“A missed opportunity and lack of good faith by BP leadership”
BP held an ‘on-line’ Information Session for members of its UK Pension Scheme on 20th February 2024. This one-way broadcast was arranged to address concerns raised by thousands of pensioners regarding decisions made by BP executive leaders which have led to an 11% reduction in the real terms value of pensions paid in recent years.
1,400 members of the BP Pensioner Group each submitted in advance the same 8 critical questions which they considered must be answered fully and properly in order for the session to be judged a genuine effort by BP to engage and address deep concerns.
Mike Slingsby, a retired senior BP manager and spokesman for the BP Pensioner Group said: “58,000 members of BP’s UK Pension Fund have been waiting 10 months for the Company to engage properly and discuss a way to resolve this wholly unnecessary dispute. Today was not just a huge, missed opportunity by the Company – but it showed a lack of good faith on the part of BP’s leadership. Instead of answering the 8 questions put by pensioners, a range of irrelevant and disingenuous information and assertions was deployed. Furthermore, we still await the Company’s and the Trustee’s responses to the detailed solicitor’s letters that they each received nearly 3 months ago.”
In reviewing the outcome of the information session, the BP Pensioner Group has concluded that it did not represent a genuine attempt by bp to engage with and discuss the serious concerns that they have raised for the past 10 months for the following reasons:
- Only two of the eight critical questions submitted by 1,400 pensioners were answered in any material or serious way.
- The same assortment of irrelevant factors (in trust and pensions law) – and some new ones – were deployed as reasons for rejecting even the Trustee recommendation for an additional 4% discretionary increase to pensions in 2023. These reasons include claims of unfairness to pensioners in other countries and an unaffordable financial impact on BP and on the Fund surplus which do not stand up to close scrutiny. These reasons have been challenged in a legal letter issued to the Company by solicitors acting for pensioners.
- BP managers were unable to describe any circumstances where a Trustee recommendation for a discretionary increase to the pension might be approved by BP. Instead, they appeared to suggest that BP now sees discretionary increases to pensions as some form of “additional benefit” – rather than a commitment to a long-established policy put in place to protect the value of pensions in exceptional circumstances – such as when inflation is above 5%.
- A key pensions document from 2007 was presented with wording selectively highlighted by BP to suggest the policy of increasing pensions in line with inflation had been withdrawn. The highlighting disingenuously omitted wording that confirmed this not to be the case – the 2007 document set out clearly that the Trust Deed includes a power to make discretionary increases to pensions “when circumstances are exceptional, such as price inflation being above the 5% ceiling.” Moreover, BP failed to mention that they continued to repeat the policy in pension-related documents in subsequent years.
- Managers highlighted contributions of £3.8bn were made to the Fund by BP in recent years – but failed to mention that the large majority of this was simply meeting the terms of the employment contracts it had freely entered into with thousands of staff actually working for the Company in this recent period. Furthermore, managers failed to mention that for the majority of the period 1990-2010, the Company enjoyed a windfall by taking a prolonged contribution holiday, not needing to put in a single £ relating to the employment terms of the workforce due to the Fund performance and composition.
- BP’s CFO expressed her concern about the Pension Fund surplus being reduced if BP had consented to the Trustee’s recommendation for a discretionary increase. This was rather odd for two reasons. The 2023 increase recommended by the Trustee was considered and approved by the Pension Fund’s independent actuary, Mercer. The actuary, in its most recent actuarial report, wrote that “The Fund’s investment strategy is substantially hedged against both interest rates and inflation although in extreme events additional Company contributions could still be required”. With the Fund now holding 83% of its assets in the form of bonds and cash, it’s very difficult to imagine the extreme events which might wipe out the current surplus, short of a default by the UK Government on its debts – something which hasn’t happened since the 17th century and before the Bank of England was even founded.
- A BP manager dismissed a question about concerns raised by MPs on behalf of BP constituents by claiming that in a recent Westminster debate, “the Pensions Minister was really clear that we (BP) had fulfilled our obligations according to the pension rules.” In fact, the Minister Paul Maynard said: “Our priority is to ensure that schemes pay out the full value of the promised pension to each member when it falls due, as set out in the scheme.” And “As much as I can do, I will look closely again at the situation regarding the scheme (BP) that I have heard about in this debate.”
(Updated – 23/02/2024)
Notes to Editors
The BP Pension Fund has c. 58,000 members of whom 16,000 are over the age of 80. The average annual pension paid is c. £18,000 pa.
For some 30 years, BP and the Trustees have given written and verbal assurances that their policy is to “increase pensions fully in line with cost-of-living increases wherever possible and provided the Fund has sufficient resources.”
Thousands of BP employees invested their own money into the Fund with that assurance. The Fund currently has a very strong surplus of £5 billion.
In the past two years, BP and the Trustees have failed to follow the policy of increasing pensions in line with the cost of living leading to a permanent 11% reduction in the value of BP pensions in real terms.
The BP Pension Fund trustee recently admitted that it was in talks with insurance companies inviting them to ‘buy-in’ to the Fund. Buy-In arrangements are invariably the first step leading to a complete sell off of pension funds to insurance companies.