ìWhen Shell announced in October that it was taking a pension contribution holiday it reawakened the debate around this hotly disputed strategy. Historically it has been seen as a key factor that contributed to the issue of pension scheme deficits, although in truth we know it was actually a combination of this and many other factors.
ìShell and now BPís announcement may seem radical, however this is not the case - this is a strategy that a number of smaller companies are already pursuing.
ìWith schemes being funding more prudently than previously, there is a rational case for considering this strategy. There is, after all, little benefit in continuing to put additional cash into a scheme that is well funded as once cash is in the scheme it can become trapped. A contribution holiday can be one way of ensuring a scheme does not become over funded. It might not suit all schemes, but nowadays schemes are better able to stand any shocks to the system, and as schemes become increasingly mature, contributions become financially less significant than other factors such as investment strategy.ì
Era of pension surplus prompts the return of pension holidays
When Shell announced in October that it was taking a pension contribution holiday it reawakened the debate around this hotly disputed strategy
