Leaving Shell – APF Pension

Watch this hypothetical case study on how your APF Pension benefit is calculated: https://newheightsplanning.com/shells-apf-pension/

Full Transcript:

What do I do with my Shell pension when I leave Shell?

I love Shell’s pensions. They’re an incredible benefit, especially considering corporate pensions today are quite rare. Now, in addition to being extremely valuable, they can also be quite confusing. Today, we’ll talk about the APF pension and the options you have for your APF pension once you leave Shell. Now, I encourage you to have a plan in place before you make the decision to leave.

With your APF pension, the value of your pension is based on a lump-sum calculation. I did a full hypothetical example of this in a previous video, and will link to that video in the comments. Now for your APF pension. You have a few options for when you leave Shell. You can do nothing. You can take it in the form of an annuity. You can take the lump sum and cash it out. Or you can take the lump sum and roll it over. Let’s talk about each one of these options.

First, if you do nothing, this is of course, the default option. Your APF pension will then grow at the 30-year treasury rate after you leave Shell. Now it’ll continue to grow at that rate until you select an election, like an annuity or a lump sum, or you hit age 65. At this point, your normal retirement age for Shell, it will then kick it out into an annuity if you don’t do anything.

Of course, after you leave Shell at any time, you can select to take that annuity. The annuity, of course, is based on your lump sum factor and then is calculated out into monthly payments depending on the age at which you start it. Current mortality tables i.e. how long do you think the average person will live, and current interest rates? So for some people, the annuity is the best option. It really depends on your current financial situation, current interest rates, when you want to start the payments, and of course, how long do you expect to live? Do expect to live longer than the average individual. Now another option is to cash out the lump sum. So by doing this, of course, you will be hit with taxes during any withdrawal of a pension.

But when you take it as a lump sum, because it may be a higher number, it could push you into a higher tax bracket. And so that could be more taxes. Additionally, depending on your age, you may also be hit with a 10% penalty. For most people cashing out your pension with the lump sum option is generally not the best option.

Another common option for people is to roll it over into another plan, like their Shell 401(k) or into an IRA. This is a great option for those of you that want to have control of the money and be able to invest it how you want to invest it. Of course, one of the downsides of rolling it over is that then you also take on the investment risks and are responsible for the distributions.

As you can see, there are a lot of options for your pension, and there’s a lot of complexity and implications of each choice within these options. I encourage you to review your unique situation with your financial advisor to make sure that you have the right plan in place before you decide to leave Shell. Also, please continue to like these videos on social media and share them with your colleagues so they can see them as well.