Summary
- The purpose of this annual summary funding statement is to tell you about the funding position of the defined benefit section of the Phillips 66 UK Pension Plan (the “Plan”). It is for information only.
- Since the last summary funding statement provided to you in August 2022, an annual funding update of the Plan at 31 March 2023 has been completed by the Scheme Actuary.
- The Plan had a funding surplus of £121 million at 31 March 2023.
- The surplus increased over the previous year.
- This is mainly due to changes in market conditions over the period where although the value of the Plan’s assets and liabilities both fell, the value of the Plan’s liabilities fell by a greater amount.
What do we mean by funding position?
The trustee of the Plan, Phillips 66 Pension Plan Trustee Limited (the “Trustee”) is responsible for ensuring that the Plan has enough money and other investments (“assets”) to pay pensions when due (“liabilities”). If the assets are more than the liabilities the Plan is said to be in surplus. If the liabilities are more than the assets, it is said to be in deficit.
At least every three years the Scheme Actuary completes a formal actuarial “valuation”, with an update in the years between valuations. The last formal actuarial valuation was at 31 March 2021. The purpose of this statement is to summarise the position of the Plan as at 31 March 2021, together with the results of the further annual updates as at 31 March 2022 and 31 March 2023.
What is the Plan’s funding position?
The results of the latest formal valuation and annual updates of the Plan are given below.
| Formal valuation 31 March 2021 | Annual update 31 March 2022 | Annual update 31 March 2023 | |
|---|---|---|---|
| Market value of assets | £691 million | £720 million | £527 million |
| Amount needed to provide benefits (liabilities) | £627 million | £617 million | £406 million |
| Funding surplus | £64 million | £103 million | £121 million |
| Funding level | 110% | 117% | 130% |
As part of the 31 March 2021 formal valuation, it was agreed that the sponsoring employer, Phillips 66 Limited (the “Sponsor”), would continue to pay contributions of 37.9% p.a. of pensionable earnings to fund the build-up of new accrued benefits for active members of the Plan.
How has the funding position of the Plan changed?
Since the previous update the funding level has improved from 117% to 130%. This has mainly been due to changes in market conditions over the year from 31 March 2022 to 31 March 2023, where although the value of the Plan’s assets and liabilities both fell, the value of the Plan’s liabilities fell by a greater amount.
Financial markets have been volatile since the latest update, which has led to material changes in the value of the Plan’s assets and liabilities. This volatility has been caused by various factors including the impact of the ongoing conflict in Ukraine and the current high levels of inflation and interest rates being experienced in the UK and globally.
It is important to note that as the performance of the Plan’s assets and the assumptions change over time, it is expected that the funding position will change between valuations. The Trustee monitors the funding position closely and is in regular contact with its advisers.
How secure is my pension?
The intention is for there to be enough money in the Plan to pay pensions now and in the future, but this partly depends on the Sponsor continuing to support the Plan.
All pension schemes are required to tell members what the funding level would be if the Sponsor’s circumstances were to change and the pension scheme had to be wound up.
If this happened the Sponsor would be required to pay an amount into the Plan to enable members’ benefits to be provided in full by an insurance company (known as the “solvency level”). As at the latest formal valuation date (31 March 2021), the Scheme Actuary estimated that the solvency level was 70% corresponding to a deficit of £300 million.
If the Sponsor was to become insolvent and unable to meet any shortfall at the time, the Pension Protection Fund might be able to take over the Plan and pay compensation to members. This compensation may be less than the benefits you are entitled to under the Plan. Please note that this information is included within this statement purely for regulatory and information purposes and does not imply that the Sponsor or the Trustee is thinking of winding-up the Plan.
Further information and guidance is available at www.pensionprotectionfund.org.uk or you can write to the Pension Protection Fund at
Renaissance,
12 Dingwall Road,
Croydon
CR0 2NA
Other information
The Pensions Regulator can, in certain circumstances, use its powers to intervene in a pension scheme’s funding plan. The Trustee can confirm that this has not happened in relation to the Plan.
The Trustee can confirm that there have not been any payments to the Sponsor from the Plan’s assets since the last statement.
What do I need to do now?
You are not required to do anything in response to this statement. If you have any questions or would like any more information, please contact the Trustee:
c/o Stephen Burgess
Director, Total Rewards,
Phillips 66 Limited,
Humber refinery,
South Killingholme,
North Lincolnshire,
DN40 3DW.
If you are thinking of taking any action based on the information here, you should consult a financial adviser regulated by the Financial Conduct Authority before doing anything.
A list of relevant documents is available on request.
On behalf of the Trustee of the Phillips 66 UK Pension Plan
September 2023