NETHERLANDS - The Shell pension fund will cut its equity allocation, increase contributions and skip indexation this year as part of its recovery plan submitted to the Dutch pension regulator.
Key to the plan was an adjustment of the investment policy, reducing the equity weighting from 55% to 45% and increasing fixed income allocations from 30% to 35%. The scheme said it would also boost its allocation to alternative investments from 15% to 20%.
Within its equity allocation, Shell said it would rebalance its investments, shifting 5% more to European equities at the expense of emerging markets.
The scheme took emergency action over its equity holdings in October last year in light of the market volatility, and shifted to a temporary allocation of 30% equities, 50% fixed income and 20% alternatives. The scheme's board said it would monitor the market conditions and keep the decision as to when to shift from the temporary asset allocation to the new strategic asset allocation under review.
Employer contributions are set to rise to 32.1% as of 1 July, with employee contributions of 2%, rising to 8% on salaries above €74,881 (US$98,613).
Shell also said it would not make a conditional indexation adjustment to pension payments this year.
The scheme, which was badly hit by falling interest rates and declining asset values, saw its funding level drop to 85% by the end of November 2008 and fell further to around 80% over the last few weeks.
Under Dutch pension rules, all pension schemes with coverage ratios below 105% were required to file recovery plans with the regulator De Nederlandsche Bank by 1 April, detailing how they would restore solvency.
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