Shell Pension Fund in Nigeria

The Shell Nigeria Staff Pension Fund provides pension benefits for Nigerian staff of The Shell Petroleum Development Company of Nigeria Ltd. (SPDC). It is managed by Shell Nig. Closed Pension Fund Administrator Ltd (SNCPFA).

The Shell Nigeria staff (Non-Contributory) Pension Fund (the Fund) was created in the early 1960s. It provides end-of-service pension benefits for Nigerian staff of the sponsor company, SPDC.

Shell Nig. Closed Pension Fund Administrator Ltd (SNCPFA) was incorporated in 1991 as Shell Trustees (Nigeria) Limited (STNL) for the primary purpose of managing the “Shell Nigeria Staff (Non-Contributory) Pension Fund”, the defined benefit pension scheme of SPDC.

The purpose of end-of-service payments is to ensure that long serving company employees who have reached the end of their established working term in Shell EP Companies in Nigeria will be able to enjoy a regular monthly income to enable them to maintain a reasonable standard of living in retirement. Lump sum payments are made to employees whose period of service or conditions of departure do not qualify them for a monthly pension.

As the name implies, the scheme is non-contributory thus employees are not required to make any financial contributions. It is also a Defined Benefit (DB) scheme and as such, all benefits payable from the scheme are computed based on pre-defined criteria.

The Fund currently caters for almost 3,000 pensioners and 4,000+ active employees of SPDC.

Shell Nig. Closed Pension Fund Administrator Ltd is the Trustee of the Shell Nigeria Staff (Non Contributory) Pension Fund. It is guided in the discharge of its duties by the Trust Deed and Regulations for the Fund executed by the sponsor company, The Shell Petroleum Development Company of Nigeria Ltd. (SPDC).

The Trustee

Shell Nig. Closed Pension Fund Administrator Ltd (SNCPFA) was incorporated in 1991 as Shell Trustees (Nigeria) Limited (STNL) for the primary purpose of managing the “Shell Nigeria Staff (Non-Contributory) Pension Fund”, the defined benefit pension scheme of SPDC.

SNCPFA’s Mission

• To optimise Investment Returns—by minimising the contribution level required to maintain the 100% funding target level for SPDC’s Defined Benefit Scheme.

• To safeguard the Pension Fund Assets—by making sound investment decisions, using the right Pension Fund Custodian and ensuring strict compliance with the Pension Reform Act of 2004, and other applicable laws and Shell Group policies.

• To offer our members first class retirement benefit administration services—by dealing professionally and efficiently with all members and stakeholders through qualified staff who are empowered to contribute towards the continuous improvement of SNCPFA’s suite of services.

SNCPFA’s primary objectives are:

• To reduce the long-term cost of the Fund to SPDC through efficient management of the Fund. This is achieved by developing an asset structure that closely matches the Fund’s liability profile and, within this structure, maximizing investment returns thereby minimising the amount of contribution required to maintain the funding level at 100%.
• To efficiently administer issues relating to SPDC’s pensioners in accordance with the Fund’s Trust Deed & Regulations.

The National Pension Commission

The Pension Reform Act 2004 established the National Pension Commission (PenCom) as the body to regulate, supervise and ensure the effective administration of pension matters in Nigeria.

Under the provisions of the Pension Reform Act 2004 the National Pension Commission is empowered to license and regulate the activities of all Pension Fund Administrators in Nigeria

Conservative Investment Philosophy - The ‘blue-chip’ investment portfolio

Shell Nig. Closed Pension Fund Administrator Ltd (SNCPFA) manages a diversified investment portfolio that consists of fixed income securities, listed equities and real estate.

The security of assets is maintained by a prudent and stringent investment strategy, which is set out  in SNCPFA’ s Statement of Investment Principles (SIP) developed in collaboration with Shell Group Pensions and approved by the National Pension Commission (PenCom).

The statement emphasizes safety of assets and ensures that alignment between asset and liability profiles is balanced with the pursuit of investment returns. Consequently, SNCPFA only invests in the highest grade assets, conservative money market placements and other adequately researched investment opportunities that, as much as possible, match its liability profile.

Prior to the enactment of the Pension Reform Act, all investments were made in line with regulations such as the Trustee Investments Act 1957.

In addition, the filing of annual returns with the Joint Tax Board (JTB) up till December 31, 2004 ensured that the Fund continued to enjoy  the tax exemption associated with being an ‘approved scheme’ as recognized by the JTB from 1996 till 2004.

By virtue of the PRA, effective January 2005, (the date of the commencement of transitional arrangements for the private sector under the PRA), SNCPFA is no longer required to make annual returns to the JTB.

SNCPFA has never received a qualified audit report in any of its years of existence.

The pension fund assets are segregated from the assets of the SPDC, and all transactions between both parties are carried out at arm’s length.

In compliance with the PRA, SNCPFA continues to render monthly returns to its regulator and to date has not received any sanctions or been reprimanded on any of its investment decisions.