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Oil giant Shell to close UK DB pension scheme to new entrants

EUROPE - Shell is to close its UK defined benefit scheme to new members, replacing it with a defined contribution (DC) scheme from the first quarter of next year.

In a statement, the company said the £12.5bn (€15.1bn) Shell Contributory Pension Fund (SCPF) would remain open to existing members, adding that the shift to DC for new employees simply followed prevailing market trends.

The company pledged that the new DC offering would remain “strongly competitive”, but was unable to provide further details, as the scheme is still under development.

Len McCluskey, general secretary at labour union Unite, condemned the closure as “nothing less than greed on the part of one of the world’s richest and most powerful corporations”.

He added: “Shell has no need whatsoever to close this scheme and in the process deny its employees the safe retirement they were promised they could save for. Shame on Shell - for where it leads, other corporates will follow.”

The Dutch oil company is believed to have been the last FTSE 100 company to allow new employees into its DB scheme - paying 31% in contributions and, as of the end of December 2010, reporting a surplus of £1.1bn, translating to 110% funding.

The scheme targets a strategic asset allocation of 40% bonds, 40% equities, 10% property, 5% private equity and 5% hedge funds.

According to its most recent annual report, its 10 largest holdings were all fixed income issuances - with all but one UK inflation-linked gilts - while 2.2%, its fourth-largest holding, was for an inflation-linked paper issued by Network Rail.

Earlier this week, the company’s Dutch pension fund increased its contribution rate to 45%, with the 9.5 percentage point increase shouldered exclusively by the company.

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