutions, other customers and

debt securities in issue

1,382.3

1,752.0

3,634.3

6,768.6

Derivative financial instruments

8.9

51.9

132.0

0.1

192.9

Lease liabilities

8.4

27.8

73.4

23.2

132.8

Trade payables

14.4

Fair value of put option obligation

0.7

0.4

1.1

Subordinated liabilities

21.9

393.8

415.7

Subscribed capital

1.3

5.1

note A

6.4

Total

17,885.6

10,859.2

9,831.3

111.2

38,687.3

2024

Group

Up to 3

3 - 12

1 - 5

Over 5

Total

£m

months

years

15,148.0

9,408.1

4,148.1

86.8

28,791.0

Amounts owed to credit institutions, other customers and

debt securities in issue

1,552.1

3,057.5

2,569.6

7,179.2

Derivative financial instruments

20.9

98.8

104.1

11.9

235.7

Lease liabilities

7.5

25.2

58.7

20.8

112.2

Trade payables

11.0

Fair value of put option obligation

3.9

0.4

4.3

Subordinated liabilities

28.9

769.1

798.0

Subscribed capital

1.6

2.9

18.0

note A

22.5

Total

16,741.1

12,625.3

7,668.0

119.5

37,153.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 246

Note

A. With respect to subscribed capital, gross contractual cash flows represent interest payable on the Society’s Permanent Interest-

Bearing Shares (PIBS) (see Note 38). Following buy-back of the 12.875% legacy Tier 2 PIBS in the year, as described in Note 38, the

undiscounted gross interest payable each year by the Society going forwards is £1.3m per annum (2024: £4.5m per annum). As the

PIBS have no specified contractual maturity (as shown on pages 243 and 244, it is not possible to calculate the total amount of

undiscounted gross interest that is payable beyond 5 years (i.e. into perpetuity). Also, as the PIBS have no specified contractual

maturity, the amounts shown in the tables above do not anticipate any future repurchase of the PIBS by the Society.

Amounts owed to other customers in the Society tables above include a deemed loan from the Group’s

securitisation vehicle Darrowby No. 6 plc, which arise from the funding transactions carried out through that

entity. The undiscounted gross contractual cash flows arising on this loan have been calculated on the

assumption that the call options referred to on page 244 are exercised.

The Society has off-balance sheet exposure from commitments to lend where a mortgage has been offered

but not yet completed. The total amount of such loan commitments at 31 December 2025 is £2,155.4m (2024:

£1,867.3m) which are due within 3 months.

Society

£m

2025

Up to 3

3 - 12

1 - 5

Over 5

Total

months

years

16,471.6

9,003.6

5,592.3

85.9

31,153.4

Amounts owed to credit institutions, other customers and

debt securities in issue

758.9

566.7

3,796.7

5,122.3

Derivative financial instruments

8.9

60.5

134.7

0.1

204.2

Lease liabilities

0.6

1.5

5.8

1.2

9.1

Trade payables

3.4

Subordinated liabilities

21.9

393.8

415.7

Subscribed capital

1.3

5.1

note A

6.4

Total

17,243.4

9,655.5

9,928.4

87.2

36,914.5

Society

£m

2024

Up to 3

3 - 12

1 - 5

Over 5

Total

months

years

15,148.0

9,408.1

4,148.1

72.4

28,776.6

Amounts owed to credit institutions, other customers and

debt securities in issue

653.0

1,944.9

2,925.1

5,523.0

Derivative financial instruments

35.5

122.7

130.5

11.9

300.6

Lease liabilities

0.6

1.6

5.6

1.5

9.3

Trade payables

2.8

Subordinated liabilities

28.9

769.1

798.0

Subscribed capital

1.6

2.9

18.0

note A

22.5

Total

15,841.5

11,509.1

7,996.4

85.8

35,432.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 247

Market risk is the risk that the value of, or income arising from, the Group’s assets and liabilities changes as a

result of changes in market prices; the principal elements being interest rate risk (including the use of

derivatives) and foreign currency risk.

The Group’s Treasury function is responsible for managing the Group’s exposure to all aspects of market risk

within the operational limits set out in the Group’s Treasury policy, which is reviewed and recommended by

ALCO and approved by the Board. The Group’s Treasury function measures and monitors adherence to the

Treasury policy and reports regularly on all aspects of market risk exposure, including interest rate risk and

foreign currency risk.

a) Interest rate risk

The main market risk faced by the Group is interest rate risk.

The Group uses a number of different metrics to monitor interest rate risk and details of these are set out

below.

The Group monitors interest rate risk exposure against limits by determining the effect on the Group’s current

net notional value of assets and liabilities for a parallel shift in interest rates equivalent to 2% for all maturities,

in line with regulatory requirements. These results are compared to the Board limit and operational trigger at

least weekly, and are formally reported to ALCO and the Board monthly.

Other interest rate risk metrics employed by the Group incorporate earnings-at-risk and market value

methodologies. The market value exposure position is calculated using at least 250 monthly yield curve

movements from, approximately, the last seven years. The earnings-at-risk methodology is calculated using at

least 100 stochastically (randomly) generated rate paths. Both of these approaches employ 95% confidence

intervals. The outputs of these interest rate risk measurement methodologies are compared to their respective

Board limits and operational triggers at least weekly and are reported to ALCO and the Board monthly. All

these measures are used to guide interest rate risk management decisions.

The levels of Group interest rate risk exposures throughout the reporting period, based on measures taken at

each month end, were as follows:

Although these measures provide valuable insights into the market risk to which the Group is exposed, they

need to be viewed in the context of the following limitations:

• Historical data is not necessarily the best guide to future events, but is a reasonable proxy;

• The use of 95% confidence levels, by definition, does not take account of changes that may occur beyond

this level of confidence and therefore may not fully take into account the most extreme events; and

• Exposures are calculated on static Statement of Financial Position positions and therefore future changes

in the structure of the Statement of Financial Position are ignored.

Other interest rate risk exposures, such as basis risk (the risk of loss arising from changes in the relationship

between interest rates which have similar but not identical characteristics, for example SONIA and Bank of

England Base Rate), are also monitored closely and regularly reported to ALCO.

b) Currency risk

The currency risk appetite of the Group is low and any instruments denominated in foreign currency are

immediately swapped into Sterling.

The Group has one regulated covered bond in Euros totalling €500m (2024: one bond, €500m). The exposure

to foreign currency fluctuations on this bond is fully hedged as a derivative contract was taken out to swap the

Euros into Sterling on issuance of the bond.

£m

As at 31 December

Average

High

Low

As at 31 December

2025

2024

Static earnings

-at-risk

25.3

22.1

25.5

16.8

27.9

Historical value

-at-risk

3.3

5.1

7.1

2.1

3.5

2% parallel interest rate shift

8.8

14.5

21.8

4.1

20.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 248

The Group has one intragroup loan denominated in New Zealand Dollars totalling $25m (2024: nil). The

exposure to foreign currency fluctuations on this bond is fully hedged as a derivative contract was taken out to

swap the Dollars into Sterling on the same date funds were lent.

The Group has investments in its subsidiary undertaking Jade, which are denominated in New Zealand dollars.

The foreign currency fluctuations in relation to these investments are not hedged and are recognised in the

Group’s translation reserve.

SIL holds deposits from customers denominated in US dollars (USD). SIL manages its foreign currency risk by

holding cash and debt securities denominated in USD; the objective is to minimise mismatches between the

balance and maturity profile of USD assets and USD liabilities, and also mismatches between the related

interest income and interest expense on USD assets and liabilities.

In addition, a number of the Group’s businesses undertake transactions denominated in foreign currency as

part of their normal business. Any amounts outstanding at 31 December 2025 are not material.

c) Other price risk

The Group also has exposure to market risk arising from the movement in the Retail Price Index and house

price indices. In particular, movements in these indices impact on the valuation of the equity release portfolio,

as outlined further in Note 1v).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 249

Credit risk is the risk of suffering financial loss should borrowers or counterparties default on their contractual

obligations to the Group.

The Group faces this risk from its lending to:

• individual customers (retail mortgages);

• businesses (through legacy commercial lending no longer originated and current debt factoring / invoice

discounting);

• wholesale counterparties (including other financial institutions). Credit risk within our treasury portfolio

arises from the investments held by the Group in order to meet liquidity requirements and for general

business purposes; and

• other Group entities, for the Society only.

Changes in the credit quality and the recoverability of loans and amounts due from counterparties influence

the Group’s exposure to the risk of credit losses. The Group’s strategy is to maintain a cautious approach to

credit risk and new lending. Adverse changes in the credit quality of counterparties, collateral values or

deterioration in the wider economy, including rising unemployment, changes in interest rates, deterioration in

household finances and any contraction in the UK property market leading to falling property values, could

affect the recoverability and value of the Group’s assets and influence its financial performance.

The Group has embedded a comprehensive credit risk management framework with clear lines of

accountability and oversight as part of its overall governance framework.

The Group has policies and procedures to monitor, control, mitigate and manage credit risk within the Group’s

credit risk appetite. The Retail Credit Committee and the Group Wholesale Credit Committee provide oversight

to the effectiveness of all credit management across the Group and the controls in place ensure lending is

within the Board approved credit risk appetite. The reporting structure ensures timely and accurate reporting of

all substantive risk matters to the Board and the Board Risk Committee. The Board receives monthly updates

on the credit risk profile of the Group.

Scenario analysis has been undertaken to identify the impact of climate-related risks on the Group’s credit risk

management. This includes assessing the residential lending portfolio at property level to determine the

potential impact of key climate-related physical and transitional risks. The scenario analysis indicates that the

most significant effects from climate change occur in the medium to long-term, with material financial impacts

from transition risks expected to transpire before physical risks. Based on current UK Government policies, a

delayed transition appears the most probable. Therefore, the most significant transition risks which may

impact the Group are not expected to occur before the 2030s. The results of this assessment did not lead to a

change in carrying amounts as at 31 December 2025 or 31 December 2024. The future impact of climate-

related risks on credit risk is uncertain, and the Group will continue to monitor developments in future periods.

Management makes use of the Group’s IFRS 9 ECL information for purposes that include regulatory capital

management, certain product pricing models and credit risk forecasting.

The maximum exposure to credit risk for financial assets is represented by the carrying amount of each

financial asset, except for the following:

• A fair value adjustment debit for hedged risk of £58.9m (2024: £274.6m credit) for the Group and £60.9m

(2024: £271.7m credit) for the Society is included within loans and advances to customers. This is indirectly

exposed to credit risk through the relationship with the underlying loans covered by the Group’s hedging

strategy.

• The Group has credit risk exposure from commitments to lend where a mortgage has been offered but not

yet completed, which leads to the recognition of a financial asset (within loans and advances to customers)

on completion of the mortgage. As outlined in Note 1h), an impairment loss allowance is held against these

commitments in accordance with IFRS 9. The total amount of such loan commitments at 31 December

2025 is £2,197.8m (2024: £1,885.1m) for the Group and £2,155.4m (2024: £1,867.3m) for the Society and

the impairment loss allowance held against these commitments is £0.3m (2024: £0.2m) for both the Group

and the Society.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 250

Retail mortgage lending to customers

The Group currently lends in the prime residential UK mortgage market, including buy-to-let, through the

Society, whilst SIL lends in the Channel Islands and in the UK. The Board’s credit risk appetite defines a number

of limits regarding customer and collateral credit quality to which all lending activity must adhere.

The credit decision process utilises automated credit scoring and policy rules with lending policy criteria

supporting manual underwriting. All aspects of the credit decision process are subject to regular independent

review and development ensuring they support decisions in line with the Board’s credit risk appetite.

Commercial lending to customers and businesses

The Society’s commercial mortgage portfolio was closed to new lending in November 2008.

Other loans and advances

These include advances made by our factored debt and invoice discounting business, SBF, which continue to

be managed by appropriately skilled teams. In addition, other loans and advances include advances made to

residential mortgage customers in Guernsey and Jersey by SIL; these are secured on shares in a property

management company which owns the building in which the properties are located. These loans are monitored

by appropriately skilled teams in SIL.

Wholesale lending to other financial institutions

Wholesale credit risk arises from the wholesale investments undertaken by the Group’s Treasury function

which is responsible for managing this aspect of credit risk in line with the Board approved credit risk appetite

and wholesale credit policies. Wholesale counterparty limits are reviewed monthly by the Group Wholesale

Credit Committee based on analyses of counterparties’ financial performance, ratings and other market

information to ensure that limits remain within our risk appetite. We regularly review and closely monitor the

number of counterparties to whom we will lend and, for those counterparties to whom we have lent, we review

both the amount and duration of any limits.

A deterioration in wholesale credit markets could lead to volatility in the value of the Group’s portfolio of

treasury assets together with the risk of further impairment within our treasury investments portfolio.

ALCO provides oversight to the effectiveness of wholesale credit risk management.

Intra-Group lending

Credit risk also arises on loans made by the Society to other Group entities, including any committed to but

undrawn amounts. Intra-Group counterparty limits are reviewed monthly by, and any increases must be pre-

approved by, the Group Wholesale Credit Committee.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 251

^ Also known as commercial mortgages.

For details on how the Group assesses ECLs see Note 1h).

2025

Fair value

Group

Gross carrying

ECL allowance

adjustment for

Carrying amount

amount

(Note 17)

hedged risk

£m

Residential mortgages

33,007.5

(21.6)

58.9

33,044.8

99.0

Loans fully secured on land^

92.2

(2.6)

89.6

0.3

Other lending:

Debt factoring advances

200.6

(1.4)

199.2

0.6

Other loans

45.3

0.1

Total

33,345.6

(25.6)

58.9

33,378.9

100.0

2024

Fair value

Group

Gross carrying

ECL allowance

adjustment for

Carrying amount

amount

(Note 17)

hedged risk

£m

Residential mortgages

30,542.8

(13.5)

(274.6)

30,254.7

98.8

Loans fully secured on land^

114.3

(4.7)

109.6

0.4

Other lending:

Debt factoring advances

190.0

(1.4)

188.6

0.6

Other loans

48.2

0.2

Total

30,895.3

(19.6)

(274.6)

30,601.1

100.0

2025

Fair value

Society

Gross carrying

ECL allowance

adjustment for

Carrying amount

amount

(Note 17)

hedged risk

£m

Residential mortgages

30,991.2

(20.9)

60.9

31,031.2

99.7

Loans fully secured on land^

92.2

(2.6)

89.6

0.3

Other lending

0.5

Total

31,083.9

(23.5)

60.9

31,121.3

100.0

2024

Fair value

Society

Gross carrying

ECL allowance

adjustment for

Carrying amount

amount

(Note 17)

hedged risk

£m

Residential mortgages

28,509.8

(12.8)

(271.7)

28,225.3

99.6

Loans fully secured on land^

114.3

(4.7)

109.6

0.4

Total

28,624.1

(17.5)

(271.7)

28,334.9

100.0

a) Credit risk - loans and advances to customers held at amortised cost

The tables below show the breakdown of the Group and Society’s loans and advances to customers held at

amortised cost at the reporting date:

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 252

The tables below provide information on movements in the gross carrying amount of residential loans and

advances to customers during the year:

2025

Group

Society

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Not past due

32,216.6

468.4

19.8

32,704.8

30,212.1

465.1

19.8

30,697.0

Up to 30 days past due

104.5

3.3

107.8

101.9

3.3

105.2

31 to 60 days past due

49.9

7.8

57.7

47.1

7.8

54.9

61 to 90 days past due

23.8

11.2

35.0

23.1

11.2

34.3

Over 90 days past due

102.2

99.8

Total

32,216.6

646.6

144.3

33,007.5

30,212.1

637.2

141.9

30,991.2

2024

Group

Society

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Not past due

30,067.3

224.2

13.8

30,305.3

28,046.0

220.4

13.8

28,280.2

Up to 30 days past due

72.5

3.6

76.1

70.6

3.6

74.2

31 to 60 days past due

46.4

4.6

51.0

43.6

4.6

48.2

61 to 90 days past due

15.7

9.8

25.5

15.7

9.8

25.5

Over 90 days past due

84.9

81.7

Total

30,067.3

358.8

116.7

30,542.8

28,046.0

350.3

113.5

28,509.8

2025

Group

Society

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Gross carrying amount at 1 January

30,067.3

358.8

116.7

30,542.8

28,046.0

350.3

113.5

28,509.8

Transfers due to changes in credit

risk (note A):

From stage 1 to stage 2

(379.9)

379.9

(373.3)

373.3

From stage 1 to stage 3

(17.5)

17.5

(16.6)

16.6

From stage 2 to stage 1

102.5

(102.5)

99.1

(99.1)

From stage 2 to stage 3

(16.5)

16.5

(16.5)

16.5

From stage 3 to stage 2

10.2

(10.2)

10.2

(10.2)

From stage 3 to stage 1

0.6

(0.6)

0.6

(0.6)

Modification of contractual

(99.4)

67.9

26.3

(5.2)

(99.4)

67.9

26.3

(5.2)

cashflows

Increases due to origination

6,960.1

19.3

2.1

6,981.5

6,772.4

19.3

2.1

6,793.8

Decrease due to derecognition and

repayments

(4,427.6)

(71.1)

(20.7)

(4,519.4)

(4,227.2)

(68.8)

(19.0)

(4,315.0)

Written off

(0.1)

(4.1)

(4.2)

(0.1)

(4.1)

(4.2)

Other movements

10.5

0.7

0.8

12.0

10.5

0.7

0.8

12.0

Gross carrying amount at

31 December

32,216.6

646.6

144.3

33,007.5

30,212.1

637.2

141.9

30,991.2

i) Residential mortgages

The majority of loans and advances to customers are secured on UK residential properties and are

geographically diverse.

The tables below provide information on residential loans and advances by payment due status:

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 253

As shown in the tables above, during 2025 there was a net increase in stage 2 loans of £287.8m for the Group

and of £286.9m for the Society. As outlined in Note 1v), during 2025 the Group has revised its view of forward-

looking economic indicators and the associated scenario weightings; this caused PDs to increase and, as a

result, more accounts have migrated to stage 2.

Gains and losses arising during the year from loan modifications that did not result in derecognition were not

material. Amounts written off are in accordance with the Group’s accounting policy for write-offs (see Note

1h)). Amounts presented within ‘other movements’ in the tables above include movements in the Group’s

effective interest rate asset as described in Note 1f).

For residential mortgages, stage 3 loans which no longer meet any of the default criteria are subject to a six

month minimum probation period before they become eligible for transfer out of stage 3. At 31 December

2025, stage 3 loans include £36.7m (2024: £23.3m) for the Group and Society being held in stage 3 under this

probation period.

2024

Group

Society

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Gross carrying amount at 1 January

27,485.7

628.6

78.0

28,192.3

25,412.6

624.3

77.1

26,114.0

Transfers due to changes in credit

risk (note A):

From stage 1 to stage 2

(180.2)

180.2

(171.8)

171.8

From stage 1 to stage 3

(14.8)

14.8

(11.7)

11.7

From stage 2 to stage 1

352.8

(352.8)

350.3

(350.3)

From stage 2 to stage 3

(15.5)

15.5

(15.5)

15.5

From stage 3 to stage 2

6.0

(6.0)

6.0

(6.0)

From stage 3 to stage 1

1.0

(1.0)

1.0

(1.0)

Modification of contractual

(26.8)

(8.5)

30.6

(4.7)

(26.8)

(8.5)

30.6

(4.7)

cashflows

Increases due to origination

5,996.7

15.1

0.7

6,012.5

5,833.8

15.1

0.7

5,849.6

Decrease due to derecognition and

repayments

(3,555.8)

(93.9)

(12.7)

(3,662.4)

(3,350.1)

(92.2)

(11.9)

(3,454.2)

Written off

(0.1)

(0.4)

(3.9)

(4.4)

(0.1)

(0.4)

(3.9)

(4.4)

Other movements

8.8

0.7

9.5

8.8

0.7

9.5

Gross carrying amount at

31 December

30,067.3

358.8

116.7

30,542.8

28,046.0

350.3

113.5

28,509.8

Note

A. For the purposes of the analysis presented above, the amounts shown for ‘transfers due to changes in credit risk’ are based on

account balances at the start of the reporting period (not account balances at the date of transfer).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 254

The table below provides information on movements in the impairment loss allowance for residential loans

and advances to customers during the year:

2025

Group

Society

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Loss allowance at 1 January

4.5

2.5

6.5

13.5

4.4

2.4

6.0

12.8

Transfers due to changes in credit

risk:

From stage 1 to stage 2

(0.1)

2.3

2.2

(0.1)

2.3

2.2

From stage 1 to stage 3

1.0

From stage 2 to stage 1

(0.2)

From stage 2 to stage 3

(0.3)

0.7

0.4

(0.3)

0.7

0.4

From stage 3 to stage 2

0.1

(0.1)

0.1

(0.1)

Remeasurements within existing

2.3

0.3

2.6

2.2

0.1

0.2

2.5

stage

Increases due to origination

2.4

0.3

2.7

2.5

0.3

2.8

Decrease due to derecognition and

repayments

(0.5)

(0.3)

(1.4)

(2.2)

(0.5)

(0.3)

(1.4)

(2.2)

Changes due to modification

0.7

1.5

2.2

0.7

1.5

2.2

without derecognition

Written off

(0.6)

Loss allowance at 31 December

8.6

5.4

7.6

21.6

8.5

5.1

7.3

20.9

2024

Group

Society

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Loss allowance at 1 January

16.2

6.0

6.8

29.0

15.4

5.9

6.6

27.9

Transfers due to changes in credit

risk:

From stage 1 to stage 2

(0.1)

0.8

0.7

(0.1)

0.8

0.7

From stage 1 to stage 3

0.5

From stage 2 to stage 1

0.1

(1.6)

(1.5)

0.1

(1.6)

(1.5)

From stage 2 to stage 3

(0.4)

0.4

(0.4)

0.4

From stage 3 to stage 2

0.1

(0.2)

(0.1)

0.1

(0.2)

(0.1)

Remeasurements within existing

(11.0)

(0.8)

(0.4)

(12.2)

(10.4)

(0.9)

(0.7)

(12.0)

stage

Increases due to origination

1.2

0.1

1.4

1.1

0.1

1.3

Decrease due to derecognition and

repayments

(1.9)

(0.6)

(0.9)

(3.4)

(1.7)

(0.5)

(0.9)

(3.1)

Changes due to modification

(1.1)

0.9

(0.2)

(1.1)

0.9

(0.2)

without derecognition

Written off

(0.7)

Loss allowance at 31 December

4.5

2.5

6.5

13.5

4.4

2.4

6.0

12.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 255

The loss allowance at 31 December 2025 includes judgmental adjustments totalling £4.8m (2024: £2.7m) for

the Group and £4.8m (2024: £2.7m) for the Society. Details of these judgmental adjustments are set out in

Note 1v).

The tables below provide information on residential loans and advances to customers grouped by credit risk

rating (probability of default). For further details on how the probability of default (PD) affects the Group’s

assessment of ECLs, see Note 1h) and Note 1v). ECL coverage shows the level of loss allowance expressed as

a percentage of the gross carrying amount.

The PDs used by the Group for IFRS 9 accounting purposes are not directly comparable to the PDs used by the

Group for IRB regulatory purposes; this is due to significant differences in the requirements and methodologies

applied by the Group for IFRS 9 and for IRB respectively.

Group 2025 (£m)

Gross Carrying Amount

Loss Allowance

Probability of default

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<0.15%

1,409.6

0.9

1,410.5

0.5

0.15%

- <0.25%

4,408.0

1.6

4,409.6

0.8

0.25%

- <0.5%

16,089.9

1.8

16,091.7

3.6

0.5%

- <0.75%

7,690.8

4.9

7,695.7

2.3

0.75%

- <2.5%

2,601.4

51.0

2,652.4

1.4

2.5%

- <10%

16.9

144.7

161.6

0.2

10%

- <100%

441.7

5.2

Default

144.3

7.6

Total

32,216.6

646.6

144.3

33,007.5

8.6

5.4

7.6

21.6

ECL coverage by stage (%)

0.03%

0.84%

5.27%

0.07%

Group 2024 (£m)

Gross Carrying Amount

Loss Allowance

Probability of default

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<0.15%

4,841.6

0.4

4,842.0

0.6

0.15%

- <0.25%

11,387.8

0.4

11,388.2

1.5

0.25%

- <0.5%

10,752.9

5.7

10,758.6

1.8

0.5%

- <0.75%

2,647.4

13.0

2,660.4

0.4

0.75%

- <2.5%

430.9

65.3

496.2

0.2

2.5%

- <10%

6.7

59.4

66.1

0.1

10%

- <100%

214.6

2.4

Default

116.7

6.5

Total

30,067.3

358.8

116.7

30,542.8

4.5

2.5

6.5

13.5

ECL coverage by stage (%)

0.01%

0.70%

5.57%

0.04%

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 256

Society 2025 (£m)

Gross Carrying Amount

Loss Allowance

Probability of default

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<0.15%

1,409.6

0.9

1,410.5

0.5

0.15%

- <0.25%

4,408.0

1.6

4,409.6

0.8

0.25%

- <0.5%

15,438.0

1.8

15,439.8

3.6

0.5%

- <0.75%

6,338.2

4.9

6,343.1

2.2

0.75%

- <2.5%

2,601.4

51.0

2,652.4

1.4

2.5%

- <10%

16.9

144.7

161.6

0.2

10%

- <100%

432.3

4.9

Default

141.9

7.3

Total

30,212.1

637.2

141.9

30,991.2

8.5

5.1

7.3

20.9

ECL coverage by stage (%)

0.03%

0.80%

5.14%

0.07%

Society 2024 (£m)

Gross Carrying Amount

Loss Allowance

Probability of default

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<0.15%

4,841.6

0.4

4,842.0

0.6

0.15%

- <0.25%

11,387.7

0.4

11,388.1

1.5

0.25%

- <0.5%

10,063.3

5.7

10,069.0

1.8

0.5%

- <0.75%

1,315.8

13.0

1,328.8

0.3

0.75%

- <2.5%

430.9

65.3

496.2

0.2

2.5%

- <10%

6.7

59.4

66.1

0.1

10%

- <100%

206.1

2.3

Default

113.5

6.0

Total

28,046.0

350.3

113.5

28,509.8

4.4

2.4

6.0

12.8

ECL coverage by stage (%)

0.02%

0.69%

5.29%

0.04%

The tables below provide an analysis of residential loans held in stage 2 as at the balance sheet date,

reflecting the reasons for inclusion in stage 2. For the purposes of this analysis, where a loan satisfies at the

balance sheet date more than one of the stage 2 criteria, the loan is included below within one category only

and in order of the categories as presented. The amounts presented below as ‘Over 30 days past due’

therefore include all stage 2 loans which are over 30 days past due as at the balance sheet date, including

those where this was not the initial reason for being classified as stage 2.

Stage 2 Analysis

2025

2024

Gross

ECL

Gross

ECL

Group

carrying

allowance

coverage

carrying

allowance

coverage

amount

£m

amount

£m

Over 30 days past due

73.7

2.1

2.8%

62.1

1.2

1.9%

In forbearance

130.2

1.1

0.8%

16.5

0.1

0.6%

In arrears

59.4

0.9

1.5%

66.8

0.6

0.9%

Term expired

15.7

18.6

Temporary transfer to interest only*

85.8

0.1

0.1%

103.5

0.1

0.1%

Increase in PD since origination

281.8

1.2

0.4%

91.3

0.5

0.5%

Total

646.6

5.4

0.8%

358.8

2.5

0.7%

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 257

*Temporary arrangement in place, via the Mortgage Charter Scheme, to repay interest only

The tables below provide further information on the types of lending and geographical split:

* Fast track relates to certain mortgages granted between 2007-2009 for which, subject to certain application criteria, the Society

accepted reduced documentation from borrowers.

^ Sub-prime mortgages are defined as loans to borrowers that typically had weakened credit histories at the time the loan was advanced.

Prior to 1 June 2021, these loans were held by the Group’s specialist lending businesses Amber and NYM; these loans were hived-up into

the Society with effect from 1 June 2021.

Stage 2 Analysis

2025

2024

Gross

ECL

Gross

ECL

Society

carrying

allowance

coverage

carrying

allowance

coverage

amount

£m

amount

£m

Over 30 days past due

70.2

1.9

2.7%

59.3

1.1

1.9%

In forbearance

127.0

1.1

0.9%

12.6

0.1

0.8%

In arrears

56.7

0.8

1.4%

65.0

0.6

0.9%

Term expired

15.7

0.0

0.0%

18.6

Temporary transfer to interest only *

85.8

0.1

0.1%

103.5

0.1

0.1%

Increase in PD since origination

281.8

1.2

0.4%

91.3

0.5

0.5%

Total

637.2

5.1

0.8%

350.3

2.4

0.7%

Group

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Prime:

Residential

26,835.0

513.2

109.0

27,457.2

24,273.8

288.6

80.1

24,642.5

Buy-to-let

5,239.7

91.4

19.4

5,350.5

5,608.3

42.1

18.3

5,668.7

Self build

7.5

0.9

0.7

9.1

8.6

0.8

1.0

10.4

Fast track*

7.8

0.4

0.2

8.4

9.2

0.6

0.1

9.9

Self certified

113.1

35.0

13.7

161.8

145.2

21.4

15.4

182.0

Sub

-prime^:

Residential

2.6

1.1

3.7

0.8

0.2

4.7

Buy-to-let

3.3

0.6

0.3

4.2

5.0

0.4

0.3

5.7

Self certified

7.6

4.0

1.0

12.6

13.5

4.1

1.3

18.9

Total

32,216.6

646.6

144.3

33,007.5

30,067.3

358.8

116.7

30,542.8

Society

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Prime:

Residential

26,183.1

511.2

109.0

26,803.3

23,584.1

285.0

79.8

23,948.9

Buy-to-let

3,887.1

84.0

17.0

3,988.1

4,276.7

37.2

15.4

4,329.3

Self build

7.5

0.9

0.7

9.1

8.6

0.8

1.0

10.4

Fast track*

7.8

0.4

0.2

8.4

9.2

0.6

0.1

9.9

Self certified

113.1

35.0

13.7

161.8

145.2

21.4

15.4

182.0

Sub

-prime^:

Residential

2.6

1.1

3.7

0.8

0.2

4.7

Buy-to-let

3.3

0.6

0.3

4.2

5.0

0.4

0.3

5.7

Self certified

7.6

4.0

1.0

12.6

13.5

4.1

1.3

18.9

Total

30,212.1

637.2

141.9

30,991.2

28,046.0

350.3

113.5

28,509.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 258

ndexed loan-to-value information on the Group’s residential loan portfolio is set out below:

Group (£m)

2025

2024

Region

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

North

871.8

19.7

5.6

897.1

854.6

14.3

3.9

872.8

Yorkshire

2,445.7

50.8

9.8

2,506.3

2,332.1

30.2

9.8

2,372.1

East Midlands

2,199.7

52.1

8.2

2,260.0

2,035.7

26.7

7.2

2,069.6

East Anglia

3,186.6

69.6

16.2

3,272.4

2,836.3

43.8

11.3

2,891.4

London

6,211.9

110.9

29.4

6,352.2

5,732.7

54.4

22.6

5,809.7

South East

5,281.4

107.2

26.4

5,415.0

4,847.5

57.2

21.5

4,926.2

South West

2,804.1

51.9

9.5

2,865.5

2,695.6

29.2

6.9

2,731.7

West Midlands

2,625.2

55.8

10.0

2,691.0

2,381.5

31.1

7.4

2,420.0

North West

2,996.0

65.1

15.4

3,076.5

2,821.4

37.5

13.6

2,872.5

Wales

878.4

20.2

3.9

902.5

825.6

10.3

3.9

839.8

Scotland

2,012.4

39.7

8.6

2,060.7

1,959.1

19.8

6.7

1,985.6

Northern Ireland

8.7

1.4

1.3

11.4

11.2

0.8

1.3

13.3

Channel Islands

694.7

2.2

696.9

734.0

3.5

0.6

738.1

Total

32,216.6

646.6

144.3

33,007.5

30,067.3

358.8

116.7

30,542.8

Society (£m)

2025

2024

Region

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

North

867.8

19.7

5.6

893.1

850.3

14.3

3.9

868.5

Yorkshire

2,429.4

50.8

9.8

2,490.0

2,315.5

30.0

9.8

2,355.3

East Midlands

2,190.6

51.8

8.2

2,250.6

2,024.7

26.6

7.2

2,058.5

East Anglia

3,164.8

69.5

16.2

3,250.5

2,814.4

43.4

11.3

2,869.1

London

5,357.6

105.2

27.6

5,490.4

4,899.8

50.4

20.3

4,970.5

South East

5,145.1

107.2

26.0

5,278.3

4,705.0

57.0

21.5

4,783.5

South West

2,771.0

51.9

9.5

2,832.4

2,661.5

29.2

6.9

2,697.6

West Midlands

2,556.1

55.5

9.8

2,621.4

2,315.4

31.0

7.1

2,353.5

North West

2,863.3

64.6

15.4

2,943.3

2,698.9

37.5

13.6

2,750.0

Wales

873.0

19.9

3.9

896.8

819.6

10.3

3.9

833.8

Scotland

1,984.7

39.7

8.6

2,033.0

1,929.7

19.8

6.7

1,956.2

Northern Ireland

8.7

1.4

1.3

11.4

11.2

0.8

1.3

13.3

Total

30,212.1

637.2

141.9

30,991.2

28,046.0

350.3

113.5

28,509.8

Group (£m)

2025

2024

Loan

-to-value

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<40%

5,526.9

119.9

20.3

5,667.1

5,891.7

72.6

21.0

5,985.3

40%

- 50%

3,705.0

93.6

22.7

3,821.3

4,052.9

58.7

19.8

4,131.4

50%

- 60%

4,169.7

125.3

26.9

4,321.9

4,442.5

63.8

32.9

4,539.2

60%

- 70%

4,367.5

106.7

23.8

4,498.0

4,622.4

60.2

16.6

4,699.2

70%

- 80%

4,586.0

78.7

14.5

4,679.2

4,021.4

41.5

8.7

4,071.6

80%

- 90%

6,620.2

93.4

21.0

6,734.6

5,324.7

46.2

10.8

5,381.7

90%

- 100%

3,181.4

27.0

11.1

3,219.5

1,687.3

14.5

3.0

1,704.8

>100%

59.9

2.0

4.0

65.9

24.4

1.3

3.9

29.6

Total

32,216.6

646.6

144.3

33,007.5

30,067.3

358.8

116.7

30,542.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 259

The Group’s policy for new mortgage lending is currently a maximum loan-to-value ratio of 100% for residential

mortgages and 75% for buy-to-let lending. In addition, SIL lends up to 100% on its ‘Next Generation’ mortgages,

for which a family member is required to provide a guarantee of up to 20% of the borrower’s property value (to

be supported by a bond over the guarantor’s own suitable property in Guernsey or Jersey).

There has been an increase in the volume of 80-100% LTV lending within the year as we continue to deliver on

our purpose of helping more people have a home. This has resulted in an increase in the overall percentage of

the book with an LTV greater than 80%; 31.8% at 31 December 2025 (2024: 24.5%) and an increase in the

average indexed loan-to-value of the Society’s new lending in 2025 to 68.4% (2024: 65.3%). The quality of the

lending remains high, with a well-managed spread of risk, carried out in a controlled manner being cognisant of

the economic challenges that lie ahead. This is represented by the proportion of Group residential mortgage

accounts in arrears by three months or more which remained low at 0.30% (2024: 0.28%).

At 31 December 2025, the average indexed loan-to-value of Group residential mortgages on a valuation

weighted basis (calculated as the total outstanding balance divided by the total value of collateral held), was

48.8% (2024: 46.1%) and for Society residential mortgages was 48.7% (2024: 45.9%).

Forbearance

Where appropriate for customers, the Group applies a policy of forbearance. This may be applied where the

actual or apparent financial stress of the customer is considered to be short-term with a potential to be

recovered. Forbearance may involve arrears capitalisation, a reduction in the monthly payment (known as a

concession), a conversion to interest only or a mortgage term extension. Forbearance is undertaken in order to

achieve the best outcome for both the customer and the business through dealing with repayment difficulties

at an early stage.

Possession is generally considered only as a last resort, once all other options for the customer have been

exhausted. Possession balances represent loans against which the Group has taken ownership of properties

pending their sale. The Group does not occupy repossessed properties for business use or use assets

acquired in its operations. All customer accounts are monitored to ensure that these strategies remain

appropriate.

Possessions

For the Group, at 31 December 2025 the balance of residential loans where the property has been taken into

possession was £3.0m and represents less than 0.1% of total outstanding loans (2024: £3.8m; less than 0.1%).

For the Society, at 31 December 2025 the balance of residential loans where the property has been taken into

possession was £3.0m and represents less than 0.01% of total outstanding loans (2024: £3.2m; less than

0.1%). All possessions balances are classified as stage 3.

Forbearance activity

The tables below provide further information on residential mortgages regarded as being in forbearance as at

31 December 2025, showing the type of account renegotiations applied. For the purposes of these forbearance

tables, the Group applies the Bank of England Prudential Regulatory Authority (PRA) definition of forbearance

(which is aligned to the European Banking Authority, EBA, definition).

Society (£m)

2025

2024

Loan

-to-value

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<40%

5,249.9

119.1

20.3

5,389.3

5,611.6

71.9

21.0

5,704.5

40%

- 50%

3,425.0

93.2

22.0

3,540.2

3,761.8

58.7

19.4

3,839.9

50%

- 60%

3,785.2

124.1

26.4

3,935.7

4,036.9

61.1

32.2

4,130.2

60%

- 70%

3,869.9

104.0

23.8

3,997.7

4,091.1

57.3

16.5

4,164.9

70%

- 80%

4,169.7

76.3

13.7

4,259.7

3,628.3

40.7

7.3

3,676.3

80%

- 90%

6,505.1

92.4

21.0

6,618.5

5,235.9

45.6

10.2

5,291.7

90%

- 100%

3,154.0

27.0

10.7

3,191.7

1,663.2

14.5

3.0

1,680.7

>100%

53.3

1.1

4.0

58.4

17.2

0.5

3.9

21.6

Total

30,212.1

637.2

141.9

30,991.2

28,046.0

350.3

113.5

28,509.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 260

Under the PRA definition, loans are required to meet certain payment and arrears criteria before they are

deemed to exit forbearance; this includes a minimum two-year probation period following the forbearance

event (extended to three years in certain situations).

For the purposes of the tables below, the following loans are regarded as forborne as at 31 December 2025*:

• any loan to which forbearance measures were applied within the two years prior to the reporting date

(regardless of whether the loan remains on renegotiated terms at 31 December 2025); and

• any loan to which forbearance measures were applied and which remains in the probation period following

the forbearance event.

For the purposes of the tables below, loans are presented according to the ECL stage they were held in as at

the reporting date.

* As noted in Note 1v), the SICR criteria applied by the Group was revised during the year, to align the probation period of forborne

accounts with that used in regulatory reporting standards. For the purposes of the 2024 comparative tables below, information is

therefore presented in accordance with the criteria that was applicable as at 31 December 2024 (as disclosed in Note 43a)(i) to the 2024

Annual Report and Accounts).

Reduced

Transfer to

Term

Total renegotiations

Group

- 2025

Total

Capitalisation

Payment

interest only

Extension

£m

Stage 1

Not past due

32,216.6

Stage 2

Not past due

468.4

3.8

66.8

14.3

84.9

18.1

Past due up to 30 days

104.5

0.3

43.3

1.6

45.2

43.3

Over 30 days past due

73.7

24.4

2.2

26.6

36.1

646.6

4.1

134.5

18.1

156.7

24.2

Stage 3

Not past due

19.8

1.5

7.8

0.2

9.5

48.0

Past due up to 90 days

22.3

0.1

9.8

2.1

12.0

53.8

Over 90 days past due

102.2

0.7

53.9

7.5

62.1

60.8

144.3

2.3

71.5

9.8

83.6

57.9

Gross carrying amount

33,007.5

6.4

206.0

27.9

240.3

0.7

Loss allowance

(21.6)

(0.1)

(5.2)

(0.3)

(5.6)

25.9

32,985.9

6.3

200.8

27.6

234.7

0.7

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 261

Reduced

Transfer to

Term

Total renegotiations

Group

– 2024

Total

Capitalisation

Payment

interest only

Extension

£m

Stage 1

Not past due

30,067.3

0.3

27.8

6.0

34.1

0.1

30,067.3

0.3

27.8

6.0

34.1

0.1

Stage 2

Not past due

224.2

0.2

24.0

7.9

32.1

14.3

Past due up to 30 days

72.5

29.4

0.6

30.0

41.4

Over 30 days past due

62.1

0.3

24.4

1.4

26.1

42.0

358.8

0.5

77.8

9.9

88.2

24.6

Stage 3

Not past due

13.8

1.1

3.2

0.2

4.5

32.6

Past due up to 90 days

18.0

0.2

8.9

2.0

11.1

61.7

Over 90 days past due

84.9

0.2

46.8

5.9

52.9

62.3

116.7

1.5

58.9

8.1

68.5

58.7

Gross carrying amount

30,542.8

2.3

164.5

24.0

190.8

0.6

Loss allowance

(13.5)

(0.3)

(3.8)

(0.2)

(4.3)

31.9

30,529.3

2.0

160.7

23.8

186.5

0.6

Reduced

Transfer to

Term

Total renegotiations

Society

- 2025

Total

Capitalisation

Payment

interest only

Extension

£m

Stage 1

Not past due

30,212.1

Stage 2

Not past due

465.1

3.2

64.3

14.2

81.7

17.6

Past due up to 30 days

101.9

0.3

43.3

1.6

45.2

44.4

Over 30 days past due

70.2

24.4

2.2

26.6

37.9

637.2

3.5

132.0

18.0

153.5

24.1

Stage 3

Not past due

19.8

1.5

7.8

0.2

9.5

48.0

Past due up to 90 days

22.3

0.1

9.8

2.1

12.0

53.8

Over 90 days past due

99.8

0.7

53.9

7.5

62.1

62.2

141.9

2.3

71.5

9.8

83.6

58.9

Gross carrying amount

30,991.2

5.8

203.5

27.8

237.1

0.8

Loss allowance

(20.9)

(0.1)

(5.2)

(0.3)

(5.6)

26.8

30,970.3

5.7

198.3

27.5

231.5

0.7

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 262

Collateral

Collateral held consists of residential properties. The use of such collateral is in line with terms that are usual

and customary to standard lending activities.

Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques

commonly used for the corresponding assets. In subsequent periods, the fair value is updated by reference to

market prices or indices of similar assets.

Fair value of capped collateral held

Some properties in the Group’s mortgage book are in negative equity, which increases the possibility of the

Group incurring a loss if the property is taken into possession.

The fair value of residential property used to derive the figures in the table above is determined by reference to

a recognised house price index. Movements in this index to the reporting date are applied to all properties in

the portfolio on a regional basis. For the majority of the Group’s loans, the Group holds excess collateral

however this cannot be used to offset those instances where the loan amount exceeds the collateral held. The

fair value of capped collateral in the table above therefore represents, on an individual loan basis, the lower of

the value of the property and the outstanding loan amount. It does not reflect the overall value of properties

against which the loans are secured. The total fair value of collateral held in respect of residential mortgages

for the Group at 31 December 2025 is £67,624.3m (2024: £66,203.5m) and for the Society is £63,600.6m

(2024: £62,133.0m).

Total

Capitalisation

Reduced

Transfer to

Term

Total renegotiations

Society

- 2024

£m

Payment

interest only

Extension

£m

Stage 1

Not past due

28,046.0

0.3

27.8

6.0

34.1

0.1

28,046.0

0.3

27.8

6.0

34.1

0.1

Stage 2

Not past due

220.4

0.2

22.3

5.7

28.2

12.8

Past due up to 30 days

70.6

29.4

0.6

30.0

42.5

Over 30 days past due

59.3

0.3

24.4

1.4

26.1

44.0

350.3

0.5

76.1

7.7

84.3

24.1

Stage 3

Not past due

13.8

1.1

3.2

0.2

4.5

32.6

Past due up to 90 days

18.0

0.2

8.9

2.0

11.1

61.7

Over 90 days past due

81.7

0.2

46.8

5.9

52.9

64.7

113.5

1.5

58.9

8.1

68.5

60.4

Gross carrying amount

28,509.8

2.3

162.8

21.8

186.9

0.7

Loss allowance

(12.8)

(0.3)

(3.8)

(0.2)

(4.3)

33.6

28,497.0

2.0

159.0

21.6

182.6

0.6

£m

Group

Society

2025

2024

2025

2024

Stage 1

32,206.7

30,059.9

30,204.9

28,041.6

Stage 2

646.1

358.4

636.8

350.0

Stage 3

143.6

115.8

141.2

112.6

32,996.4

30,534.1

30,982.9

28,504.2

Gross loan balances

33,007.5

30,542.8

30,991.2

28,509.8

Negative equity

11.1

8.7

8.3

5.6

Capped collateral held in respect of

possessions (included in stage 3 above)

2.8

2.9

2.8

2.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 263

At 31 December 2025 the contractual amount outstanding on loans written off during the year due to there

being no reasonable expectation of recovery, but which remain subject to enforcement activity, is £0.8m

(2024: £0.7m) for the Group and for the Society.

ii) Commercial mortgages

The commercial mortgage portfolio (also known as loans fully secured on land) is currently closed to new

business.

The tables below provide information on commercial loans by payment due status.

Group & Society

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Not past due

74.6

2.6

2.7

79.9

93.9

0.4

11.3

105.6

Up to 30 days

2.8

2.3

31 to 60 days

2.7

2.1

61 to 90 days

1.0

1.1

0.7

1.8

Over 90 days

5.8

2.5

Total

74.6

9.1

8.5

92.2

93.9

5.9

14.5

114.3

The table below provides information on movements in the gross carrying amount of commercial loans during

the year.

Group & Society

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Gross carrying amount at 1 January

93.9

5.9

14.5

114.3

91.0

37.8

6.4

135.2

Transfers due to changes in credit

risk (note A):

From stage 1 to stage 2

(2.5)

2.5

(1.1)

1.1

From stage 1 to stage 3

(2.0)

2.0

(1.4)

1.4

From stage 2 to stage 1

0.1

(0.1)

19.2

(19.2)

From stage 2 to stage 3

(0.8)

0.8

(3.4)

3.4

From stage 3 to stage 1

0.8

(0.8)

Modification of contractual

(3.2)

2.3

0.5

(0.4)

0.8

(8.0)

6.8

(0.4)

cashflows

Decrease due to derecognition and

repayments

(12.5)

(0.7)

(7.2)

(20.4)

(14.6)

(2.4)

(3.1)

(20.1)

Written off

(1.3)

(0.4)

Gross carrying amount at

31 December

74.6

9.1

8.5

92.2

93.9

5.9

14.5

114.3

Note

A. For the purposes of the analysis presented above, the amounts shown for ‘transfers due to changes in credit risk’ are based on

account balances at the start of the reporting period (not account balances at the date of transfer).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 264

Gains and losses arising during the year from loan modifications that did not result in derecognition were not

significant. Amounts written off are in accordance with the Group’s accounting policy for write-offs (see Note

1h)).

For commercial loans, stage 3 loans which no longer meet any of the default criteria are subject to a three

month minimum probation period before they become eligible for transfer out of stage 3. At 31 December

2025, stage 3 loans include £0.1m being held in stage 3 under this probation period (2024: £nil).

The table below provides information on movements in the impairment loss allowance for commercial loans

during the year.

Group & Society

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Loss

allowance at 1 January

0.2

4.3

4.7

0.6

6.6

1.8

9.0

Transfers due to changes in credit

risk:

From stage 1 to stage 2

0.1

From stage 1 to stage 3

0.6

From stage 2 to stage 1

(1.9)

From stage 2 to stage 3

(0.4)

0.4

Remeasurements within existing

0.2

0.1

0.3

(0.3)

(0.1)

(0.4)

stage

Decrease due to derecognition and

repayments

(0.1)

(0.9)

(1.1)

(2.1)

Changes due to modification

(0.1)

(3.1)

3.3

0.2

without derecognition

Written off

(2.9)

(0.1)

Loss allowance at 31 December

0.4

0.3

1.9

2.6

0.2

4.3

4.7

ECL coverage (%)

0.54%

3.30%

22.35%

2.82%

0.21%

3.39%

29.66%

4.11%

Given the size and nature of the Group’s commercial portfolio, it is not meaningful to manage credit risk by

reference to behavioural scores or PD percentages. Credit risk is predominantly managed by individual review

of loans in accordance with certain criteria. To aid an understanding of significant credit risk concentrations

for the Group’s commercial portfolio, the tables below provide analyses of loans by industry type, by geography

and by loan-to-value percentage.

Group & Society (£m)

2025

2024

Industry analysis

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Leisure and hotels

5.7

0.5

6.2

6.4

0.6

5.1

12.1

Retail

1.9

0.3

0.2

2.4

2.1

0.3

0.2

2.6

Nursing/residential homes

1.6

1.7

2.2

3.9

Offices

1.1

1.2

Commercial and industrial units

63.8

8.3

80.4

81.9

5.0

7.0

93.9

Miscellaneous

0.5

0.6

Total

74.6

9.1

8.5

92.2

93.9

5.9

14.5

114.3

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 265

Group & Society (£m)

2025

2024

Geographical analysis (Region)

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

North

1.3

1.7

3.0

2.9

0.3

3.2

Yorkshire

3.7

0.5

1.1

5.3

6.2

0.3

5.7

12.2

East Midlands

2.1

2.2

4.3

3.2

2.3

5.5

East Anglia

8.4

0.1

8.6

9.6

0.1

9.7

London

19.0

2.9

1.2

23.1

22.8

2.1

0.7

25.6

South East

12.4

1.6

0.4

14.4

15.5

1.2

16.7

South West

11.2

0.4

11.6

12.0

0.4

12.8

West Midlands

5.3

1.1

0.3

6.7

7.0

0.6

2.3

9.9

North West

8.7

1.2

2.0

11.9

10.5

0.9

2.1

13.5

Wales

2.3

0.5

2.8

2.4

0.7

3.1

Scotland

0.2

0.3

0.5

1.8

0.3

2.1

Total

74.6

9.1

8.5

92.2

93.9

5.9

14.5

114.3

Group & Society (£m)

2025

2024

Loan

-to-value

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

<40%

24.4

2.5

1.2

28.1

27.4

1.0

2.0

30.4

40%

- 50%

12.7

1.4

1.2

15.3

18.5

1.1

0.6

20.2

50%

- 60%

14.3

1.2

15.5

16.6

1.2

19.0

60%

- 70%

5.1

1.9

0.2

7.2

6.3

1.4

0.1

7.8

70%

- 80%

6.0

0.9

6.9

7.4

0.5

1.3

9.2

80%

- 90%

8.7

1.2

0.8

10.7

9.3

0.3

9.6

90%

- 100%

2.2

5.4

0.4

5.8

>100%

1.2

5.1

6.3

3.0

9.3

12.3

Total

74.6

9.1

8.5

92.2

93.9

5.9

14.5

114.3

Forbearance

The Group’s policy on forbearance for commercial mortgages is the same as the policy for residential

mortgages, which is set out in Note 45a)(i).

At 31 December 2025 the balance of commercial mortgages where the property has been taken into

possession was £0.1m for the Group and Society (2024: £nil). Possessions balances are classified as stage 3.

The tables below provide further information on commercial mortgages regarded as being in forbearance as at

31 December 2025, showing the type of account renegotiations applied. The tables below are presented on the

same basis as the corresponding tables for residential mortgages, the basis for which is described on pages

259 and 260.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 266

Collateral

The collateral held consists of properties held within the categories previously outlined. The use of such

collateral is in line with terms that are usual and customary to standard lending activities.

Fair value of capped collateral held

An analysis of capped collateral, where the collateral is capped to the lower of the value of the property and

the amount outstanding on an individual loan basis, is shown below.

2025

Group & Society

Reduced

Transfer to

Total renegotiations

Total

Capitalisation

Payment

interest only

£m

Stage 1

Not past due

74.6

Stage 2

Not past due

2.6

0.8

0.9

2.6

100.0

Past due up to 30 days

2.8

0.3

10.7

Over 30 days past due

3.7

0.8

21.6

9.1

1.6

1.2

0.9

3.7

40.7

Stage 3

Not past due

2.7

0.1

1.2

1.3

48.1

Past due up to 90 days

Over 90 days past due

5.8

1.0

2.8

3.8

65.5

8.5

1.1

4.0

5.1

60.0

Gross carrying amount

92.2

1.6

2.3

4.9

8.8

9.5

Loss allowance

(2.6)

(0.1)

(0.7)

(0.9)

34.6

89.6

1.5

2.2

4.2

7.9

8.8

2024

Group & Society

Reduced

Transfer to

Total renegotiations

Total

Capitalisation

Payment

interest only

£m

Stage 1

Not past due

93.9

0.9

0.4

0.5

1.8

1.9

93.9

0.9

0.4

0.5

1.8

1.9

Stage 2

Not past due

0.4

100.0

Past due up to 30 days

2.3

0.1

4.3

Over 30 days past due

3.2

0.9

0.5

1.4

43.8

5.9

0.9

0.5

1.9

32.2

Stage 3

Not past due

11.3

8.4

74.3

Past due up to 90 days

0.7

Over 90 days past due

2.5

0.6

0.7

1.3

52.0

14.5

0.6

9.1

9.7

66.9

Gross carrying amount

114.3

1.8

1.5

10.1

13.4

11.7

Loss allowance

(4.7)

(3.8)

80.9

109.6

1.8

1.5

6.3

9.6

8.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 267

The fair value of commercial property used to derive the figures in the table above is determined by reference

to the latest external valuation of the properties in question. The total fair value of collateral held in respect of

commercial loans for the Group and the Society at 31 December 2025 is £236.8m (2024: £270.5m).

At 31 December 2025 the contractual amount outstanding on loans written off during the year due to there

being no reasonable expectation of recovery, but which remain subject to enforcement activity, is £0.2m

(2024: £0.2m) for the Group and the Society.

iii) Other lending

Other lending comprises the following:

The table below provides information on movements in the gross carrying amount of other loans and

advances during the year.

Note:

A. For the purposes of the analysis presented above, the amounts shown for ‘transfers due to changes in credit risk’ are based on

account balances at the end of the reporting period (not account balances at the date of transfer).

Group & Society (£m)

2025

2024

Stage 1

74.4

93.2

Stage 2

9.1

5.9

Stage 3

7.0

12.3

Total

90.5

111.4

Gross loan balances

92.2

114.3

Negative equity

1.7

2.9

Capped collateral held in respect of possessions (included within stage 3 above)

0.1

2025

2024

Group

Gross

ECL

Net

Gross

ECL

Net

£m

carrying

Allowance

carrying

allowance

carrying

amount

Debt factoring advances

200.6

(1.4)

199.2

190.0

(1.4)

188.6

Other loans

45.3

48.2

Total

245.9

(1.4)

244.5

238.2

(1.4)

236.8

Performance & Strategy Governance

Financial Statements

Other Information

Group

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Gross carrying amount at 1 January

234.5

2.3

1.4

238.2

219.6

4.3

0.5

224.4

Transfers due to changes in

credit risk (note A):

From stage 1 to stage 2

(1.1)

1.1

(3.4)

3.4

From stage 1 to stage 3

(0.4)

0.4

From stage 2 to stage 1

1.0

(1.0)

2.3

(2.3)

From stage 2 to stage 3

(0.7)

0.7

(1.6)

1.6

From stage 3 to stage 2

1.0

(1.0)

0.3

(0.3)

From stage 3 to stage 1

0.4

(0.4)

0.3

(0.3)

Modification of contractual

cashflows

Increases due to origination

68.8

74.2

Decrease due to derecognition

(60.3)

(0.5)

(60.8)

(58.1)

(1.8)

(59.9)

and repayments

Write

-offs

(0.3)

(0.6)

Other movements

0.1

Gross carrying amount at 31

243.3

2.2

0.4

245.9

234.5

2.3

1.4

238.2

December

Skipton Group Annual Report & Accounts 2025 268

The table below provides information on movements in the impairment loss allowance for other loans and

advances during the year.

Debt factoring advances

Debt factoring advances relate to amounts advanced to clients by SBF, the Group’s debt factoring and invoice

discounting business.

Credit risk is predominantly managed by rigorous due diligence controls and regular monitoring of client

accounts, and includes the use of concentration limits, credit reference checks and ‘watchlists’ on clients’

debtors. Advances are typically made to clients only against notified invoices that are less than 90 days past

due.

Debt factoring and invoice discounting advances are typically secured via a legal charge against the relevant

client’s sales ledger. Additional security may also be taken in the form of an all assets debenture that may

incorporate other unencumbered assets as well as personal guarantees. At 31 December 2025 and 31

December 2024, the fair value of the total collateral held by the Group against debt factoring and invoice

discounting advances was in excess of the value of the total advances outstanding.

Other loans

The table below provides information on the gross carrying amount of other loans by payment due status.

Other loans of £44.8m (2024: £48.2m), at a Group level, were advanced by SIL to customers in respect of

residential properties owned by a property management holding company. The loans are secured on shares in

that property management holding company and the fair value of the total collateral held is £94.1m (2024:

£99.7m).

b) Credit risk – balances with the Bank of England, debt securities and loans and advances to credit

institutions

The Group holds treasury investments in order to meet liquidity requirements and for general business

purposes. The credit risk arising from these investments is closely monitored and managed by the Group.

Collateral held for treasury assets is determined by the nature of the instrument. Loans and debt securities are

generally unsecured with the exception of asset backed securities and covered bonds which are secured by

pools of financial assets. For details of collateral held against debt securities see Note 14. For details of

collateral held against loans and advances to credit institutions see Note 13. No collateral is held against

balances with the Bank of England.

Performance & Strategy Governance

Financial Statements

Other Information

Group

2025

2024

£m

Stage 1

Stage 2

Stage 3

Total

Stage 1

Stage 2

Stage 3

Total

Loss allowance at 1 January

0.2

0.6

1.4

0.2

1.1

0.3

1.6

Transfers due to changes in

credit risk:

From stage 1 to stage 2

0.9

(0.1)

1.0

0.9

From stage 2 to stage 1

(0.2)

(0.3)

From stage 2 to stage 3

(0.7)

0.7

(1.0)

1.0

From stage 3 to stage 2

0.6

(0.6)

From stage 3 to stage 1

0.1

(0.1)

Remeasurements within existing

0.1

(0.5)

(0.4)

(0.2)

stage

Write

-offs

(0.3)

(0.6)

Loss allowance at 31 December

0.3

0.7

0.4

1.4

0.2

0.6

1.4

Group

2025

2024

£m

Stage 1

Stage 2

Total

Stage 1

Stage 2

Total

Not past due

45.2

48.2

Up to 30 days

0.1

Total

45.2

0.1

45.3

48.2

Skipton Group Annual Report & Accounts 2025 269

At 31 December 2025 none of the Group or the Society’s treasury assets were past due (2024: none past due).

At 31 December 2025 the ECLs on the Group and the Society’s treasury assets were all held as stage 1 (2024:

all stage 1).

At 31 December 2025 and 31 December 2024, all the Group and the Society’s treasury investments, except for

building society deposits (2025: £nil; 2024: £0.1m) and certain collateral held (2025: £nil: 2024: £0.1m), were

assessed to have a probability of default (PD) of less than 3.5% (2024: 0.11%).

The Group’s accounting policies on impairment losses on treasury assets and how the Group assesses ECLs

and PDs on treasury assets are detailed in Note 1h).

At 31 December 2025 over 99.9% (2024: 99.9%) of the Group’s treasury investment assets (including cash in

hand and with the Bank of England and excluding exposures to a central clearing house used to clear

derivatives to manage interest rate risk in line with regulation) were rated A3 or better, and for the Society over

99.9% (2024: 99.9%) were rated A3 or better. The table below provides further details of the credit ratings for

both the Group and the Society’s treasury investment portfolios:

‘Unrated’ in the above analysis includes an exposure to a central clearing house totalling £254.6m for the

Group and Society (2024: £273.3m) used to clear derivatives to manage interest rate risk, as required by

regulation, together with an exposure to subsidiary undertakings in the form of Credit Support Annex (CSA)

collateral for the Society only, totalling £9.0m (2024: £52.2m).

The Group also monitors exposure concentrations against a variety of criteria including industry sector / asset

class and country of risk.

Group

Society

Rating

2025

2024

2025

2024

£m

Aaa

2,818.1

47.1

2,429.6

36.3

3,040.5

51.2

2,666.1

40.0

Aa1

212.6

3.6

268.2

4.0

179.2

3.0

268.2

4.0

Aa2

0.1

Aa3

2,611.1

43.6

3,605.1

53.8

2,416.1

40.7

3,336.4

50.0

85.3

1.4

117.3

1.8

40.9

0.7

72.1

1.1

1.0

Unrated

254.6

4.3

273.5

4.1

263.6

4.4

325.7

4.9

Total

5,982.9

100.0

6,694.8

100.0

5,940.3

100.0

6,668.5

100.0

Group

Society

Industry sector / asset class

2025

2024

2025

2024

£m

Cash in hand and balances with the

Bank of England

1,360.2

22.7

1,930.6

28.9

1,360.2

22.9

1,930.6

29.0

Loans and advances to banks and

building societies

353.3

5.9

414.6

6.2

304.7

5.1

397.8

6.0

Gilts

500.5

8.4

1,086.5

16.2

500.5

8.4

1,086.5

16.3

Certificates of deposit

Fixed rate bonds

1,552.0

26.0

1,274.9

19.0

1,552.0

26.2

1,274.9

19.1

Floating rate notes

11.0

0.2

Treasury bills

733.4

12.9

598.2

8.9

557.0

9.4

321.2

4.8

Covered bonds

813.5

13.6

770.1

11.5

813.5

13.7

770.1

11.5

Residential mortgage backed

619.0

10.3

619.9

9.3

852.4

14.3

887.4

13.3

securities

Total

5,982.9

100.0

6,694.8

100.0

5,940.3

100.0

6,668.5

100.0

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 270

c) Credit risk – trade receivables

The tables below provide information on movements in trade receivables during the year.

As outlined in Note 1h), the Group’s accounting policy for trade receivables is to always recognise lifetime

ECLs in accordance with the simplified approach in IFRS 9. Trade receivables are therefore not allocated to

ECL stages.

Group

Society

Geographical exposure (Region)

2025

2024

2025

2024

£m

4,344.1

72.7

5,331.5

79.7

4,388.2

73.8

5,393.6

81.0

Rest of Europe

419.7

7.0

327.9

4.9

389.7

6.6

293.3

4.4

Supranationals:

Europe

226.7

3.8

122.4

1.8

215.6

3.6

122.4

1.8

Global

504.5

8.4

528.4

7.9

504.5

8.5

528.4

7.9

Africa

56.1

0.9

28.4

0.4

56.1

0.9

28.4

0.4

Asia

163.4

2.7

135.2

2.0

163.4

2.8

135.2

2.0

South America

145.8

2.4

117.7

1.8

145.8

2.5

117.7

1.8

North America

118.8

2.0

100.2

1.5

77.0

1.3

49.5

0.7

Rest of World

3.8

0.1

3.1

Total

5,982.9

100.0

6,694.8

100.0

5,940.3

100.0

6,668.5

100.0

£m

Group

Society

2025

2024

2025

2024

Gross carrying amount

76.3

71.0

1.5

1.9

Loss allowance

(2.7)

(2.2)

Net carrying amount

73.6

68.8

1.5

1.9

£m

Group

Society

2025

2024

2025

2024

Loss allowance at 1 January

2.2

2.4

Net allowances made during the

year

1.4

0.8

0.1

Write

-offs

(0.9)

(1.0)

(0.1)

Loss allowance at 31 December

2.7

2.2

The table below provides information on the gross carrying amount of trade receivables by payment due

status.

£m

Group

Society

2025

2024

2025

2024

Not past due

42.6

38.3

Up to 30 days past due

18.1

19.5

0.6

0.5

31 to 120 days past due

10.1

9.5

0.5

1.0

Over 120 days past due

5.5

3.7

0.4

Total

76.3

71.0

1.5

1.9

No collateral is held against trade receivables. At 31 December 2025 the contractual amount outstanding on

trade receivables written off during the year due to there being no reasonable expectation of recovery, but

which remain subject to enforcement activity, is £nil (2024: £nil) for the Group and £nil (2024: £nil) for the

Society.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 271

d) Credit risk – derivative financial instruments

A credit exposure could arise in respect of derivative contracts entered into by the Group if the counterparty

was unable to fulfil its contractual obligations. The Group addresses the risks associated with these activities

by monitoring counterparty credit exposure and requiring additional collateral to be posted or returned as

necessary. For all but one derivative, the only form of collateral accepted by the Group in respect of derivatives

is cash. Derivatives are either transacted under International Swaps and Derivatives Association (ISDA) Master

Agreements or Cleared Derivatives Execution Agreements. For swaps that are cash collateralised, no Credit

(CVA) or Debit (DVA) Value Adjustments have been made in respect of credit risk in determining the fair value

of these derivatives as the risk is significantly mitigated. Credit Support Annexes executed with certain

counterparties in conjunction with the ISDA Master Agreement require collateral to be posted regularly, as

required by specific terms and conditions of the arrangements. Due to the frequency of the posting of

collateral, there is no material exposure from these minimal timing differences that would require CVA or DVA

adjustments. At 31 December 2025 the Group held one derivative (2024: one) that is not fully collateralised for

cash; CVA and DVA adjustments are made to the valuation of this derivative.

Netting arrangements do not necessarily result in an offset of Statement of Financial Position (SoFP) assets

and liabilities, as transactions are usually settled on a gross basis. The Group’s legal documentation for

derivative transactions does grant legal rights of set-off for those transactions with the same counterparty.

Accordingly, the credit risk associated with such contracts is reduced to the extent that negative mark to

market valuations on derivatives will offset positive mark to market values on derivatives. The following tables

provide further detail on the net exposure to derivative transaction counterparties.

Group

2024

£m

As reported

Netting

Cash

Net amounts

within SoFP

agreements

collateral

after offsetting

Financial assets

Derivative financial instruments

752.1

(204.2)

(557.3)

Financial liabilities

Derivative financial instruments

225.1

(204.2)

(18.1)

2.8

Society

2025

£m

As reported

Netting

Cash

Net amounts

within SoFP

agreements

collateral

after offsetting

Financial assets

Derivative financial instruments

333.1

(189.4)

(141.3)

2.4

Financial liabilities

Derivative financial instruments

205.0

(189.4)

(14.6)

1.0

Group

2025

£m

As reported

Netting

Cash

Net amounts

within SoFP

agreements

collateral

after offsetting

Financial assets

Derivative financial instruments

350.8

(180.5)

(141.5)

28.8

Financial liabilities

Derivative financial instruments

186.2

(180.5)

(5.7)

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 272

In respect of derivative assets, there is £28.8m (2024: £nil) for the Group, and £2.4m (2024: £nil) for the

Society, after offsetting between the value of the derivatives and the cash collateral held. At a Group level, this

predominantly relates to the collateral arrangements for the one cross currency derivative held by the Group

where collateral is not required to be posted up to a threshold. In 2024, the cross currency derivative was in a

net liability position.

In respect of derivative liabilities, there is a net amount after offsetting of £nil (2024: £2.8m) for the Group, and

£1.0m (2024: £3.5m) for the Society, between the value of the derivatives and the cash collateral pledged.

Society

2024

£m

As reported

Netting

Cash

Net amounts

within SoFP

agreements

collateral

after offsetting

Financial assets

Derivative financial instruments

743.0

(208.3)

(557.3)

Financial liabilities

Derivative financial instruments

282.2

(208.3)

(70.4)

3.5

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 273

a) Classification and measurement

The tables below summarise the classification of the carrying amounts of the Group’s and Society’s financial

assets and liabilities:

Group

Amortised

2025

Amortised

2024

£m

FVOCI

FVTPL

Total

FVOCI

FVTPL

Total

cost

Cash in hand and

balances with the

Bank of England

1,360.2

1,930.6

Loans and advances

353.3

414.6

to credit institutions

Debt securities

4,269.4

4,349.6

Derivative financial

350.8

752.1

Instruments

Loans and advances

33,378.9

0.8

33,379.7

30,601.1

0.9

30,602.0

to customers

Equity release

263.1

277.2

portfolio

Equity share

18.3

16.9

investments

Trade receivables

73.6

68.8

Share warrants

21.9

Loan to defined

benefit pension

10.9

scheme

Other assets

0.1

Total financial

35,166.0

4,269.4

643.9

40,079.3

33,015.2

4,349.6

1,069.0

38,433.8

assets

Other non

-financial

664.9

581.5

assets

Total assets

40,744.2

39,015.3

30,526.3

28,268.5

Amounts owed to

credit institutions

3,046.8

4,350.7

and other

customers

Debt securities in

issue

3,361.9

2,435.3

Derivative financial

186.2

225.1

Instruments

Lease liabilities

110.3

92.1

Trade payables

14.4

11.0

Fair value of put

1.0

4.1

option obligation

Subordinated

356.0

690.2

liabilities

Subscribed capital

15.2

41.6

Total financial

37,430.9

187.2

37,618.1

35,889.4

229.2

36,118.6

liabilities

Other non

-financial

261.5

229.3

liabilities

Total liabilities

37,879.6

36,347.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 274

All financial assets and liabilities in the tables above that are held as at FVTPL are mandatorily held as such.

As outlined in Note 21, during the year, non-current assets with a total carrying value of £3.7m (for the Group

and Society) were reclassified as held for sale, and therefore presented separately within the Statement of

Financial Position. In the above table, these amounts are included within ‘Other non-financial assets’.

Society

2025

2024

£m

Amortised

FVOCI

FVTPL

Total

Amortised

FVOCI

FVTPL

Total

cost

Cash in hand and

balances

1,360.2

1,930.6

with the Bank of

England

Loans and advances

304.7

397.8

to credit institutions

Debt securities

4,201.9

73.5

4,275.4

4,269.8

70.3

4,340.1

Derivative financial

333.1

743.0

instruments

Loans and advances

31,121.3

0.8

31,122.1

28,334.9

0.9

28,335.8

to customers

Equity release

263.1

277.2

portfolio

Loans to subsidiary

454.7

403.9

undertakings

Trade receivables

1.5

1.9

Loan to defined

benefit pension

10.9

scheme

Total financial

33,242.4

4,201.9

681.4

38,125.7

31,069.1

4,269.8

1,091.4

36,430.3

assets

Other non

-financial

201.2

198.0

assets

Total assets

38,326.9

36,628.3

30,524.3

28,254.1

Amounts owed to

credit institutions

1,685.0

3,069.5

and other

customers

Debt securities in

issue

2,955.0

1,930.1

Derivative financial

205.0

282.2

Instruments

Lease liabilities

8.2

8.6

Trade payables

3.4

2.8

Subordinated

356.0

690.2

liabilities

Subscribed capital

15.2

41.6

Total financial

35,547.1

205.0

35,752.1

33,996.9

282.2

34,279.1

liabilities

Other non

-financial

46.7

43.8

liabilities

Total liabilities

35,798.8

34,322.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 275

b) Valuation of financial instruments carried at fair value

The Group holds certain financial assets and liabilities at fair value, grouped into Levels 1 to 3 of the fair value

hierarchy as explained below.

Valuation techniques

Fair values are determined using the following fair value hierarchy that reflects the significance of the inputs

used in measuring fair value.

Level 1

The most reliable fair values of financial instruments are quoted market prices in an actively traded market.

The Group’s Level 1 portfolio mainly comprises the Group’s debt securities, with the exception of certificates of

deposits; for which traded prices are not readily available.

Level 2

These are valuation techniques for which all significant inputs are taken from observable market data. These

include valuation models used to calculate the present value of expected future cash flows and may be

employed when no active market exists and quoted prices are available for similar instruments in active

markets. Examples of Level 2 instruments are certificates of deposit and interest rate swaps.

Level 3

These are valuation techniques for which one or more significant inputs are not based on observable market

data.

Valuation techniques include net present value by way of discounted cash flow models. Assumptions and

market observable inputs used in valuation techniques include risk-free and benchmark interest rates, similar

market products, foreign currency exchange rates and equity index prices. Critical judgement is applied by

management in utilising unobservable inputs including expected price volatilities, expected mortality rates and

prepayment rates, based on industry practice or historical observation. The objective of valuation techniques is

to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date

that would have been determined by market participants on an arm’s-length basis.

Transfers between levels

The Group makes transfers between the different levels of the fair value hierarchy where the inputs used to

measure the fair value of the financial instruments in question no longer satisfy the conditions required to be

classified in a certain level within the hierarchy. Any such transfer between different levels of the fair value

hierarchy is made at the date the event in question that results in a change in circumstances occurs.

There were no transfers between different levels of the fair value hierarchy during the year ended 31 December

2025 or the year ended 31 December 2024.

The following tables provide an analysis of financial assets and liabilities held within the Statement of

Financial Position at fair value, grouped into Levels 1 to 3 of the fair value hierarchy.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 276

Group

2025

2024

£m

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Financial assets

held at FVOCI:

Debt securities

4,269.4

4,349.6

Financial assets at

FVTPL:

Equity share

18.3

16.9

investments

Derivative

financial

335.2

15.6

350.8

736.8

15.3

752.1

Instruments

Equity release

263.1

277.2

portfolio

Loans and

advances to

customers

0.8

0.9

Share warrants

21.9

Loan to defined

benefit pension

10.9

scheme

4,269.4

335.2

308.7

4,913.3

4,349.6

736.8

332.2

5,418.6

Financial liabilities

at FVTPL:

Derivative

financial

178.4

7.8

186.2

209.0

16.1

225.1

Instruments

Fair value of put

1.0

4.1

option Obligation

178.4

8.8

187.2

209.0

20.2

229.2

4,269.4

156.8

299.9

4,726.1

4,349.6

527.8

312.0

5,189.4

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 277

Society

2025

2024 (restated*)

£m

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Financial assets

held at FVOCI:

Debt securities

4,201.9

4,269.8

Financial assets at

FVTPL:

Derivative

financial

315.1

18.0

333.1

727.7

15.3

743.0

Instruments

Debt securities*

73.5

70.3

Equity release

263.1

277.2

portfolio

Loans and

advances to

customers

0.8

0.9

Loan to defined

benefit pension

10.9

scheme

4,201.9

315.1

366.3

4,883.3

4,269.8

727.7

363.7

5,361.2

Financial liabilities

at FVTPL:

Derivative

financial

197.2

7.8

205.0

261.7

20.5

282.2

Instruments

197.2

7.8

205.0

261.7

20.5

282.2

4,201.9

117.9

358.5

4,678.3

4,269.8

466.0

343.2

5,079.0

Performance & Strategy Governance

Financial Statements

Other Information

* The information shown above for the year ended 31 December 2024, and the information for the year ended 31 December 2024 within

the table on page 279, is restated to reflect the appropriate presentation of ‘Financial assets at FVTPL: Debt securities’. The valuation of

these financial assets is determined using a discounted cashflow valuation model and is not based on observable market prices.

Accordingly, all £70.3m of Debt securities (at FVTPL) are now classified as Level 3 financial assets, rather than Level 1. There is no

impact on the overall total amount reported for the year ended 31 December 2024.

Skipton Group Annual Report & Accounts 2025 278

The tables below analyse the movements in the Level 3 portfolio during the year:

Group 2024

Equity

Loans and

Derivative

Fair value of

£m

release

advances

financial

put option

warrants

Total

Investments

portfolio

to customers

instruments

obligation

At 1 January

10.5

293.3

0.9

(22.7)

(3.5)

15.1

293.6

Gain / (loss)

recognised in

Income Statement

1.1

(12.6)

21.9

(0.3)

5.9

16.0

Revaluations to

goodwill

(0.3)

Accrued interest

2.6

0.1

2.7

Repayments

(4.3)

(0.1)

(4.4)

Realised losses

(1.8)

Additions / Disposals /

5.3

0.9

6.2

Other

At 31 December

16.9

277.2

0.9

(0.8)

(4.1)

21.9

312.0

Notes

A. These are unrealised gains and are included in the Income Statement line ‘Fair value (losses) / gains on financial instruments

mandatorily held at FVTPL’; as presented within Note 5 line ‘Equity share investments’.

B. These are unrealised losses and are included in the Income Statement line ‘Fair value (losses) / gains on financial instruments

mandatorily held at FVTPL’; as presented within Note 5 line ‘Equity release portfolio’.

C. These are unrealised gains and are included in the Income Statement line ‘Fair value (losses) / gains on financial instruments

mandatorily held at FVTPL’; as presented within Note 5 line ‘Derivatives associated with equity release portfolio’.

D. Included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented

within Note 5 line ‘Put options held by minority shareholders’.

E. Included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented

within Note 5 line ‘Share warrants’.

F. Included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented

within Note 5 line ‘Loan to defined benefit pension scheme’.

G. Included in the Income Statement line ‘Interest receivable and similar income’.

H. Included in the Income Statement line ‘Impairment and provisions’; as presented within Note 8 line ‘Realised losses on equity release

portfolio’.

Group 2025

Equity

Loans and

Derivative

Fair value of

Loan to defined

£m

release

advances

financial

put option

warrants

benefit pension

Total

investments

portfolio

to customers

instruments

obligation

scheme

At 1 January

16.9

277.2

0.9

(0.8)

(4.1)

21.9

312.0

Gain / (loss)

recognised in Income

0.4

(14.5)

8.1

(0.2)

5.6

(2.2)

(2.8)

Statement

Revaluations to

goodwill

(0.8)

Accrued interest

5.7

0.1

0.5

0.8

7.1

Repayments

(4.0)

(0.2)

(2.3)

(6.5)

Realised losses

(1.3)

Exercise of put

options by non

controlling

4.2

shareholders

Additions / Disposals

1.0

(0.1)

(27.5)

14.6

(12.0)

/ Other

At 31 December

18.3

263.1

0.8

7.8

(1.0)

10.9

299.9

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 279

Loans and

Loan to

Society 2025

Equity

advances

Derivative

Debt

defined

£m

release

financial

securities

benefit

Total

portfolio

customers

instruments

pension

scheme

At 1 January

277.2

0.9

(5.2)

70.3

343.2

(Loss) / gain recognised in Income Statement

(14.5)

14.9

3.2

(2.2)

1.4

Accrued interest

5.7

0.1

0.5

0.8

7.1

Repayments

(4.0)

(0.2)

(2.3)

(6.5)

Realised losses

(1.3)

Additions

14.6

At 31 December

263.1

0.8

10.2

73.5

10.9

358.5

Society 2024 (restated*)

Equity

Loans and

Derivative

Debt

£m

release

advances

financial

securities*

Total

portfolio

to customers

instruments

At 1 January

293.3

0.9

(34.2)

260.0

(Loss) / gain recognised in Income Statement

(12.6)

29.0

(4.0)

12.4

Accrued interest

2.6

0.1

2.7

Repayments

(4.3)

(0.1)

(4.4)

Realised losses

(1.8)

Additions

74.3

At 31 December

277.2

0.9

(5.2)

70.3

343.2

* The information shown above for the year ended 31 December 2024 is restated to reflect the appropriate presentation of ‘Debt

securities’ – see page 277 for details.

Notes

A. Included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented

within Note 5 line ‘Equity release portfolio’.

B. £8.1m (2024: £21.9m) is included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held

at FVTPL’; as presented within Note 5 line ‘Derivatives associated with equity release portfolio’. The remaining £6.8m (2024: £7.1m)

is included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as

presented within Note 5 line ‘Hedging instruments and hedged items’.

C. Included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented

within Note 5 line ‘Other financial instruments’.

D. Included in the Income Statement line ‘Fair value (losses) / gains on financial instruments mandatorily held at FVTPL’; as presented

within Note 5 line ‘Loan to defined benefit pension scheme’.

E. Included in the Income Statement line ‘Interest receivable and similar income’.

F. Included in the Income Statement line ‘Impairment and provisions’; as presented within Note 8 line ‘Realised losses on equity release

portfolio’.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 280

Equity share investments

The valuation of the Group’s unlisted investments is typically regarded as a Level 3 valuation technique as

certain inputs are not market observable. Further details of the Group’s equity share investments are found in

Note 20e).

Equity release portfolio

The valuation of the equity release portfolio is regarded as a Level 3 valuation technique as certain inputs into

the valuation are not market observable. Further details on the valuation techniques used are found in Note 1f).

Further details on the inputs into the valuation and the impact of reasonably possible alternative assumptions

of certain inputs into the valuation of the portfolio are found in Note 1v).

Loans and advances to customers

The valuation of these loans and advances to customers is regarded as a Level 3 valuation technique as

certain inputs are not market observable. Further details are found in Note 1f).

Derivative financial instruments

The Level 3 derivative financial instruments included in the tables on pages 276 to 279 mostly comprise

derivatives which are used to hedge the Group’s interest rate risk and inflation risk arising from the equity

release portfolio. The valuation of these derivatives is regarded as a Level 3 valuation technique as certain

inputs into the valuation are not market observable. Further details on the inputs into the valuation and the

impact of reasonably possible alternative assumptions of certain inputs into the valuation of these derivatives

are found in Note 1v).

Any change in fair value of the derivative liabilities is offset to some extent by a corresponding but opposite

change in the value of the equity release portfolio. The characteristics and the valuation requirements differ

slightly between the derivatives and the equity release portfolio resulting in the changes in fair value not

offsetting completely. During the year the net impact to the Income Statement (Group and Society) was a debit

of £6.4m (2024: £9.3m credit).

Debt securities

The valuation of the retained Darrowby 6 B Notes is regarded as a Level 3 valuation technique as the

credit risk premium is a key input into the calculation and is not market observable. This input is based on

the judgement of senior management and observed similar transactions within the market.

Fair value of put option obligation

A key input into the calculation of the fair value of the put option obligation is the estimate of the market value

of the noncontrolling shareholding. As this input is based on the judgement of senior management, the

valuation of the put option obligation is considered to be a Level 3 valuation technique.

Share warrants and other assets

These assets relate to share warrants held in unlisted entities and amounts recognised, where appropriate, for

additional share warrants yet to be received. The valuation of these assets is regarded as a Level 3 valuation

technique as certain inputs into the valuation are not market observable. Further details are found in Note 1f).

Loan to defined benefit pension scheme

The valuation of the loan to the defined benefit pension scheme is regarded as a Level 3 valuation technique

as certain inputs into the valuation are not market observable. Further details on the inputs into the valuation

of this loan, and the impact of reasonably possible alternative assumptions of certain inputs, are found in Note

1v). For the year ended 31 December 2025 the net impact to the Income Statement (Group and Society) was a

debit of £2.2m (2024: £nil).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 281

c) Fair values of financial instruments not carried at fair value

The tables below summarise the carrying values and fair values of those financial assets and liabilities not

presented within the Statement of Financial Position at fair value.

£m

Group 2025

Society 2025

Carrying Value

Fair Value

Carrying Value

Fair Value

Financial assets

Cash in hand and balances with the Bank of England

1,360.2

Loans and advances to credit institutions

353.3

304.7

Loans and advances to customers

33,378.9

33,609.2

31,121.3

31,324.5

Trade receivables

73.6

1.5

Loans to subsidiary undertakings

454.7

35,166.0

35,396.3

33,242.4

33,445.6

Financial liabilities

30,526.3

30,535.0

30,524.3

30,531.0

Amounts owed to credit institutions

327.2

513.1

Amounts owed to other customers

2,719.6

2,723.5

1,171.9

Debt securities in issue

3,361.9

3,349.8

2,955.0

2,950.6

Lease liabilities

110.3

8.2

Trade payables

14.4

3.4

Subordinated liabilities

356.0

364.1

356.0

364.1

Subscribed capital

15.2

21.1

15.2

21.1

37,430.9

37,445.4

35,547.1

35,563.4

£m

Group 2024

Society 2024

Carrying Value

Fair Value

Carrying Value

Fair Value

Financial assets

Cash in hand and balances with the Bank of England

1,930.6

Loans and advances to credit institutions

414.6

397.8

Loans and advances to customers

30,601.1

30,804.7

28,334.9

28,531.4

Trade receivables

68.8

1.9

Loans to subsidiary undertakings

403.9

Other assets

0.1

33,015.2

33,218.8

31,069.1

31,265.6

Financial liabilities

28,268.5

28,239.2

28,254.1

28,239.2

Amounts owed to credit institutions

1,599.6

1,800.6

Amounts owed to other customers

2,751.1

2,753.8

1,268.9

1,268.7

Debt securities in issue

2,435.3

2,423.1

1,930.1

1,930.9

Lease liabilities

92.1

8.6

Trade payables

11.0

2.8

Subordinated liabilities

690.2

700.4

690.2

700.4

Subscribed capital

41.6

61.8

41.6

61.8

35,889.4

35,881.0

33,996.9

34,013.0

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 282

Key considerations in the calculation of fair values of those financial assets and liabilities not presented within

the Statement of Financial Position at fair value are set out below unless there is no significant difference

between carrying value and fair value.

Loans and advances to customers

For fixed rate and tracker mortgage products, the Group has estimated the fair value of these products using

discounted cash flows and has applied relevant current market product rates as discount rates in order to also

incorporate an element of future expected credit losses. Fixed rate and tracker mortgages have been

discounted using current market product rates that are specific to the particular market to which they relate.

Market prices will generally have moved since the fixed or tracker rate was taken out, therefore the valuation of

these products will change reflecting upwards or downwards movements in market rates. The valuation

includes information and expectations regarding estimated redemption profiles which are regularly reviewed

and updated in light of experience.

As these redemption profiles are not considered to be observable by the market, the fair value of loans and

advances to customers is considered to be derived by using Level 3 valuation techniques.

For standard variable rate mortgage products, the interest rate on such products is equivalent to a current

market product rate and as such the Group considers the fair value of these mortgages to be equal to their

carrying value.

Savings products at variable rates are at current market rates and therefore the Group regards the fair value to

be equal to the carrying value.

The fair value of fixed rate savings products has been determined using discounted cash flows, discounted

using a combined yield curve of cash and swap term rates.

Changes in market prices since the product was taken out will result in increases or decreases in the fair value

of the fixed rate savings products. The valuation includes information and expectations regarding estimated

withdrawal profiles which are regularly reviewed and updated in light of experience. As these profiles are not

considered to be observable by the market, the fair value of shares is considered to be derived by using Level 3

valuation techniques.

Amounts owed to credit institutions and other customers

Balances in these categories are valued using discounted cash flows which use only observable market inputs

consisting of the combined yield curve of cash and swap term rates. All inputs to this valuation technique are

market observable and as such they are categorised within Level 2 of the fair value hierarchy, with the

exception of amounts owed to other customers in relation to retail deposits with SIL which uses information

and expectations regarding estimated withdrawal profiles which are regularly reviewed and updated in light of

experience. As these profiles are not considered to be observable by the market, this fair value is considered to

be derived by using Level 3 valuation techniques.

Debt securities in issue

Where securities are actively traded in a recognised market, with readily available and quoted prices, these

have been used to value the securities. These securities are therefore regarded as having Level 1 fair values.

Where such prices are not available, discounted cash flows are used. Where only market observable inputs are

used within these discounted cash flows, such as a combined yield curve of cash and swap term rates, theses

securities are categorised as having Level 2 fair values. Securities valued using unobservable inputs are

regarded as having Level 3 fair values.

Subordinated liabilities and subscribed capital

Prices are quoted for these instruments in actively traded markets and, as a result, these instruments are

categorised as having Level 1 fair values.

d) Fair values of non-financial assets and liabilities not carried at fair value

The fair value of investment property, which is a non-financial asset, is disclosed in these financial statements.

Note 24 provides details of the valuation techniques used in estimating this fair value, together with the

resulting categorisation of these valuation techniques within the fair value hierarchy.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 283

The Group’s structure and reportable segments are outlined in the Strategic Report.

Transactions between the segments are on normal commercial terms and conditions. The accounting policies

of the reportable segments are consistent with the Group’s accounting policies. The Group has not aggregated

any of its operating segments for the purposes of financial reporting. Intra-group dividends are excluded from

the segmental analysis presented as these are not included in the measure of segment profit or loss that is

used by the Group’s Board.

No geographical analysis is presented because substantially all of the Group’s activities are conducted within

the UK. Of the total external income, £81.5m (2024: £63.1m) was generated outside the UK.

A breakdown of the allocation of goodwill by segment is included within Note 25.

Group

2025

£m

Society

SIL

Connells

Other^

Total

Interest receivable and similar income

1,956.8

141.7

16.0

(157.6)

1,956.9

Interest payable and similar charges

(1,514.6)

(99.9)

(13.0)

185.5

(1,442.0)

Net interest income

442.2

41.8

3.0

27.9

514.9

Net non

-interest income

46.2

0.3

1,155.1

11.0

1,212.6

Fair value gains / (losses) on hedged

15.1

(0.2)

(5.9)

9.0

items and derivatives

Fair value losses on equity release

(14.5)

portfolio

Fair value gains on share warrants

5.6

Fair value losses on put options held by

minority shareholders

(0.2)

Fair value gains on equity share

0.4

investments mandatorily held at FVTPL

Fair value gains / (losses) on other

instruments mandatorily held at FVTPL

1.1

(3.3)

(2.2)

Realised profits on treasury assets held

0.3

at FVOCI

Profit on disposal of Group

10.8

undertakings

Share of profits from joint ventures

2.0

Charge on buy

-back of Permanent

(27.9)

Interest

-Bearing Shares

Total income

462.5

41.9

1,176.7

29.7

1,710.8

Administrative expenses

(262.4)

(29.7)

(1,102.5)

(28.8)

(1,423.4)

Realised losses on equity release

(1.3)

portfolio

Impairment and provisions for liabilities

(9.5)

(0.1)

(1.1)

(0.2)

(10.9)

Profit before tax

189.3

12.1

73.1

0.7

275.2

Taxation

(49.5)

(1.6)

(15.2)

0.1

(66.2)

Profit after tax

139.8

10.5

57.9

0.8

209.0

Total assets

38,326.9

2,540.4

698.2

(821.3)

40,744.2

Total liabilities

35,798.8

2,388.7

440.3

(748.2)

37,879.6

Total income can be analysed as follows:

Group

2025

£m

Society

SIL

Connells

Other^

Total

External Income

517.9

13.8

1,157.7

21.4

1,710.8

Income from other segments

(55.4)

28.1

19.0

8.3

Total Income

462.5

41.9

1,176.7

29.7

1,710.8

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 284

Total income can be analysed as follows:

* In accordance with IFRS 8

Operating Segments

, the Group has expanded the above segmental analysis to show the breakdown of ‘Net

interest income’ between ‘Interest receivable and similar income’ and ‘Interest payable and similar charges’. The information shown for

the year ended 31 December 2024 is therefore restated to present on this updated basis. The impacts of this change are presentational

only and there is no impact on the amounts reported for the year ended 31 December 2024.

^ The ‘Other’ category comprises segments that are not separately reportable, together with the impact of Group consolidation

adjustments. The Other category therefore includes amounts relating to all Group entities except for the Society, SIL and Connells.

Amounts relating to Group consolidation adjustments include the elimination of intra-group transactions such as intercompany fees.

Group (restated*)

2024

£m

Society

SIL

Connells

Other^

Total

Interest receivable and similar income

2,083.5

166.4

17.8

(165.4)

2,102.3

Interest payable and similar charges

(1,676.3)

(114.6)

(12.3)

189.3

(1,613.9)

Net interest income

407.2

51.8

5.5

23.9

488.4

Net non

-interest income

43.9

0.3

1,055.4

13.6

1,113.2

Fair value gains / (losses) on hedged

28.8

(0.1)

(4.8)

23.9

items and derivatives

Fair value losses on equity release

(12.6)

portfolio

Fair value gains on share warrants

5.9

Fair value losses on put options held by

minority shareholders

(0.3)

Fair value gains on equity share

1.1

investments mandatorily held at FVTPL

Fair value (losses) / gains on other

instruments mandatorily held at FVTPL

(4.0)

4.0

Realised losses on treasury assets held

(1.8)

at FVOCI

Share of profits from joint ventures

1.4

Total income

461.5

52.0

1,069.0

36.7

1,619.2

Administrative expenses

(262.0)

(21.4)

(1,008.9)

(20.0)

(1,312.3)

Realised losses on equity release

(1.8)

portfolio

Impairment and provisions for liabilities

12.2

0.4

1.2

(0.3)

13.5

Profit before tax

209.9

31.0

61.3

16.4

318.6

Taxation

(56.7)

(3.1)

(15.8)

(2.5)

(78.1)

Profit after tax

153.2

27.9

45.5

13.9

240.5

Total assets

36,628.3

2,618.6

649.1

(880.7)

39,015.3

Total liabilities

34,322.9

2,466.6

396.8

(838.4)

36,347.9

Group

2024

£m

Society

SIL

Connells

Other^

Total

External Income

550.2

1.4

1,051.4

16.2

1,619.2

Income from other segments

(88.7)

50.6

17.6

20.5

Total Income

461.5

52.0

1,069.0

36.7

1,619.2

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 285

The components of the Prudential Group’s capital and the associated regulatory framework are set out in the

Strategic Report, and this is followed by quantitative disclosure of the components of capital resources and

capital requirements. The Group’s capital management processes are also set out in the Strategic Report.

Throughout both the current year and the prior year, the Group complied with and maintained surplus capital

above all externally imposed capital requirements.

The Group adopted during the year the following new accounting standards and amendments to existing

accounting standards, none of which had a material impact on these consolidated financial statements:

•

Lack of exchangeability

(Amendments to IAS 21).

Standards issued but not yet effective

The new and amended accounting standards and interpretations set out below will be effective for future

reporting periods (subject to UK endorsement for some) and have not been early adopted by the Group in

preparing these consolidated financial statements:

Amendments to Classification and Measurement of Financial Instruments

(Amendments to IFRS 9 and

IFRS 7)

The Amendments, which are effective for accounting periods commencing on or after 1 January 2026, include:

• Clarifications of the requirements for recognition and derecognition of financial assets and liabilities

• A clarification that a financial liability is derecognised on the ‘settlement date’ and introduce an accounting

policy choice (if specific conditions are met) to derecognise financial liabilities settled using an electronic

payment system before the settlement date

• Additional guidance on how the contractual cash flows for financial assets with environmental, social and

corporate governance (ESG) and similar features should be assessed

• Clarifications on what constitute ‘non-recourse features’ and what are the characteristics of contractually-

linked instruments

• The introduction of disclosures for financial instruments with contingent features and additional disclosure

requirements for equity instruments classified at FVOCI

With respect to the amendments on the derecognition of financial liabilities that are settled through an

electronic payment system, the Group has performed an initial impact assessment. There is a limited number

of electronic payment systems used by the Group that do not result in real-time settlement. In response to the

Amendments, the Group is establishing any revisions required to existing accounting practices; the impact on

the Group’s annual consolidated financial statements is not currently expected to be material.

ii. IFRS 18

Presentation and Disclosure in Financial Statements

IFRS 18 replaces IAS 1

Presentation of Financial Statements

and becomes effective for accounting periods

commencing on or after 1 January 2027. IFRS 18 introduces new requirements for presentation within the

statement of profit or loss, including specified totals and subtotals. Furthermore, entities are required to

classify all income and expenses within the statement of profit or loss into one of five categories; operating,

investing, financing, income taxes and discontinued operations, whereof the first three are new. There are also

other changes, including specific presentation requirements and options for entities, such as the Society, that

provide finance to customers.

The Group is currently assessing the impacts for the Group’s primary financial statements and notes to the

financial statements.

iii. Other, none of which are currently expected to have a material impact on the Group’s consolidated

financial statements:

• IFRS 19

Subsidiaries without Public Accountability: Disclosures

;

•

Annual Improvements to IFRS Accounting Standards – Volume 11

; and

•

Contracts Referencing Nature-dependent Electricity

(Amendments to IFRS 9 and IFRS 7).

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 286

There have been no material subsequent events between 31 December 2025 and the date of approval of this

Annual Report and Accounts by the Board.

Performance & Strategy Governance

Financial Statements

Other Information

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 288

Nature of the Group’s activities

The Group holds an investment in a number of subsidiary undertakings. The Society and the majority of its

subsidiary undertakings are incorporated in the UK, with the exception of the entities listed below. For a full list

of the principal trading subsidiaries in the Group and the nature of their activities, see Note 20a) of the financial

statements.

At 31 December 2025, Jade also held a 100% ownership in the following trading subsidiary undertakings, all of

which carry out the principal business activity of the Jade group of businesses.

In addition, the Group holds a non-controlling interest of 17.7% in Wynyard Group Limited, which entered

liquidation in February 2017 and which is incorporated in New Zealand.

Country by country disclosures

An analysis of turnover, which is regarded as total income as defined below (and which excludes dividend

income from subsidiaries), profit before tax, the current tax charge, corporation taxes paid, public subsidies

received and the average number of employees on a full-time equivalent basis is set out below. The

information presented is at a full Group level of consolidation.

Total income is defined as net interest income plus fees and commissions receivable (net of fees and

commissions payable), together with all other components of operating income. Total gross income and total

gross profit before tax, for each country, represents consolidated income or profit before tax for that country.

Name of subsidiary undertaking Principal business activity

Country of

incorporation

% ownership

Interest

31.12.25

Jade Software Corporation Limited

Provider of software development services

New Zealand 100%

Skipton International Limited

Offshore deposit taker and lender

Guernsey 100%

2025

£m

UK Australia Guernsey

New

Zealand

Jersey Total

Current tax expense*

62.7

1.3

0.1

0.3

64.4

Corporation taxes paid

54.2

1.7

0.5

56.4

Public subsidies received^

Average number of employees

17,430

137

213

17,841

Name of subsidiary undertaking Country of incorporation

Contec Group International Limited

New Zealand

Jade Software Corporation (NZ) Limited

New Zealand

Jade Software Corporation Pty Limited

Australia

Jade Software Corporation UK Limited

Northwest Investments NZ Limited

New Zealand

2025

£m

UK Australia Guernsey

New

Zealand

Jersey Total

Total income by country

1,653.6

3.7

33.5

16.2

8.3

1,715.3

Inter

-country adjustments

28.1

(28.1)

(4.5)

Consolidated income

1,681.7

3.7

5.4

11.7

8.3

1,710.8

Profit before tax by country

263.2

0.1

9.7

0.1

2.1

275.2

Inter

-country adjustments

35.4

1.8

(27.3)

(9.9)

Consolidated profit before tax

298.6

1.9

(17.6)

(9.8)

2.1

275.2

Performance & Strategy Governance

Financial Statements

Other Information

* The current tax expense in Guernsey and Jersey includes a Pillar Two top-up charge in SIL.

Skipton Group Annual Report & Accounts 2025 289

2024

£m

UK Australia Guernsey

New

Zealand

Jersey Total

Current tax expense**

67.1

2.7

0.4

70.2

Corporation taxes paid

64.0

3.6

0.7

68.3

Public subsidies received^

0.2

Average number of employees

16,572

105

225

16,951

2024

£m

UK Australia Guernsey

New

Zealand

Jersey Total

Total income by country

1,551.7

3.0

42.8

17.8

9.2

1,624.5

Inter

-country adjustments

54.1

(54.1)

(5.3)

Consolidated income

1,605.8

3.0

(11.3)

12.5

9.2

1,619.2

Profit before tax by country

285.9

0.1

27.1

1.3

4.2

318.6

Inter

-country adjustments

59.8

1.3

(53.4)

(7.7)

Consolidated profit before tax

345.7

1.4

(26.3)

(6.4)

4.2

318.6

** The current tax expense in the UK includes a Pillar Two top-up charge in the Society.

^ Public subsidies received relate to cash payments received from governments in the form of grants.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 290

These percentages form part of the audited Accounts.

Explanation

The above percentages have been calculated in accordance with the provisions of the Building Societies Act

1986.

The lending limit measures the proportion of business assets not in the form of loans fully secured on

residential property. Business assets are defined as the total assets of the Group plus provisions for

impairment losses on loans and receivables, less liquid assets, intangible assets, property, plant and

equipment, right-of-use assets and investment property as shown within the Group Statement of Financial

Position.

The funding limit measures the proportion of shares and borrowings (excluding the fair value adjustment for

hedged risk) not in the form of shares held by individuals. We have taken advantage of the relief set out in SI

2007/No 860, effective from April 2007, to exclude retail offshore deposits from the total of wholesale funds.

The statutory limits are as laid down under the Building Societies Act 1986 and ensure that the principal

purpose of a building society is that of making loans which are secured on residential property and are funded

substantially by its members.

These percentages form part of the audited Accounts.

Explanation

The above percentages have been calculated from the Group and Society Income Statements and Statements

of Financial Position.

Shares, deposits and borrowings represent the total of shares, amounts owed to credit institutions, amounts

owed to other customers and debt securities in issue, including accrued interest and the fair value adjustments

for hedged risk.

Gross capital represents the general reserve together with the fair value reserve, cash flow hedging reserve,

cost of hedging reserve, translation reserve, subordinated liabilities, subscribed capital and non-controlling

interests, as shown within the Group Statement of Financial Position. Free capital represents gross capital,

less property, plant and equipment, right-of-use assets, investment property and intangible assets as shown

within the Group Statement of Financial Position.

Liquid assets represent the total of cash in hand and balances with the Bank of England, loans and advances

to credit institutions and debt securities. Mean total assets are the average of the 2025 and 2024 total assets.

Management expenses represent administrative expenses.

1. Statutory percentages

As at December 2025 (%)

Statutory Limit (%)

Lending limit

2.79

25.00

Funding limit

12.53

50.00

2. Other percentages

2025 (%) 2024 (%)

As a percentage of shares and borrowings:

(i) Gross capital

8.76

9.70

(ii) Free capital

7.24

8.31

(iii) Liquid assets

16.20

19.10

As a percentage of mean total assets:

(i) Group profit after taxation

0.52

0.63

(ii) Group management expenses

3.57

3.44

(iii) Society management expenses

0.70

0.73

As a percentage of closing total assets:

(i) Group profit after tax

0.51

0.62

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 291

3. Information relating to Directors at 31 December 2025

The Board of Directors at 31 December 2025, their dates of birth and dates of appointment as a Director are as

follows:

*Executive Directors

Documents may be served on any of the above-named Directors at the following address: Addleshaw Goddard,

3 Sovereign Square, Sovereign Street, Leeds, LS1 4ER.

The Directors’ business occupations and other Directorships at 31 December 2025 were as follows:

Director Date of Birth Date of Appointment

G V Burr

12 January 1963 27 April 2022

P S Chambers*

26 April 1967 26 March 2024

I A Cummings

22 October 1961 1 July 2022

S J Davis

28 June 1963 3 April 2023

H I Gunawickrema

10 April 1978 1 November 2024

S A Haire*

18 April 1974 31 December 2022

D A Hall

9 November 1955 27 March 2017

H L Jackson

23 August 1965 24 October 2018

G J Lindsay

24 August 1958 19 May 2025

Director Skipton Group Role Other Directorships held

G V Burr

Non-Executive Director

(Chair of the Board, Chair of the Board Nominations

Committee, Chair of the Non

Executive Remuneration

Committee)

Metro AG

Skipton Group Holdings Limited

P S Chambers

Building Society Group Chief Financial Officer

(member of the Group Executive Committee, member

of the Non-Executive Remuneration Committee)

Skipton Financial Services Limited

Skipton Group Holdings Limited

Skipton Investments Limited

Skipton Trustees Limited

I A Cummings

Non-Executive Director

(Chair of the Board Audit Committee, member of the

Board Change Committee, member of the Board

Nominations Committee, member of the Board Risk

Committee)

Designated Speak Out (Whistleblowing) Non-

Executive Director

Investec Wealth & Investment Limited

Rathbones Group PLC

Rathbone Investment Management Limited

Skipton Group Holdings Limited

TFS Derivatives Limited

Tradition Financial Services

Tradition UK Holdings Limited

Tradition London Clearing Limited

Tradition Management Services Limited

Tradition (UK) Limited

S J Davis

Non-Executive Director

(Chair of the Board Remuneration Committee,

member of the Board Nominations Committee)

Designated Colleague Non-Executive Director

Peter Vardy Global

Philip Kingsley Products Limited

Scottish Ballet

Skipton Group Holdings Limited

Trichological Clinic Limited

H I Gunawickrema

Non-Executive Director

(member of the Board Nominations Committee,

member of the Board Risk Committee)

Countess of Chester Hospital NHS

Foundation Trust

HIG Advisory Limited

Skipton Group Holdings Limited

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 292

3. Information relating to Directors at 31 December 2025 (continued)

Director Skipton Group Role Other Directorships held

S A Haire

Building Society Group Chief Executive

(Chair of the Group Executive Committee, member of the

Non-Executive Remuneration Committee)

Skipton Group Holdings Limited

D A Hall

Non-Executive Director

(Chair of the Board Risk Committee, member of the

Board Audit Committee, member of the Board

Nominations Committee)

Aareal Bank AG

Auxmoney Europe Holding Limited

Moneta Money Bank

Skipton Group Holdings Limited

H L Jackson

Non-Executive Director

(Chair of the Board Change Committee, member of the

Board Nominations Committee, member of the Board

Remuneration Committee, member of the Board Risk

Committee)

Admiral Long Foundation

Ikano Bank AB

Rothesay Life PLC

Rothesay Limited

Skipton Group Holdings Limited

The Veterinary Defence Society

Yorkshire Cancer Research

G J Lindsay

Non-Executive Director

(Deputy Chair of the Board, member of the Board

Nominations Committee, member of the Board Audit

Committee, member of the Board Change Committee,

member of the

Board Remuneration Committee)

Senior Independent Director

Break Charity

Family Assurance Friendly Society Limited

Family Assurance Staff Pension Scheme

Trustees Limited

Gastonrange Limited

Skipton Group Holdings Limited

The Brain Tumour Charity

Vanquis Banking Group PLC

Vanquis Bank Limited

Messrs Chambers and Haire have service contracts entered into on 6 February 2024 and 14 July 2022

respectively which may be terminated by either party giving one year’s notice.

4. Principal office

The Society is a building society incorporated and domiciled in the United Kingdom. The address of the

principal office is The Bailey, Skipton, North Yorkshire, BD23 1DN.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 293

Set out below are the definitions of terms used within the Annual Report and Accounts to assist the reader and

to facilitate comparison with other financial institutions:

Arrears

A customer is in arrears when they are behind in fulfilling their obligations with the result

that an outstanding loan commitment is overdue.

Asset Backed Securities

(ABS)

An Asset Backed Security (ABS) is a security whose value and income payments are

derived from and collateralised (or ‘backed’) by a specified pool of underlying assets.

Typically, these assets are pools of residential or commercial mortgages.

Buy

-to-let (BTL)

mortgages

Mortgages offered to customers purchasing residential property to be rented to others to

generate a rental income.

Common Equity Tier 1

(CET1) capital

Common Equity Tier 1 (CET1) capital primarily comprises internally generated capital from

retained profits, less regulatory adjustments. CET1 capital is fully loss absorbing.

Contractual maturity

The final payment date of a loan or other financial instrument, at which point the entire

remaining outstanding principal and interest is due to be repaid.

Covered bonds

Debt securities backed by a portfolio of mortgages that are segregated from the issuer’s

other assets to be solely for the benefit of the holders of the covered bonds. The Group

has established covered bonds as part of its funding activities. Covered bonds use retail /

residential mortgages as the asset pool.

Credit Valuation

Adjustment (CVA)

The adjustment applied to the fair value of derivatives for potential mark-to-

market losses

due to credit quality deterioration of a counterparty (that does not necessarily default).

Capital Requirements

Directive V (CRD V)

Capital Requirements Directive V (CRD V) became effective on 28 December 2020 and is

made up of the Capital Requirements Directive (CRD) and the Capital Requirements

Regulation (UK CRR).

Debt securities

Assets representing certificates of indebtedness of credit institutions, public bodies or

other undertakings.

Debt securities in issue

Transferable certificates of indebtedness of the Group to the bearer of the certificates.

These are liabilities of the Group and can include certificates of deposit.

Derivative financial

instruments

A derivative financial instrument is a type of financial instrument (or an agreement

between two parties) that has a value based on the underlying asset, index or reference

rate it is linked to. The Group uses derivative financial instruments to hedge its exposures

to market risks such as interest rate risk and currency risk.

Effective Interest Rate

(EIR) method

The method used to measure the carrying value of a financial asset or liability measured at

amortised cost and to allocate associated interest income or expense over the relevant

period.

Energy Performance

Certificate (EPC)

An Energy Performance Certificate (EPC) relates to an energy rating scheme which

identifies a household’s energy efficiency level. EPC scores range from least efficient (G)

to most efficient (A) on a scale.

Expected Credit Loss

(ECL)

The present value of all cash shortfalls over the expected life of the financial instrument to

determine impairment loss allowances under IFRS 9.

Exposure at Default (EAD)

The expected outstanding balance of an asset at the time of default.

Fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled,

between knowledgeable, willing parties in an arm's-length transaction.

Fair Value Through Other

Comprehensive Income

(FVOCI)

Financial instruments held at fair value in the Statement of Financial Position, with

changes in fair value recognised through other comprehensive income.

Fair Value Through Profit

or Loss

(FVTPL)

Financial instruments held at fair value in the Statement of Financial Position, with

changes in fair value recognised through the Income Statement.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 294

Financial Services

Compensation

Scheme (FSCS)

The UK's compensation fund of last resort for customers of authorised financial services

firms. The FSCS may pay compensation to customers if a firm is unable, or likely to be

unable, to pay claims against it, usually because it has stopped trading or has been

declared in default. The FSCS is funded by the financial services industry.

Forbearance strategies

Strategies to assist borrowers in financial difficulty, such as arrears capitalisation, a

reduction in the monthly payment, a conversion to interest only or a mortgage term

extension. Forbearance strategies aim, if possible, to avoid foreclosure or repossession.

Free capital

The aggregate of gross capital less property, plant and equipment, right-of-use assets,

investment property and intangible assets.

Funding limit

Measures the proportion of shares and borrowings (excluding the fair value adjustment for

hedged risk) not in the form of shares held by individuals. The calculation of the funding

limit is explained in the Annual Business Statement.

Goodwill

Goodwill arises on the acquisition of subsidiary undertakings, joint ventures, associates or

other businesses and represents the excess of the fair value of consideration over the fair

value of separately identifiable net assets acquired at the date of acquisition.

Greenhouse Gases (GHG)

Gases which absorb and re-emit infrared radiation, thereby trapping it in the Earth’s

atmosphere. It includes carbon dioxide (CO₂), methane (CH

), nitrous oxide (N₂O),

hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF

) and

nitrogen trifluoride (NF

). These emissions add to the greenhouse effect –

a contributor to

climate change.

Gross capital

The aggregate of the general reserve, translation reserve, fair value reserve, cash flow

hedging reserve, cost of hedging reserve, subordinated liabilities, subscribed capital and

non-controlling interests.

Internal Capital Adequacy

Assessment Process

(ICAAP)

The Group’s own assessment, as part of regulatory requirements, of the levels of capital

that it needs to hold in respect of the risks it faces under a business as usual scenario and

a variety of stress scenarios.

Internal Liquidity

Adequacy Assessment

Process (ILAAP)

The Group’s own assessment that current and projected levels of liquidity are sufficient

and appropriate for the Group’s plans, under a variety of stress scenarios. It also details the

Group’s compliance with the PRA’s regulatory requirements.

Internal Ratings

-Based

approach (IRB)

An advanced approach to measuring capital requirements in respect of credit risk. The IRB

approach may only be used with permission from the PRA.

International Swaps and

Derivatives

Association (ISDA)

Master Agreement

A standardised contract developed by ISDA and used to enter into bilateral derivatives

transactions.

Investment grade

The range of credit ratings, from Aaa to Baa3, as measured by external credit rating

agencies.

Lending limit

Measures the proportion of business assets not in the form of loans fully secured on

residential property. The calculation of the lending limit is explained in the Annual Business

Statement.

Leverage ratio

The ratio of Tier 1 capital divided by total leverage exposure measure of on and off-

balance

sheet assets, after netting derivatives.

Liquid assets

The total of cash in hand and balances with the Bank of England, loans and advances to

credit institutions and debt securities.

Liquidity Coverage Ratio

(LCR)

A measure designed to ensure that financial institutions have sufficient high-

quality assets

available to meet their liquidity needs for a 30 day liquidity stress scenario.

Liquidity ratio

Liquid assets as a percentage of shares, deposits and borrowings.

Loan

-to-value ratio (LTV)

A ratio which expresses the balance of a mortgage as a percentage of the value of the

property. The Group calculates residential mortgage LTVs on an indexed basis (the value

of the property is updated on a quarterly basis to reflect changes in a house price index).

Loans past due / past due

loans

Loans on which payments are overdue including those on which partial payments are

being made.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 295

Loss Given Default (LGD)

An estimate of the loss that would be incurred should a borrower default on their credit

obligations.

Management expenses

Management expenses represent administrative expenses. The cost to mean asset ratio is

management expenses expressed as a percentage of mean total assets.

Material Risk Takers

(MRTs)

A group of employees to which the FCA’s Remuneration Code applies. MRTs consist of

Executive Directors, Non-

Executive Directors and certain senior managers who could have

a material impact on the firm’s risk profile.

Mean total assets

Represents the amount produced by halving the aggregate of total assets at the beginning

and end of the financial year.

Medium Term Notes

(MTN)

Corporate notes continuously offered by an entity to investors through a dealer, across a

range of maturity periods.

Member

A person who has a share investment or a mortgage loan with the Society, or is the holder

of a Permanent Interest-Bearing Share in the Society.

Minimum Requirement for

own Funds and Eligible

Liabilities (MREL)

A regulatory requirement for the minimum amount of equity and subordinated debt a firm

must maintain to support an effective resolution.

Mortgage Backed

Securities (MBS)

Assets which are backed by underlying mortgage collateral.

Net customer

satisfaction

Net customer satisfaction score is the percentage of members surveyed that scored

satisfaction as 5, 6 or 7 minus those scoring 1, 2 or 3 (on a scale of 1-7).

Net interest income

The difference between interest received on assets and interest paid on liabilities.

Net interest margin

Net interest income as a percentage of mean total assets.

Permanent Interest

Bearing Shares (PIBS) or

subscribed capital

Unsecured, deferred shares that are a form of Tier 2 capital. PIBS rank behind the

claims of all subordinated debt holders, depositors, payables and investing members of the

Society.

Prime

Prime mortgages are those granted to the most credit worthy category of borrower.

Probability of Default

(PD)

An estimate of the probability that a borrower will default on their credit obligations.

Put option

Where the Group acquires a majority shareholding in a subsidiary undertaking, but grants

the non-

controlling shareholders an option to sell their shares to the Group at some future

date(s), a put option obligation exists.

Renegotiated loans

Loans are classed as renegotiated, with the customer’s consent, when their terms have

changed during the year. Loans and advances may be renegotiated whether or not the

customer is experiencing financial difficulty in repaying their loan with the Group.

Repo / reverse repo

Short to medium-

term funding agreements which allow a borrower to sell a financial asset,

such as an ABS or government bond, as security for cash. As part of the agreement the

borrower agrees to repurchase the security at some later date. For the party selling the

security (and agreeing to repurchase it in the future) it is a repo; for the party on the other

end of the transaction (buying the security and agreeing to sell in the future) it is a reverse

repurchase agreement or reverse repo, for which the underlying collateral can typically be

resold or repledged if desired.

Residential loans

Mortgage lending secured against residential property.

Residential Mortgage

Backed Securities

(RMBS)

A category of ABS that represent interests in a group of residential mortgages. Investors in

these securities have the right to cash received from future mortgage payments (interest

and / or principal).

Risk appetite

The articulation of the level of risk that the Group is willing to take in order to safeguard the

interests of the Society's members whilst achieving business objectives.

Risk Weighted Assets

(RWAs)

The value of assets, after adjustment, under CRD V rules to reflect the degree of risk they

represent.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Group Annual Report & Accounts 2025 296

Securitisation

A process by which a group of assets, usually loans, are aggregated into a pool which is

used to back the issuance of new securities. A firm transfers these assets to a special

purpose vehicle which then issues securities backed by the assets. The Group has

established securitisation structures as part of its funding activities. These securitisation

structures use retail / residential mortgages as the asset pool.

Money deposited by non-

corporate depositors in a retail savings account with the Society.

Such funds are recorded as liabilities for the Society.

Shares, deposits and

borrowings

The total of shares, amounts owed to credit institutions, amounts owed to other customers

and debt securities in issue, including accrued interest and fair value adjustments for

hedged risk.

Significant Increase in

Credit Risk (SICR)

A significant increase in credit risk on a financial asset is judged to have occurred when an

assessment using quantitative and qualitative factors identifies that the credit risk has

increased significantly since the asset was originally recognised.

Solely Payments of

Principal and Interest

(SPPI) test

An assessment of whether the contractual terms of the financial asset give rise to cash

flows that are in substance solely payments of principal and interest.

Scope 1 emissions

Under the Greenhouse Gas Protocol methodology, scope 1 emissions include emissions

generated from sources under the direct control of an organisation. For example,

emissions from combustion of fuel or oil for heating offices.

Scope 2 emissions

Under the Greenhouse Gas Protocol methodology, scope 2 emissions include those

generated from the purchase of electricity.

Scope 3 emissions

Under the Greenhouse Gas Protocol methodology, scope 3 includes all indirect emissions.

These result from the activities of the organisation, but not in their direct control. This

includes areas like leased assets, suppliers and colleague commuting.

Stage 1 financial assets

Stage 1 financial assets are those which have not experienced a significant increase in

credit risk since origination. 12-month ECLs are recognised and interest revenue is

determined by the EIR on the gross carrying amount.

Stage 2 financial assets

Stage 2 financial assets have experienced a significant increase in credit risk since initial

recognition. Lifetime ECLs are recognised and interest revenue is determined by the EIR on

the gross carrying amount.

Stage 3 financial assets

Stage 3 financial assets are identified as in default and considered credit impaired.

Lifetime ECLs are recognised and interest revenue is determined by the EIR on the net

carrying amount.

Subordinated debt /

liabilities

Unsecured debt that ranks below the claims of depositors and senior creditors in the event

of insolvency, and may be structured to meet regulatory loss-

absorbing requirements such

as MREL.

Sub

-prime

Loans to borrowers that typically have weakened credit histories that include payment

delinquencies and in some cases potentially more severe problems such as court

judgments and discharged bankruptcies.

tCO₂e

This stands for metric tonnes of carbon dioxide equivalent. It is a standard unit for

measuring greenhouse gas emissions, accounting for the different greenhouse gases using

a single factor.

Term Funding Scheme

with Additional Incentives

for SMEs (TFSME)

A scheme allowing eligible banks and building societies to access four-year funding at

rates very close to Bank Base Rate, designed to incentivise eligible participants to provide

credit to businesses and households to bridge through the period of economic disruption

caused by COVID-19 – TFSME, which closed for drawdowns in 2021, included additional

incentives to provide credit to SMEs.

Tier 1 capital

A measure of financial strength, as defined by CRD V. Tier 1 capital comprises Common

Equity Tier 1 capital and Additional Tier 1 capital.

Tier 2 capital

Tier 2 capital comprises the Society’s PIBS.

UK Capital Requirement

Regulation (UK CRR)

UK Capital Requirements Regulation (UK CRR) implemented in 2022.

Wholesale funding

Amounts owed to credit institutions, amounts owed to other customers and debt securities

in issue excluding balances deposited by offshore customers.

Performance & Strategy Governance

Financial Statements

Other Information

Skipton Building Society is a member of the Building Societies Association. Authorised by the Prudential Regulation Authority

and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under registration number 153706,

for accepting deposits, advising on and arranging mortgages and providing restricted financial advice.

Principal Office, The Bailey, Skipton, North Yorkshire, BD23 1DN.

Go to skiptongroup.com

Source: the issuer's announcement on the London Stock Exchange's Regulatory News Service, reproduced for reference. Announcement text is the issuer's; this site adds no commentary to it.