- OAO «LUKOIL» - Corporate retirement program

Corporate retirement program was established in 1994 and is one of the most important aspects of the Company’s social policy.

First corporate pension plans were assigned in 1997.

Following a contest Russia’s Enterprise of Highest Social Performance which was held in 2001, LUKOIL’s corporate retirement program was declared number one in Russia by the Government of the Russian Federation.

Before 2003 corporate pensions had been financed solely by the employer.

Beginning in 2004, the corporate pension system was augmented with a pension plan based on the principle of both the employee and employer contributing to the occupational pension fund.

Thus, the former pension program based on the principle of sole financing by the employer was set at the December 2003 level. To be eligible for the pension under the above plan, the employee must be employed with the LUKOIL Group Organizations throughout the entire period from 2003 up until his/her retirement.

The following core principles underlie the new shared financing pension plan:

1) The employee shall sign an individual Pension Agreement with the non-state pension fund (hereinafter, the Fund) and start paying pension taxes thereunder.

2) The Company shall establish additional pension capital in the registered account of the employee in the Fund by the time he/she reaches the retirement age that would be equivalent to the sum paid by the employee during the whole employment period with the Company, provided that he/she retires from a LUKOIL Group Organization.

3) The amount of the pension contributions paid by the employee shall not be limited.

4) The shared contribution made by the employer shall cover the employee’s pension contribution within his/her remuneration percentage set by the Company’s Management Committee (currently 4%).

5) The occupational pension accrued by the employer shall be paid for life after the employee has retired from the LUKOIL Group Organization.

6) After the employee’s retirement, the private pension savings of the employee can be used both for immediate payments and monthly lifetime pension payments.

The pension savings made by the employee shall be increased during the saving period by means of the investment income, inherited and considered employee’s property.

Judging by last year’s results, 40,265 of the Company’s employees participated in the corporate shared financing pension plan. The sum of their individual pension contributions exceeded RUR 398 million. The average pension contribution paid by the plan participant has reached approximately RUR 10 thousand per year.

Share contribution retirement plan:

Process map
Legal issues

To estimate the size of future corporate pension in the share corporate retirement program, one may use the table below, which displays proportional increase of the pension amount in relation to the amount of contribution.

Amount of Life Shared Non-state Pension
(employee’s monthly contribution is equal to RUR 1,000)

*Contribution period, (number of years)*	5	10	15	20	25
Amount of pension for men (RUR), including from the funds of	1216	2450	4197	6349	9045
the Company	545	990	1536	2081	2626
Personal	61	1460	2661	4268	6419
Amount of pension for women (RUR),including from the funds of	888	1787	3056	4618	6572
the Company	405	736	1140	1545	1950
Personal	483	1051	1916	3073	4622

Those employees with individual non-state pension agreements who contribute into non-state pension fund may apply to local tax authorities for social tax deduction, equaling their payments. The deduction can be provided by an employer upon application of an employee.