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Shell pension funding level drops below legal limit


NETHERLANDS – Royal Dutch Shell has confirmed the funding ratio for its pension scheme slumped to 85% at the end of November but stressed there would be no changes to existing pension provision.


Last year the fund’s assets stood at €19bn (US$25bn), however, the financial crisis has severely weakened that position.

The total value of the pension fund’s investments plummeted 40% since the start of this year. At the same time, lower interest rates resulted in a significant increase in the pension obligations.

This combination of events has required the pension fund board to notify the Nederlandsche Bank (DNB) that fund is now in an underfunded position – as the value of the net assets have now dropped below the 105% funding obligations.

In a statement to members, the scheme stressed there would be no change in pensions granted. These will be paid, as usual, at the beginning of each month. 

It also said the pension accrual rate would remain unchanged, with participants still able to continue to pay a pension contribution of 2% of pensionable salary up to the normal maximum of salary.
A Shell spokesman told Global Pensions: “Shell pensions are typically on defined benefit schemes, which give a pension related to the final salary of employees. This is an important part of the employee value proposition for Shell, and a policy that is taken very seriously by the Group.”

Meanwhile, the Royal Dutch Shell is to continue preparatory work on a US$10bn natural gas project in Iran, despite calls from US pension plans to withdraw.

The pension funds pressuring the firm to cease operations in Iran include California Public Employees Retirement System (CalPERS) – which is understood to have more than US$700m invested in the oil producer.

The Shell spokesman claimed the firm had not yet taken any decision whether to proceed with the Persian LNG project.

He said: “As with all projects, decision timing is fundamentally driven by the need to ensure first class decision quality. Our main concern is getting that preparatory work right. 

“When we come to make a decision, we will take political considerations into account.”


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