There are a handful of British companies that carry our name. They stand for what we used to call the best of British in the corporate place. Among these “British ” Petroleum stands high, it is not- like Shell , an Angl0-Dutch concern, it is British.

As such we expect it to show standards that mark it as a leading company. I have not worked for it and only benefit from it from a small slice of my pension that invests in its stock. In October 2007, BP’s share price peaked at £79, today it trades at under £32. It is not a stock that has been good to hold and we know why.

This is not just a matter of it being a sin-stock, other fossil fuel firms are doing better

And yet it continues to generate profits , its shares are yielding 5.4% and its P/E is a miserly 6 times. Like British and American Tobacco, it is now a sin-stock. A company with a low reputation but with a great future behind it and cash to spare should be showing leadership where it can and one area it could be showing leadership is pensions.

But instead of showing leadership, BP is showing the niggardly characteristics that have turned out great pension schemes from national monuments to corporate liabilities. Instead of improving BP’s image , the management of its Pension Scheme has added to its woes

We learn from the BP Pensioners website that

In a Parliamentary debate on UK pensions in the House of Commons on 2 May 2024, Alistair Carmichael, Liberal Democrat MP (Orkney & Shetland) told the House there appeared to be a “moral bankruptcy” at the heart of corporate BP when it came
to pensioners.

He also criticised the Company’s ‘zero engagement’ policy with the BP Pensioner Group which represents some 3,000 members of the UK BP Pension Fund. The Pensioner Group has been seeking a meeting with company leaders for more than a year.

This followed decisions by BP’s new CEO (former CFO) Murray Auchincloss to block pension increases recommended by the Fund Trustee at a time of exceptional inflation even though the Pension Fund has a record £5 billion surplus and BP enjoyed record windfall profits and executive pay. The decisions have led to an 11% fall in the value of pensions paid.

Since then , not much has changed, other than the Government. Alastair Carmichael remains in parliament and the impact of reducing pensions is about to be made worse by other cuts in pensioner income that will arrive this winter.

Of course there are many people who do not get a DB pension and there will be many pensioners poorer than BP pensioners. But photos like this would have shocked the BP boards of yester-year.

Instead of leading, BP is hiding at the back of the queue. Instead of paying out money in its pension scheme, it is hoarding it – either in the hope of buying out liabilities with the help of insurers (a receding hope) or to get the pension scheme to a state of self-sufficiency that BP can wash its hands of it as a “risk” to its balance sheet.

And so long as it adopts this “beggar my pensioner” attitude, others will follow. They will point the finger at the well-funded BP pension and talk of its prudence in not paying discretionary pension increases. Other schemes will look to their pension schemes to pay-back to shareholders what shareholders have paid in as deficit contributions and ignore the needs of the people the pension schemes were set up for.

Meanwhile, the cause of the bitterness – the value extracted from the sponsor in the years of austerity and depressed interest rates that followed the financial crash – is shuffled under the carpet. BP’s pension scheme survived the gilts crisis of 2022 better than others but still gave back much of the deficit reduction payments of the previous decade to protect its LDI programs. At best leveraged LDI was a zero sum game, but in terms of opportunity lost, it represents a terrible failure in UK pension management.

BP’s pension could have been an engine for growth in the UK. It could have funded the ESG programs that could have added to BP’s reputation, offset the damage to the environment (and its share price) ,  that its reliance on the extraction of fossil fuels has done it.

BP chose to de-risk its pension scheme and the pension scheme failed to come to BP’s aid. Now, with QE over and pensions showing the healthy surplus they always had (under long term accounting methods), it is once again getting its pension strategy all wrong.

It is putting a brick- wall up to keep its pensioner’s away. It is burying its head in the sand and refusing to use the power of its surplus to restore itself as a pension leader. Meanwhile the rest of the Defined Benefit pensions world – looks on and wonders why.

Congratulations to the BP Pensioners Group for the work they continue to do. Thanks to Alex Kent for much of the material in this article. Let us hope that BP’s management recognise that their current strategy towards their pensioners is part of their problem, not its solution.