No support by BP for discretionary pension increase above the 5% cap in 2023

The_Unready

I believe my wife's BT pension only went up by 5% this year (other BT pensioners may have different rules depending on when they joined/left the scheme).

DBdoobydoo

AlanP_2 said:

It may not make you feel better but you could be in a much worse position.

The scheme I was in (until I took the CETV and transferred out) had all increases to in payment pensions at the company's discretion.

In 14 years there was one increase of 1%.

Sounds like the Digital Equipment Corporation (DEC) pension scheme as now administered by Hewlett Packard (HP) who took over Compaq who had taken over DEC. HP obviously don't give a !!!!!! about DEC pensioners as the scheme is closed & many retirees never even worked for HP.

MoneySavingGerbil

It won't be any comfort to the OP whatsoever, but having checked the BP pension website for my deferred pension they've just applied a 13.8% increase this year. Depsite just being down to luck it does show how still being in deferrment through a period of high inflation can be very beneficial. Were I in the same postion as the OP I'd probably be feeling similarly aggrieved even if it is just down to the scheme rules. Out of general interest, if a DB pension scheme is in surplus at the point all liabilities have ceased (last pensioner dies), then what happens to the surplus funds?

My other DB pension is split with part capped at 2.5% increases and another portion capped at 5% so I suspect even with the averaging of increases over the period of deferrment it won't fair nearly as well even if inflation drops back. It doesn't help that they also don't supply annual valuations like BP so no easy way of telling what it's worth now (unless someone knows of an online calculator that accounts for capping)

DT2001

If the scheme you are in has been going for a long time what happened the last time RPI exceeded 5%?

I am a Barclays 1964 scheme member and my increase was capped at 5%. No discussion about above RPI. In just over 2 years the vast majority of my pension will be GMP with half increasing at CPI, max 2.5% and half with no increase. My retirement plan has to cover the consequence of relatively high inflation and my glass half full point of view thanks the fact that the scheme was non contributory so I had spare money to invest in my own property etc. 

AlanP_2

DBdoobydoo said:

AlanP_2 said:

It may not make you feel better but you could be in a much worse position.

The scheme I was in (until I took the CETV and transferred out) had all increases to in payment pensions at the company's discretion.

In 14 years there was one increase of 1%.

Sounds like the Digital Equipment Corporation (DEC) pension scheme as now administered by Hewlett Packard (HP) who took over Compaq who had taken over DEC. HP obviously don't give a !!!!!! about DEC pensioners as the scheme is closed & many retirees never even worked for HP.

That's the one.

Andy_L

MoneySavingGerbil said:

It won't be any comfort to the OP whatsoever, but having checked the BP pension website for my deferred pension they've just applied a 13.8% increase this year. Depsite just being down to luck it does show how still being in deferrment through a period of high inflation can be very beneficial. Were I in the same postion as the OP I'd probably be feeling similarly aggrieved even if it is just down to the scheme rules. Out of general interest, if a DB pension scheme is in surplus at the point all liabilities have ceased (last pensioner dies), then what happens to the surplus funds?

I don't think it happens. AIUI, before that point arrives, the employer buys out their liabilities with insurance products that die with the members

Malthusian

MoneySavingGerbil said:

Out of general interest, if a DB pension scheme is in surplus at the point all liabilities have ceased (last pensioner dies), then what happens to the surplus funds?

As Andy_L says, it's likely that the scheme will have been bought out by an insurance company long before then, meaning there is no "surplus fund". 
This is part of the reason discretionary increases are very rare. If the scheme has enough money to pay discretionary increases it should be using it to de-risk, not pay its members more than they are owed.
(If all the pensioners die earlier than the insurer's actuary expects, the insurer will make a profit on that buy-out, but it doesn't just go into the insurer's pocket; it goes towards paying pensioners who died later than the actuary expects. That's insurance.)

Dowel

The failure of BP to pay the full increase due for the last two years amounts to an 11% shortfall on amounts due. The Company committed itself time after time to full RPI without cap.  Accordingly a pensioner group has formed to persuade BP to pay the amounts due. They can be contacted at www.bppensionergroup.org or directly on contactus@bppensionergroup.org
Please join in to help all 60,000 of us to get the amounts due paid.

allsort

Dowel said:

The failure of BP to pay the full increase due for the last two years amounts to an 11% shortfall on amounts due. The Company committed itself time after time to full RPI without cap.  Accordingly a pensioner group has formed to persuade BP to pay the amounts due. They can be contacted at www.bppensionergroup.org or directly on contactus@bppensionergroup.org
Please join in to help all 60,000 of us to get the amounts due paid.

How interesting.  It's great to know that I wasn't alone in feeling aggrieved about BP's action towards pensioners in declining the recommended discretionary increase this year and that a group has been formed to prepare a legal challenge to BP in this regard.  I find the key points of the campaign quite powerful.

In the past BP has always supported the Fund Trustees in keeping pensions aligned with inflation.BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years.The Fund has a very strong surplus which could and should be used for the purpose it was intended – to ensure the value of the pension is not eroded permanently by inflation.This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase.Such is the profitability of the company, in just two years, Mr Looney has received a 477% increase in his own total remuneration – reaching £10 million pa in 2022.The BP Pensioner Group will shortly announce the next step in its legal challenge to the decision and other related matters.

Tommyjw

allsort said:

Dowel said:

The failure of BP to pay the full increase due for the last two years amounts to an 11% shortfall on amounts due. The Company committed itself time after time to full RPI without cap.  Accordingly a pensioner group has formed to persuade BP to pay the amounts due. They can be contacted at www.bppensionergroup.org or directly on contactus@bppensionergroup.org
Please join in to help all 60,000 of us to get the amounts due paid.

How interesting.  It's great to know that I wasn't alone in feeling aggrieved about BP's action towards pensioners in declining the recommended discretionary increase this year and that a group has been formed to prepare a legal challenge to BP in this regard.  I find the key points of the campaign quite powerful.

In the past BP has always supported the Fund Trustees in keeping pensions aligned with inflation.BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years.The Fund has a very strong surplus which could and should be used for the purpose it was intended – to ensure the value of the pension is not eroded permanently by inflation.This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase.Such is the profitability of the company, in just two years, Mr Looney has received a 477% increase in his own total remuneration – reaching £10 million pa in 2022.The BP Pensioner Group will shortly announce the next step in its legal challenge to the decision and other related matters.

Whilst I understand the reason and overall point, and myself in the DB environment have the same discussions with some of the Trustee clients around if they were giving any discretionary increase ... I do hope anybody who puts money towards a legal challenge realises it is absolutely pointless and they may as well be chucking it in a ditch on the side of the road. The Trustee (and company) are by all accounts following the Scheme rules and at the end of the day that's where the conversation stops.