Shell Pension
The Shell Pension Scheme; if you are a Shell or an ex-Shell employee you may wish to review your Shell Pension Scheme . The review should be based on the current Shell Pension Scheme, your intentions, your risk and the benefits of the alternatives including QROPS and UK pensions including SIPPs.
This is a similar review to our BP pensions review , but the points are worth covering again.
It is important to differentiate between the Shell UK pension scheme and the Shell Overseas Contributory Pension Fund which is not recognised overseas pension scheme or a UK registered pension.
Why review your Shell Pension Scheme Fund?
Transfer values are at an all-time high and anyone with Shell Contributory Pension Fund may wish to review their pension because of this. Will it be of benefit to you to consider alternatives to your Shell Contributory Pension Fund? Read on…
As at 2014, there were about 14,000 active and deferred members in the Shell Contributory Pension Fund
Using Statutory Funding Objectives, the fund was in surplus at the end of 2015 to the tune of 105%. No bad news about deficits here and a healthy looking scheme, where the trustees have confirmed that there are no plans to discontinue the scheme.
Therefore, the only reason to transfer away would be on the basis of solid and positive benefits elsewhere, rather than concerns about the existing scheme. All good news!
What are your options after you review your Shell Pension Fund?
Essentially:
1. If you are risk averse then you should probably leave your Shell Pension Fund where it is. It is offering guarantees that cannot be matched by transferring, and without taking risk you are unlikely to match growth rates. Further, the undoing of the scheme is not deemed of high concern by many experts as the basis of the funding calculation has been done on extremely low interest rates and low long term gilt rates. There are downsides of leaving it where it is (death benefits, etc), so you could;
2. Consider a transfer from the Shell Contributory Pension Fund to a UK pension (typically a SIPP) with full pension freedom rules.
3. Consider a transfer from the Shell Contributory Pension Fund to a QROPS (at the time of writing these are more restricted than UK pension freedom rules)
Why do so many websites suggest that a QROPS is the right answer for the Shell Contributory Pension Fund then?
Ok, first of all, our own website advises the use of QROPS in limited circumstances, including consideration of Lifetime Allowance, certain jurisdictions and certain circumstances. However, we are regulated in multiple countries including the UK (we are not simply a UK based adviser – we are a worldwide specialist company) and we find that SIPPs with their additional freedoms, full access, attractive benefits to beneficiaries especially children and grandchildren including the handing down of pension pots tax-free, are more often the correct answer.
Many overseas advisers give the impression that they have a connection with the UK (citing a similar named firm based in the UK) whereas actually they have no real connection with this firm, no personal regulation in the UK, no qualifications and/or no knowledge. What they have been provided with is a week’s marketing training on how to sell the benefits of a QROPS; as a result UK pensions, including SIPPs, are often immediately ruled out or disregarded, and pension members are given a list of 10 reasons for supposed QROPS benefits, covered here .
USA Malta QROPS transfer recommendations
Of significant concern is the recommendation for those resident in the USA to transfer from the Shell Contributory Pension Fund, or any final salary scheme, to a QROPS usually based in Malta. The relevant independent Wikipedia page can be read on this.
This is not likely to be good advice and may have severe and future undisclosed tax consequences . This page has other links to other independent websites that support those concerns.
We are aware that there are targeted campaigns on LinkedIn and other social media in the USA, aimed at Shell members to move the Shell Contributory Pension Fund to a Maltese QROPS. Unfortunately, according to some Maltese trustees this will likely lead to mis-selling and potential future tax liabilities. Despite these warnings a momentum is building as more and more members transfer. Indeed, internal referrals to other members give the false feeling of strength in numbers. Nothing could be further from the truth.
If you have transferred your Shell Pension Fund to a QROPS before you moved to the US then there is an understanding that may be okay, but it has to be declared as a foreign trust (Form 3520-A) with all the tax implications of that status. Also, use of tax credits can be a consideration.
If you are already a US resident then the IRS will not confirm in correspondence that a transfer from your Shell Contributory Pension Fund to an overseas QROPS would qualify as an “eligible rollover distribution (Section 402c)”. If it does not then the transfer should be declared to the IRS and the whole amount may be subject to US income tax.
This argument has been put forward by the IRS since at least 2013. The counter-argument to this is an often expressed judicial opinion from 2011 that says that it is okay to hold a QROPS in the USA but fails to confirm the tax position. Critically, this review was paid for a by a non-independent third party who wants to encourage QROPS transfers from the UK for commission reasons.
General Shell Contributory Pension Fund outcome and consideration
Many of you reading this, by virtue of Shell’s international profile, are expats and are being targeted to move your Shell Contributory Pension Fund by QROPS adverts that are mostly spurious. If you are being told that it is “Time to review your Shell Pension Fund“ you must base any decision s on facts. There is a lot of deliberately misleading information out there on around 20 websites to worry Shell Contributory Pension Fund members into a decision they make come to regret later.
Those with the Shell Contributory Pension Fund are regularly recommended to move their pensions to QROPS when, actually, remaining in the Shell Contributory Pension Fund or transferring to a UK SIPP would provide a far better retirement. Consideration should be given to all 3 options with Pros and Cons assessed.
We cannot recommend strongly enough, that as Shell Contributory Pension Fund, when you are advised to move to a QROPS or see adverts recommending QROPS, you need to obtain a second opinion direct from a UK regulated firm, and not the Isle of Man. Once a decision has been made to transfer your Shell Contributory Pension Fund, there is no reverse gear and almost no chance to recover tax nor investment losses caused by poor advice.
We have written this blog to be informative and helpful and to counter-act what appears to be a world-wide campaign on LinkedIn and social media by some firms to focus on encouraging people to “review your Shell Contributory Pension Fund and move it to a QROPS”. However, in feedback from people who now find themselves in trouble, we have found that the websites do not really mean a review, as everyone is sold a QROPS and, in the USA, this is of particular concern.
The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.
This article was published on 2nd February 2017
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