The pensions of oil and gas workers are at risk as low oil prices start to undermine the finances of some drilling and exploration firms.
Thousands of jobs have already been shed around the world in the oil and gas industry – and now the futures of some companies are looking fragile as well.
Trinity Exploration has suspended share trading on the London Alternative Investment Market (AIM) after lender Citibank called in a $13 million debt.
The company had asked the bank to stave off action while negotiating a restructured deal, but the bankers finally lost patience and pulled the loan and froze the company’s bank accounts.
Collapsing oil prices
In a wider context, Trinity has suffered from the collapse in oil prices and the difficulty small independents face scratching a living from high production costs in fields like the North Sea compared to the cheaper to access oil reserves in the Middle East and Africa.
The Trinity experience is important.
The North Sea only saw two companies hit the wall last year, while Premier Oil and Enquest are also in talks with their bankers. The companies have total debts of close to $3.8 billion and could easily be forced into administration.
If a UK oil or gas company goes bust, the Pension Protection Fund steps in to rescue any retirement savings – but only pays out 90% of promised benefits. If any protection is available depends on the country where the oil company is based.
Pensions for expats
British expats in the oil and gas industry could lose a great deal of cash if more companies go into administration.
One way they can safeguard money in a pension is to switch the cash into a Qualifying Recognised Overseas Pension Scheme (QROPS) that belongs to the expat.
QROPS based in a financial centre like Malta allow retirement savers to live and work anywhere in the world.
This feature also lets contractors live in countries that have no QROPS providers, such as the Philippines and Thailand, while benefitting from an offshore pension.