UK Retirement Benefits Review – 2011                                                                                                       December 2011

This update is primarily aimed at employees of the Member Companies of the Shell Contributory Pension Fund (SCPF) and Shell Overseas Contributory Pension Fund (SOCPF) who are members of those funds or may be considered for membership.

Periodically the Group requires each country to review retirement benefits to ensure that they are competitive in the local market and meet business needs. The last UK Retirement Benefits review took place in 2007/8 and the 2011 review has reached the point where we can share the key proposals.

In line with market trends in the UK, it is proposed that a new Defined Contribution (DC) retirement benefit plan (‘NewPlan’) should be developed and this should be offered to those joining Shell as new hires either as UK local employees or directly overseas as UK base country expatriates. The aim would be to have NewPlan ready for implementation in Q1 2013.

Careful consideration has been given to whether the retirement benefit plans for existing UK local employees (via the SCPF) and UK base country expatriates (via the SOCPF) should be amended and/or kept open for further accrual.  The outcome of the review is a recommendation that existing members of both SCPF and SOCPF should continue to accrue the benefits provided for in the SCPF/SOCPF on the current basis.                                                                                          

Current members of the SCPF and/or SOCPF would also be able to continue to move between the SCPF and SOCPF (and vice-versa) when moving employment from/to the UK.

So, in summary, the proposal is that if you are an existing member of the SCPF or SOCPF (in either the pre or post 2009 sections) then your retirement benefits would remain unaffected by the outcome of this review.  The proposed introduction of NewPlan in 2013 would not affect you.

The above proposal to implement NewPlan would mean that no new members would be admitted to the post-2009 sections of both SCPF and the SOCPF once NewPlan is in place. In the interim, between now and Q1 2013, the proposed date of NewPlan implementation, new hires would continue to be offered membership of the post-2009 sections of the SCPF and SOCPF (as appropriate).

Further design work on the proposed NewPlan is in hand and members of the SCPF and SOCPF will receive further updates as and when more information is available. The intention is that NewPlan would offer a strongly competitive retirement benefit so that Shell companies in the UK can continue to attract and retain the talent we need to deliver business plans. External specialist advice will be sought on the various design aspects including contribution levels and investment choices.

UK Retirement Benefits Review: FAQs                                                                                                       December 2011

1.  What is the difference between a Defined Contribution (DC) and DefinedBenefit (DB) pension scheme?

Members of Defined Benefit (sometimes referred to as final salary-related or career average) pension schemes, accrue pension benefits based on their final pensionable salary (or a career average salary), pensionable service and the accrual rate of the pension scheme (which in the case of the SCPF/SOCPF is 1/54th, for members who joined on or before 31st December 2008 and 1/60th for members who joined on or after 1st January 2009). Members and employers contribute to the scheme and the fund’s assets are invested in a range of investment options. It is the responsibility of the employers or other relevant companies to meet any shortfall between the assets of the fund and the pension liabilities that need to be met.

Members of Defined Contribution (sometimes referred to as money purchase) pension schemes, invest their own contributions (and contributions provided by the employer) in a range of investment options. The choice of investments rests with the member although typically a standard ‘default’ choice is available. To draw pension benefits, members purchase a retirement annuity using their investment funds which then pays out pension benefits. The amount available to purchase the annuity depends largely on the performance of the investments.

A – Proposed Closure of the post-2009 sections of the SCPF and SOCPF to new members

1.  What are the implications of the NewPlan proposal for the Shell Contributory Pension Fund (SCPF) and the Shell Overseas Contributory Pension Fund (SOCPF)?

The proposed closure of the post-2009 sections of the SCPF and SOCPF to new members in Q1 2013 will not impact the benefits available to active members of these two Funds.  Active members will continue to accrue benefits in accordance with the Trust Deeds and Regulations of those funds and it is proposed that members will still be able to move between the two plans when they accept an overseas assignment or return to work in the UK. Similarly deferred members and pensioners will not be impacted.                                   In terms of what the future might hold, the current planning is that the next UK Retirement Benefits review is scheduled to take place in 2015 at the earliest as part of the normal Group review cycle.

2.  As a current member of the SCPF and/or SOCPF are my benefits affected by the proposed closure of the post 2009 sections of each fund to new members?

No, your current benefits are not affected by this proposal.

3.    If I am a UK base country employee employed overseas on or after the introduction of NewPlan, will I still be able to join the SCPF when I return to work for a Shell company in the UK?

If you are an active and accruing member of the SCPF or SOCPF on the date that NewPlan is introduced then it is proposed that you will still be able to move between the two Funds whilst you remain in continuous Shell employment.  So, if you are overseas and in the SOCPF at, for example, April 2013 and move back to the UK to work for a Shell company in the UK in, for example, 2015 then it is proposed that you will rejoin the relevant defined benefit section of the SCPF at that point in 2015. This proposal to introduce NewPlan and close the post-2009 sections of the SCPF and SOCPF does not constitute a change to the current practice for existing active members of these funds.

4.  Will members of the SCPF still be able to contribute to the SCPF AVC plan?

Yes.  These proposals do not affect the AVC arrangements for active members of the SCPF. The pensions design for all employees in Shell are reviewed periodically, and the next review for UK Retirement Benefits is scheduled to place at the earliest in 2015.

5.  Will there be any changes to the funding of the SCPF and SOCPF?

This review is not proposing any changes to the way in which the pre and post-2009 sections of the SCPF and SOCPF are managed by the Trustee and funded by the Member Companies.         The employer contribution rates will continue to be reviewed on behalf of the Member Companies, by the Trustee and its advisers periodically.

The obligation to meet any deficit continues to be the responsibility of the Member Companies.

6.  Why are we closing the post-2009 section of the SCPF to new members when the SCPF is well funded? Will this affect our ability to recruit and retain the best employees? Do our competitors still have DB plans?

The proposal to close the post-2009 sections of the SCPF and SOCPF to new members has been taken after careful analysis of business needs, the pension market in the UK, competitor practice and market trends.                                                              It is not felt that these proposals will affect Shell in the UK’s ability to attract and retain talent in the future. Furthermore pension benefits should be considered within the context of our total reward package which remains highly competitive.

The trend in the wider UK Plc market is that Defined Contribution (DC) plans are offered to new employees and this is the practice for virtually all the companies in the FTSE 100. The UK Oil & Gas market is also following this trend.

7.  If I leave Shell in the future and therefore become a deferred member of the SCPF and/or SOCPF and I return to work for a Shell company, will I be treated like a new member and only be able to join NewPlan?

If you leave the Company, becoming a deferred member of the SCPF/SOCPF, then should you return to work as a UK local employee for a Shell company in the UK or for an overseas Shell company as a UK base country expatriate it is proposed that you would be treated like any other new employee and be eligible to join whichever UK base country pension arrangements remain available to new joiners at that time for equivalent new employees.

8.  As a result of the retirement benefits review, is it likely that the employee contributions to the SCPF and/or SOCPF will need to be raised?

There are no current plans to increase the member contributions to the SCPF and/or SOCPF. The Member Companies continue to keep a close eye on pension developments in the market, including periodic benchmarking with the benefits offered by our competitors and considers pressures that are common to all pension funds such as increased longevity. If periodic reviews indicate changes need to be made to stay competitive or to help preserve the long-term health of the funds, then these will be considered on behalf of the Member Companies.

9.  I am currently employed on a fixed term contract and have now joined the SCPF. If my contract is renewed, can I continue to be a member of the SCPF?

If your contract is renewed, with no break in service, you will continue to be an active member of the SCPF. If there is a break in service between your old and new contract, then you will be treated like a new employee at the start of your new contract, being eligible for the pension arrangements in place for equivalent new employees at the time your contract starts.

10.I am a member of the SCPF and/or the SOCPF and I have a concern regarding the proposed closure of the post-2009 sections of the SCPF and/or SOCPF.  How do I make this known?

Please send any questions or concerns to:  SI-HRUK-Pension-Review-2011@shell.com These will be collated and answers will be provided and updated for members to access via HR Online > My Benefits > United Kingdom Pension.

B – NewPlan

1.  What type of pension scheme will NewPlan be?

It is proposed that NewPlan will be a Defined Contribution (DC) pension plan.  See question “What is the difference between a Defined Contribution (DC) and Defined Benefit (DB) pension scheme?” which explains what this type of pension arrangement is.

2.  Will the relevant Shell employing company contribute to this pension arrangement?

Yes it is proposed that Shell employing companies will contribute to this pension arrangement and so will employees.  It is proposed that NewPlan will provide strong and competitive pension benefits relative to the UK market.

3.  When can we find out the details of the proposed new DC plan on offer?

The rules and proposed design of NewPlan to be offered for new members are still to be determined. Further details of the proposed NewPlan and how it will work will be communicated to all relevant employees as soon as they are available.

4.  Will NewPlan be managed and administered by the Trustee for the SCPF?

The design and details on the proposed NewPlan are still to be determined.  Further details will follow in due course.

5.  If I am a member of the SCPF, will I also be able to join NewPlan, effectively being able to join two pension plans? Or can I choose to leave the SCPF and join NewPlan?

No.  It is proposed that if you are an active member of the SCPF and/or SOCPF at the date NewPlan is implemented then you will remain a member of those Fund(s). The intention is that only new employees, from date of implementation of the proposed NewPlan, who are employed by one of the participating Shell employing companies, would be able to join NewPlan.

6.  For new employees who join the company on or after the date NewPlan is implemented and then transfer overseas, will they be able to continue in the proposed NewPlan whilst overseas or will there be a separate overseas NewPlan fund?

The proposed design of NewPlan for new members is still to be determined and further details will be communicated. It is currently proposed that there will be one NewPlan arrangement that will provide pension benefits for both UK local employees and UK base country expatriates working abroad. It is therefore not proposed to provide a separate pension arrangement for UK base country employees working abroad, as currently happens with the SCPF and SOCPF.

7.  As an employee on a fixed term contract (less than 1 year), will I be eligible to join the NewPlan?

The design and details on the NewPlan are still to be determined. Further details, including any proposed eligibility requirements, will follow in due course as they are developed.