“For countless pensioners, BP will forever be known as ‘Broken Promises'”

Everyone gets to talk about pensions except pensioners. Many people will feel that the BP pensioners are impertinent in responding to a Government consultation on the use of pension surpluses. But this blog supports the calls on BP to keep its promises and is pleased to see the BP Pension Group producing an excellent response to Government. Pensions are not just for trustees, lawyers, actuaries and sponsors. Ultimately they are there to pay beneficiaries which is why the BPPG has free use of this blog to make its point.


Things aren’t getting any better at BP. With inflation remaining stubbornly high, a minimum increase will be stubbornly low and is clearly pouring petrol on the fire.

Meanwhile BP’s Pensioner group is calling  on Government to protect UK’s 9 million
defined benefit pensioners from raids on fund surpluses.

“Easing controls on surplus extraction should only be considered alongside new measures that protect pension fund members”.

The BP Pensioner Group (BPPG) has called for more measures to protect 9 million
members of UK Defined Benefit (DB) pension funds, replying to the Government’s
consultation on making it easier for employers to extract surplus cash from the funds.

More than 5,000 UK DB funds currently report a total £359 billion surplus of assets over liabilities.

In the case of BP, the company has laid claim to 100% of a £5 billion surplus in a UK
pension fund – set up to look after 58,000 UK pensioners. The company has recently blocked the Trustee of the Fund from using some of the surplus to provide ‘cost of living’ pension increases in line with a long-established pension policy.

This has resulted in the average pension of £17,000 falling in value by 11% in just two years.

BP has responded to thousands of complaints by inviting pensioners to apply to a charity fund for one-off assistance.

Responding to the Department of Work & Pensions consultation ‘Options for Defined Benefit schemes’, the BPPG has warned that easing controls on surplus extraction should only be considered alongside measures that protect pension fund members.

These include:

▪ 50% of pension fund trustees to be nominated by members, with an independent professional trustee chairperson holding a casting vote;

▪ 66% majority of a membership vote required to approve any proposal for surplus extraction;

▪ employers to have in place insurance to compensate the Fund if employer surplus extraction leads to later pension fund shortfalls; and

▪ proposed 25% reduced rate of tax on extraction of any surplus funds to be
contingent on first making good eroded benefits.

Mike Slingsby, a former senior BP manager and spokesman for the BPPG said:

“We are encouraged by the recent statements of the Pensions Minister, Paul Maynard, when he says: ‘the security of member benefits should be paramount in any major reform of the pensions landscape’ and ‘the primary purpose of a defined benefit pension is to pay the promised benefits in full’.


“However, we urge the government to recognise that the pensions landscape has changed completely for pension fund members. The old compact between employer and pension
fund member has gone. Having closed their DB pension funds to new entrants, many sponsor companies like BP now view them very differently – either as liabilities on their balance sheets or as assets with surpluses that might be captured for the benefit of
shareholders and executive reward.


“This is increasingly putting fund trustees under stress. Their fiduciary duty to act in the best interests of the members is now in conflict with the actions and aims of their sponsor company. This all requires a new and very different approach to the legislative and regulatory regime for the UK’s defined benefit pension schemes in maturity. Our response to the consultation seeks to inform that new approach. Our response to
the consultation seeks to inform that new approach.”

Here is the response which can be downloaded from this link

 

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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