The annual newsletter from the Trustee Board to
members of the Shell Overseas Contributory Pension Fund
Inside this issue
SOCPF
The Source
President of the Trustee Board
Welcome to this year’s edition of the Source, the annual newsletter for members of the Shell Overseas Contributory Pension Fund (SOCPF or the Fund).
Every three years we carry out a full valuation of the SOCPF in conjunction with our advisers, Aon. The most recent valuation, based on the position of the Fund, as at December 2023, shows that the SOCPF’s funding level has improved since the previous valuation (see pages 4 and 5). This means that the SOCPF is now in surplus compared to the expected benefit payments to be paid from the Fund.
The Trustee has an established Journey Plan intended to reduce risk in the Fund over time and ultimately to achieve low reliance on the covenant of the Company. The funding improvement meant that we could complete the Journey Plan faster than expected. You can read about our new Journey Plan on page 5.
The opportunity for the Trustees to reduce risk in the investment portfolio while increasing hedging and matching liabilities to meet members’ pension payments required significant effort from not only the Trustee but also the
2
support teams from SAMCo, the TSU, and AON. On behalf of the Trustee and members, I’d like to say a big “thank you”.
I also want to express my gratitude to my fellow Trustee Directors for their continued hard work in ensuring the Fund is well run. A special thanks goes to Pablo Gamero, who has stepped down as Trustee Director. Over the past 10 years, Pablo has brought a wealth of experience and dedication to the Board. He has been succeeded by Roy Fellowes, who you can learn more about on page 14.
Last year we asked for members to join our Member Experience Panel. The panel has provided invaluable feedback over the past year. If you’d like to represent the views of members, you can find out more on page 12.
I hope you enjoy reading this edition of the Source. If you have any comments or suggestions for future issues, please send your feedback to the Company Secretary. You will find their contact details on the back page.
Ian Robertson
President of the Trustee Board
3
The Trustee’s primary purpose is to ensure that all benefits promised by the SOCPF under its Trust Deed are paid in full and on time throughout the life of the Fund. To make sure the Fund is on track to do this, every three years the Fund Actuary carries out a valuation.
This involves estimating the amount of money needed today to pay all promised benefits from the Fund (the ‘liabilities’) and comparing this amount to the Fund’s current assets. If the assets are lower than the liabilities, the Trustee and Company need to agree on the level of Company contributions required to make up any shortfall. This summary funding statement is based on the results of the 2023 actuarial valuation.
There are a number of technical terms within the statement, so we’ve included a jargon buster on page 6, which you may find helpful.
The chart below shows the funding position as at 31 December 2023 compared with the previous actuarial valuation as at 31 December 2020. At 31 December 2023, the assets exceeded the liabilities so there was no shortfall in funding that required additional Company contributions.
Since the 2020 valuation, improvements in the funding position have enabled the Fund to de-risk its investment strategy. This positive step reduces funding level volatility, increasing the likelihood that the Fund remains fully funded at all times and improving the security of your benefits.
SOCPF Funding position
31 December 2020 (valuation year):
31 December 2023 (valuation year):
4
Change in funding position since the previous edition of the Source
The funding level of 104% at 31 December 2023 is lower than the estimated position of 124% at 31 December 2022, reported in last year’s Source. A key reason for the reduction in the funding position is because the liability value reported last year did not reflect the investment de-risking that took place over 2022. As we didn’t carry out a full valuation last year, our calculations didn’t reflect the lower expected return on assets, leading to the reported funding level being artificially high.
The Trustee recognised that the reported liability value and funding position at the end of 2022 didn’t reflect the lower risk position of the Fund and you may remember in last year’s Source we included the Fund’s ‘Low Reliance’ funding position. This refers to a Low Reliance on the need for the Company to pay contributions to the Fund in the future and is the measure the Trustee used to make de-risking decisions for the Fund. The funding position as at 31 December 2023 is broadly in line with the Low Reliance funding measure described last year.
Following the completion of Journey Plan 1, we have been able to move on to the next phase of the Fund’s life. The main aim of Journey Plan 2 is to reach a position of self-sufficiency where the Fund is expected to be able to meet all future benefit payments with a very low probability of ever needing contributions from the Company. This will involve continuing to de-risk the investment portfolio over the course of the Plan, holding mainly assets which match our pension liabilities, while maintaining prudent funding buffers in case of unexpected events.
We’ll keep you updated with the progress of Journey Plan 2 over the coming years.
5
SOCPF Funding continued
Funding jargon buster
Assets
The money within the Fund. This is built up from member and Company contributions, along with investment growth on those contributions.
Funding level
The relationship between the value of the assets held in the Fund and the present value of the expected benefits promised to members (liabilities), expressed as a percentage.
Liabilities
The present value of the expected benefits promised to members. This is based on the benefits members have earned and assumptions for the future made by the Scheme Actuary. This figure represents the amount needed today to pay the expected benefits.
Shortfall (also called a Deficit)
When there are fewer assets in the Fund than expected liabilities. Funding level is less than 100%.
Surplus
When there are more assets in the Fund than expected liabilities. Funding level is more than 100%.
6
Greg Tucker
Fund Actuary – Aon
Regular formal actuarial valuations are a requirement of the Trust Deed, and I have recently completed one for the Fund as at 31 December 2023. The valuation reviews the Fund’s financial position to determine appropriate Company contributions and to drive the Trustee’s investment strategy, taking into account the strength of support from the sponsor (its covenant). As the Actuary to the Fund, I started with a detailed analysis of its current membership, benefit structure and assets. I then recommended assumptions for future price inflation, future investment returns, members’ life expectancies and many other factors, to place a prudent value on the liabilities for comparison with the Fund’s assets. Since the previous valuation at 31 December 2020, the liabilities have decreased due to a significant rise in real interest rates. However, this has been partially offset by lower investment returns on the Fund’s assets and higher than expected inflation which has increased the Fund’s liabilities. The net effect on the funding level is an increase from 99% at the previous valuation to 104% at this valuation.
Members can remain confident in the financial position of the Fund. It currently has a funding surplus, and the Trustees continue to view the sponsor covenant as strong over the medium term. Additionally, the Trustee and sponsor have taken steps in recent years to remove significant levels of risk from the Fund’s investment strategy. The Fund is therefore well-funded with a low risk investment strategy.
7
How the assets are invested
This was the actual asset allocation in the SOCPF at 31 December 2023.
64% Liability matching assets
36% Return seeking assets
The Trustee’s overall investment objective is to make sure there’s enough money to pay the benefits due to members over the entire life of the Fund. It does so whilst taking no more investment risk than is necessary to achieve this goal.
The table below shows the SOCPF’s performance over the year to 31 December 2023 and over the last three- and five-year periods compared with its investment benchmark.
|
1 yr |
3 yrs |
5 yrs |
|
|---|---|---|---|
|
Actual performance |
1.3% |
-4.3% |
0.6% |
|
Benchmark |
0.9% |
-4.3% |
0.8% |
All percentages are annualised.
While the performance of the assets in the table above is monitored by the Trustee, the key measure of performance is how the investments have performed relative to the Fund’s liabilities.
8
Liability matching assets
Assets that closely match the expected payment profile for the pension liabilities, predominantly index-linked gilts (a UK government bond).
Return seeking assets
Assets that aim to achieve positive growth over time, such as equities (investments in the shares of companies listed on a stock exchange), bonds (loans made to companies or governments), property, hedge funds and private equity.
Benchmark
A reference point for measuring investment performance. A benchmark may be the performance of the wider market or be a return target.
9
|
2022 (£m) |
2023 (£m) |
||
|---|---|---|---|
|
We started the year with a Fund value of: |
5,401 |
3,871 |
|
|
Income (amounts that increase the value of the Fund) |
|||
|
Member contributions |
3 |
3 |
|
|
Employer contributions |
34 |
32 |
|
|
Investment income |
89 |
25 |
|
|
Total income |
126 |
60 |
|
|
Expenditure (amounts that decrease the value of the Fund) |
|||
|
Benefits paid 1 |
140 |
151 |
|
|
Transfers out |
68 |
15 |
|
|
Administration and investment expenses |
9 |
8 |
|
|
Total expenditure |
217 |
174 |
|
|
Changes to investment market values |
- 1,439 |
47 |
|
|
We ended the year with a Fund value of: |
3,871 |
3,804 |
|
Here’s a summary of the key figures from our Annual Report and Financial Statements dated 31 December 2023.
10
Did you know?
The SOCPF paid £136 million in pensions in 2023.
Membership of the SOCPF
as at 31 December 2023
5,609
Pensioner members
Already receiving a pension from the SOCPF. This group includes dependants of deceased members.
1,027
Active members
Working for one of the participating companies and paying regular contributions to the SOCPF. Includes active employees in the Shell Contributory Pension Fund (SCPF) with benefits in the SOCPF.
1,449
Deferred members
Generally, those who have left employment with Shell but whose benefits remain in the SOCPF.
11
Join our Member Experience Panel
The joint SCPF and SOCPF Member Experience Panel is your chance to have your say on the ways we communicate with you. We ask our panel to give us feedback on everything from website pages to regular update letters. We’re always on the lookout for new members, so if you want to get involved please contact SI-STB-Trustee@shell.com.
Regular communications
Here’s a calendar of the communications you’ll receive from the Trustee Services Unit (TSU):
Remember, SOCPF members do not receive a P60.
Keep us updated using Member Self Service
Member Self Service is our online portal, which allows you to make changes to your personal details, view your annual benefit statement and, if you’re a Pensioner, take a look at your pension payslip.
Not registered? No problem! Just contact the Pension Administration team and ask for new login details:
Email: UK-PensionsAdmin@shell.com.
Telephone: +44 (0)20 7934 1190.
Please make sure you keep your personal details up to date and let us know if your address or personal circumstances change.
|
March: |
Pension increase letters to pensioners. |
|
July: |
Benefit statements to active members. |
|
October: |
Benefit statements to deferred members. |
12
12
People are still being fooled by scams every year – between 2020 and 2022, more than £26 million was lost to scams. Anyone can fall victim to a scam, so it’s helpful to know what to look out for.
Pension scams will often aim to persuade you to transfer your pension or offer a way for you to release funds from it. They might use technical language, refer to new legislation or have a very professional website and lots of marketing materials that look ‘official’ – whatever it takes to convince you they’re legitimate.
If you think you’ve been contacted by a fraudster, report it to the FCA on 0800 111 6768 or use the contact form.
13
The Trustee Directors
The Fund is run by a Trustee company-Shell Trust (Bermuda) Limited.
The Board has five Directors:
The Board would like to express our deepest gratitude to Pablo Gamero for his invaluable contributions during his time on the Board. As of 1 July 2024, Pablo moved into his new position as Finance Manager for Argentina. We extend our best wishes to Pablo in his new role.
Roy is an Associate of the Chartered Insurance Institute and has over 40 years of insurance market experience working in the UK and Bermuda. Starting as a composite inspector in the UK he moved to Bermuda in 1988 where he managed a local insurance agency and HSBC’s insurance broking operations. He later became CEO of HSBC’s global insurance management business and was a director on a number of HSBC insurance boards until the insurance management business was sold in 2011.
Roy joined Shell in 2017 and is a director on all Shell Bermuda entity boards. He still lives in Bermuda and is a keen golfer.
Ian Robertson
(President and Director) Formerly EVP Finance Downstream, now retired. Joined the Board March 2016.
Liz Andrew
(Director) Project Advisor Finance, Corporate Strategy. Joined the Board in August 2021.
Sharon A. Beesley
(Director) Chief Executive Officer, BeesMont Law Limited. Joined the Board September 2019.
Peter Everson
(Vice President and Director) Formerly Chief Executive Officer, Schroders (Bermuda). Joined the Board June 2005.
Roy Fellowes
(Director) Director, Shell Bermuda entity boards. Joined the Board July 2024.
14
The Trustee Board’s professional advisers and support
Actuary
Greg Tucker (Aon)
Auditors
EY
Legal Advisers
Gareth Soanes (Shell International Limited); Hogan Lovells, Conyers Dill & Pearman Limited, Bermuda
Investment Manager
Shell Asset Management Company BV (SAMCo)
Investment Adviser
Daniel Peters (Aon)
Investment Custodian
JPMorgan Bank
Trustee Services Unit (TSU)
Head of UK Pensions
Alan Howard
Pensions Manager
Amanda Burston
Finance Manager
Lucy Pauw
Head of Pension Operations UK
David Connell
Actuarial and Funding Pensions Manager
Guy Gregory
15
The Trustee Board has published a Privacy Notice on the pension website which provides information about your personal data and how it is processed by or on behalf of the Trustee of the SOCPF. You do not need to take any action, but if you would like to view or download the Privacy Notice you can find it in the SOCPF Library section of the pension website at www.pensions.shell.co.uk.
You can contact our teams based in Krakow and London if you have a query about your pension or need to notify us about any changes.
Email: UK-PensionsAdmin@shell.com.
Telephone: +44 (0)20 7934 1190.
Company Secretary
If you have a query you would like to raise with the Trustee Board that is not covered by the Pensions Administration Team, please contact Margaret Powell, the Company Secretary.
Secretary to the Trustee Board,
Shell Trust (Bermuda) Limited,
3rd Floor Continental Building, 25 Church Street,
Hamilton, HM 12 Bermuda.
Email: SI-STB-Trustee@shell.com.
