Funding of the SOCPF
There are often articles in the press that talk about Shell having a large pension deficit. The figures frequently referred to, are taken from the Royal Dutch Shell plc accounts, and refer to the total accounting liability for all of Shell’s schemes across the globe. This includes schemes in other countries that are deliberately unfunded as permitted under local legislation, so will show a shortfall for accounting purposes.
The SOCPF is currently well funded, and its assets are ring-fenced from Shell’s other schemes, including the unfunded schemes mentioned above. You can read more about the SOCPF's funding in the upcoming Source.
The Trustee Services Unit has become aware of unsolicited approaches and cold-calling to SOCPF members from companies offering financial advice and suggesting you transfer your pension from Shell to another pension scheme, often overseas.
These companies often quote inaccurate and misleading information about your benefits from the SOCPF and actions the Trustee or Company have taken (when they have not) or they claim to offer ‘guaranteed returns’ from their own investments.
Don’t be caught out! Read The Pensions Regulator’s five tips for protecting yourself from scammers, by clicking on this link website.
Taxation Of SOCPF Benefits
In January 2017, we communicated on the SOCPF website that there would potentially be changes to the taxation of your SOCPF benefits from 6 April 2017 onwards if you are a UK tax resident.
Legislation was passed in the Finance Act 2017, which received Royal Assent on 28 April 2017, that more closely aligns the taxation of income from foreign pension schemes (such as the SOCPF) with that for UK based pension schemes, such as the SCPF. These changes take effect from 6 April 2017.
The effect on the UK taxation of SOCPF benefits for UK tax residents is as follows:
- Pension income: Up to 5 April 2017 only 90% of pension income paid from the SOCPF was subject to income tax. With effect from 6 April 2017, 100% of pension income, irrespective of when it was accrued, will be subject to tax. This aligns with the tax treatment of pension income paid from the SCPF.
- Lump sum: On retirement, members can choose to exchange 25% of the value of their pension income for a cash lump sum. Up to 5 April 2017 this lump sum was tax-free (provided you were not a UK tax resident during the period of accrual) which aligned with the SCPF. With effect from 6 April 2017 lump sums in respect of benefits accrued after that date will be subject to income tax at an individual’s marginal rate. Tax relief will remain available for lump-sums accrued before 6 April 2017 (subject to being non-resident in the period of accrual).
- Please note, the Company and Trustee are still working with advisors to understand the practical implications of these changes (for example, how to separate benefits accrued both pre-and-post 6 April 2017 for the purposes of establishing amounts eligible for tax relief). You should ensure that you take the appropriate tax advice and understand the tax consequences of any decisions you make regarding the form of your benefits.
Please note that both pension income and cash lump sums are paid from the SOCPF gross, i.e. with no deduction for tax. It will be your responsibility to ensure that the correct amount of tax is paid to the relevant tax authority.
Beware of unsolicited emails and of pension scams. We are aware that some companies have contacted SOCPF members suggesting they can transfer their SOCPF and SCPF benefits to more tax efficient vehicles based offshore. Some have also said that the Company or Trustee are making the changes to the SOCPF. Neither the Company nor the Trustee are changing the benefits to either the SOCPF or SCPF, these changes are entirely because of a change to UK tax legislation. Before you make any decision on where your pension is invested we recommend you follow the UK Pension Regulator’s five steps to protect your pension. These steps can be found here.