By Maggie Urry and Norma Cohen in London
Published: October 2 2007 03:00 | Last updated: October 2 2007 03:00
Shell UK, part of the Royal Dutch Shell oil group, is taking the unusual step of halting its contributions to its pension scheme for at least a year.
This is to take advantage of a combination of increasing equity values and rising interest rates this year.
In an announcement to scheme members on the company’s website, Shell UK said its latest actuarial valuation, completed last March, showed the £12.1bn scheme to be heavily in surplus.
Employees will continue to make contributions to the scheme as normal.
Shell declined to comment on its scheme. However, the scheme is understood to be close to fully funded on a “full buy-out” basis, the most conservative valuation basis used by schemes and one which is close to the cost of securing all benefits with an insurance company.
Trustees to the scheme are understood to have submitted plans for the contributions holiday to the Pensions Regulator earlier this year and to have received ap-proval. It is under continuing annual review, according to those familiar with the scheme.
The Pensions Regulator has discouraged companies from taking contributions holidays, in part because they are seen to delay full funding of schemes until later years when it is not clear the employer will be able to meet all promises in full.
Schemes that are as well funded as that of Shell UK are unusual, and the move is not likely to be followed by many other employers.
In a recent interview, June Mulroy, head of scheme funding at the regulator, said of contributions holidays: “A number of companies have raised it. I can assure you that has not been greeted well.”
The 46,000 members of the Shell UK scheme were told of the move in a report from the trustee dated “summer 2007”, which also said the fund had substantially cut investment in equities, shifting into bonds, in the second quarter of this year, before the market turbulence. Last year Shell put £67m into the scheme in contributions, while employees paid in £16m. The company’s contributions stopped from July 1.
Shell confirmed that the fund “has agreed to a temporary reduction in company contributions to zero”. The decision is thought likely to be reviewed in a year’s time.
Pension fund contribution holidays were commonplace in the 1980s and 1990s as rising stock markets and relatively high interest rates produced fund surpluses.
However, stock market reverses and the stricter actuarial assumptions which followed the implementation of the FRS 17 accounting standard in the early 2000s and the establishment of the Pensions Regulator, were adopted, and many pension funds fell into deficit. That largely ended the practice of contributions holidays.
Stephen Hodge, chairman of the trustees, said in the report: “We all recognise that financial market volatility is likely to continue and it is possible that at some time company contributions will have to start again. For the moment though my feeling is that the fund is in a strong enough position to withstand most of the changes financial markets might bring to us.”
Copyright The Financial Times Limited 2007
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
MORE DETAILS:
A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
The Shell Contributory Pension Fund (SCPF) is a well managed fund and those of us who are Shell pensioners are certainly fortunate to be members of it. But as this FT report confirms virtually all key decisions of the fund, whilst nominally made by the Trustees, are in reality made by Shell top management. The Trustee Board itself is dominated by senior Shell employees and Shell appointees (i.e. Trustees nominated by Shell senior managers). The 30,000 Shell pensioners currently receiving pensions (of which I am one) have only two elected member places on the Trustee Board (out of a total of seventeen Trustees).
It is quite clear that Shell will finesse its management of the SCPF to its own advantage when it can, within the permissible parameters of the Fund. For the last few years Shell pensioners have received annual increase in their pensions at the bare minimum level required by the Fund’s rules – these increases have been directly linked to increases in the Retail Price Index. Through various channels the Shell pensioner community has sought to get higher than RPI linked increases to their pensions for the last few years and persuasive cases have been made to successive Shell in the UK Country Chairmen to attempt to achieve this. The rationale has been first that the Fund allows for larger that RPI increases to be made and that this has happened from time to time in the past – so no precedent would be involved. Secondly that the Fund is very healthy and, therefore, to make an above RPI increase would not put the strength of the fund at risk in any way. And thirdly all the evidence from Age Concern and other authoritative sources is that pensioner inflation far exceeds the average inflation in the UK reflected in the RPI (Council tax bills, for example, have risen at more than three times the rate of increase in average pensioner household incomes during the past decade). These requests to Shell have all been rebuffed.
The explanation as to why Shell has been ungenerous to its Pensioners is obvious from its decision to halt its Employers’ contributions for at least a year as reported in the FT. The £67million that Shell will not have to pay into the SCPF goes directly to the company’s bottom line as a cost saving. Small beer, you might think, for a corporation that is one of the most profitable in the world ($26.3 Billion in 2006). But although the sum is a tiny percentage of the overall income of the company it is quite likely that senior mangers in the UK (including the Country Chairman) will have been targeted to achieve cost savings wherever they can. That is the Shell way – break the business down into its smallest manageable component parts and target the managers of these parts to save money. So it has been in the self-interest of these UK mangers to demonstrate their cost consciousness – and the saving of £67m in Pension Fund contributions will have got plenty of ticks on their scorecards. Conversely an alternative of giving some of this money to Pensioners in higher than RPI annual increases (as pensioners requested) would not have ticked any boxes at all!