News relating to the SCPF or pensions in general.
Statutory valuation: the SCPF is fully funded
Every three years we carry out a detailed actuarial valuation of the Fund. We work closely with the Scheme Actuary to carry out an in-depth analysis of future benefit payments from the Fund – the liabilities - which are then compared with the assets to check the Fund is properly financed. This tells us if we have enough money to pay the pensions that have already been promised or if the Company needs to make further contributions to the Fund. This full actuarial valuation was completed as at 31 December 2020.
You may remember from the Source last year that the funding level of the Fund as at 30 September 2020 was 94% with a shortfall of £1,040m. We are pleased to announce that the results of the full actuarial valuation showed that the funding level recovered from the lower position experienced earlier in 2020. As at 31 December 2020 the SCPF has a surplus of £479 million (103% funded). This improvement in the funding level is due to a combination of increases in the value of the Fund’s assets, changes to forecasts for inflation, interest rates and salary growth and latest indications of member behaviour and longevity.
Following the outcome of the actuarial valuation, from July 2021 the Company increased what it pays into the Contribution Reserve Account (CRA) from 10% of members’ pensionable salaries to 30% of members’ pensionable salaries. In addition, the Company will pay a further £100 million this year and £50 million, in 2022 in to the CRA. As a reminder, the CRA is a separate, ring-fenced account into which Company contributions are paid when the SCPF is well funded (member contributions continue to be paid directly into the Fund). As at 31 December 2020 the CRA had assets of £486 million, providing additional security. Money can only be released from the CRA with the Trustee’s approval and the Company has agreed an important principle that money will only be released if it would leave enough money in the CRA to cover any funding deficit. This extra money from the Company shows its commitment to provide security for your pension now and in the future.
More information on the three yearly actuarial valuation will be reported in the Source later in 2021.
Changes to the Retail Prices Index
On 25 November 2020, the Government announced changes to how the Retail Prices Index (RPI) measure of inflation will be calculated from 2030. The UK Statistics Authority decided to make these changes because they believe that the current RPI calculation is flawed and tends to overstate inflation. Deferred pensions and pensions in payment by the SCPF are increased each year by the increase in the RPI, subject to a cap. As a result of the changes, from 2030 RPI will be calculated in line with another, newer, measure of inflation called CPIH, which is the Consumer Prices Index (CPI) plus housing costs.
The SCPF Trust Deed specifically provides for pension increases by reference to the increase in the RPI. As the RPI will remain in existence, although with significant changes to the method of calculating it, those changes will apply to the SCPF for pension increases after 2030. In the meantime SCPF pensions increases will continue to be granted by reference to RPI as it is currently calculated.
Last week, the trustees of three large UK pension schemes called for a judicial review of the government’s decision to align RPI with CPIH. The court will shortly decide whether permission is given for the claim to proceed to a full hearing. The Trustee will continue to monitor the implementation of this change and the outcome of any judicial review.
Don’t be caught out! Your retirement is at risk from scammers.
The Trustee Services Unit has become aware of unsolicited approaches and cold-calling to members of Shell pension schemesfrom companies offering financial advice and suggesting you transfer your pension from Shell to another pension scheme, often overseas.
These companies often apply intense, high pressured sales techniques to convince you to invest and will quote inaccurate and misleading information about your benefits from the Shell pension and actions the Trustee or Company have taken (when they have not) or they claim to offer ‘guaranteed returns’ from their own investments.
These companies are becoming increasingly sophisticated with credible websites and supporting materials. Some companies have said that they have been engaged by the Trustee to provide financial advice to members. This is not true – the Trustee and the Company will never give your details to other organisations without your permission. These companies use LinkedIn and similar sites to gather contact information.
Don’t be caught out! Thoroughly check out the firm or person that you are dealing with to ensure that they are reputable and ensure that any provider or scheme you are considering is genuine. To help you avoid pension scams and check if a firm is genuine visit the FCAs website Scam smart.