GLOBAL – Oil giant shell says it will pay around 1.3 billion dollars (1.06 billion euros) into its defined benefit pension schemes in 2004.

“Employer contributions to defined benefit pension plans during 2004 are estimated to be 1.3 billion dollars,” the group said in its annual report released today.

The report said that Shell’s pension assets returned 6.6 billion dollars in 2003, taking the value of assets to 43.9 billion dollars as at the end of 2003 – up from 33.0 billion dollars at the end of 2002.

The discount rate assumption used to determine benefit obligations has been cut to 5.6% from 5.9% in 2002 and six percent in 2001. And the expected return on plan assets has been reduced to 7.9% from eight percent.

The schemes’ were 73% allocated to equities as at December 31, compared to a target of 72%. Debt allocation was 22% against a 23% target.

“Plan long-term investment strategies are generally determined by the responsible pension fund trustees using a structured asset-liability modelling approach to determine the asset mix which best meets the objective of optimising investment return and maintaining adequate funding levels,” the report said.

It added: “It is expected that the actuarial valuations of the group’s four main pension funds in aggregate at the end of 2003 will show an increased surplus of assets over liabilities compared with the end of 2002, mainly resulting from the improved investment performance during 2003.”

It said it was these actuarial valuations - rather than the group accounting policy FAS 87 measure – which are the basis on which the funds’ trustees “steer the funds and define the required contributions from the member companies”.