BP Pensioner Group

The Trustee has the power to grant discretionary increases above the annual RPI, provided the company agrees.

and

The Company recognises that if inflation rises above 5% for any significant length of time, this could have an adverse effect on the purchasing power of the pensions payable to the Fund’s members.

what about discretionary increases?

The Trustee must make its decision strictly within the terms of the Trust Deed and the relevant scheme rules.

The Trust Deed includes a power to make discretionary increases.  This is in order to provide some flexibility when circumstances are exceptional, such as price inflation being above the 5% ceiling. Any exercise of the discretion requires BP consent, so that in practice it is the Company that has the final say.

The Trustee must consider all beneficiaries in a consistent manner and hence does not have the power to tailor awards to individual circumstances. A further consideration for the Trustee is to ensure that the Fund has sufficient resources to meet its current and future financial commitments.

As explained in Pensions Highlights, the real cost of BP’s commitments has risen faster than inflation, owing to the impact of people living longer and the cost of complying with increased regulation. So the Trustee needs to maintain sufficient funding to protect and pay the benefits which members have already built up and to cope with unpredictable events.

Therefore, in all but exceptional years, members should expect incresses to follow RPI, subject to the 5% ceiling.  Members of other schemes within the Fund should expect increases on the basis set out under the rules of those schemes.

It is important to remember that the BP Scheme guarantees pension increases equivalent to the annual increase in the Retail Price Index (RPI) up to 5% and the Trustees with the agreement of the Company, have stated that they intend to follow a policy of increasing pensions in line with RPI wherever possible even when this exceeds 5%, so long as the BP Pension Fund has sufficient resources to permit this. In times of high inflation, this would be a valuable underpinning to the purchasing power of your pensions.

Benefits of scheme membership: Guaranteed increases to protect the value of your pension over the years of your retirement.

The Scheme guarantees increases equivalent to the Retail Proces Index (RPI) up to 5% and the Trustees with the agreement of the Company, have stated that they intend to follow a policy of increasing pensions in line with the cost of living wherever possible and provided the Fund has sufficient resources to do so.

This guarantee has operated, and this policy has been followed in practice, since 1989.

(f) The need to act fairly between members of the company
The board aim to balance the needs of various stakeholders when setting and delivering the company’s strategy, having regard to the Company’s regulatory obligations acting for and on behalf of the BP Pension Fund, and long term value creation including maximizing long term shareholder value.

Act in the best interests of your beneficiaries
You must act in the best interests of the scheme’s beneficiaries. A beneficiary is anyone who is entitled to, or who might receive, a benefit from the scheme, now or in the future.

Question – how can the BP Trustees Ltd statement on directors (ie trustees) duty to maximise shareholder (ie BP) value be consistent with the legal duty of a pension fund trustee to act in the best interests of the beneficiaries (ie pension scheme members)?