Shell reduces equities to meet recovery plan
NETHERLANDS - The Dutch pension fund of Royal Dutch Shell Group is hoping to return its funding ratio to the minimum statutory level of 105% by October 2011, through a series of changes including alterations to its asset allocation.
Details of the Dutch fund's recovery plan - submitted to pensions regulator De Nederlandsche Bank by the 1 April deadline - claimed the required buffer of 127% will be achieved before 2024, as measures to improve its financial position from an 80% cover ratio include an increase in premiums paid alongside a decision to pay no indexation in the short-term as well as an adjustment of its investment policy.
Premiums paid by the employer were raised from 5% to 23.6% as of 1 January 2009, and this will rise again to 32.1% of an individual's salary from July.
At the same time, the pension fund is adjusting its investment strategy again to reduce its holding in listed equities from 55% to 45% and raise its fixed income allocation from 30% to 35%, along with an increase in the proportion of alternative investments will from 15% to 20%.
In particular, the scheme has chosen to invest five percentage points more in European equities at the expense of emerging market equities.
The board had already temporarily reduced equity exposure to 30% during the extremely volatile market conditions in October 2008 and had increased the percentages allocated to fixed income securities and alternative investments to 50% and 20% respectively.
However, the decision as to when the fund will moves from the earlier temporary allocation to this new strategic asset allocation is still under review and dependent on global developments, according to the fund.
Part of the new arrangement means the fund will now not pay indexation compensation to pensioners from 1 July, as previously stated.
The recovery plan includes additional funding by the Shell member companies in the Netherlands, yet Shell revealed in March the company would make additional cash contributions to the world-wide pension plans ranging between $5-$6bn (€3.79-4.55bn).
Its latest announcement also follows revelations from Samco, the Shell asset management company, in December confirming it had lost more than €30m as a result of the investment fraud committed by Bernie Madoff through his ponzi scheme.
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