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

Marcon

• 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. How often has inflation exceeded the increases guaranteed under the rules of the Scheme?
• BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years. But they have received the benefits promised under the rules of the Scheme.
• 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. Surpluses do not have a 'purpose'. They can (and do) very easily turn to deficits, depending on fund movements and market conditions. Defined benefit schemes normally have surpluses at any given point in time for one reason only: the employer has paid in more cash than needed to provide the benefits promised under the rules of the scheme at that particular point in time. 
• This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase. Which is very disappointing for pensioners, but it's a discretionary increase, not a right.

What exactly is the basis of your challenge when the scheme appears to have been administered in accordance with the rules? If there is something in the rules to support your challenge, perhaps you could include it here?

allsort

Marcon said:

• 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. How often has inflation exceeded the increases guaranteed under the rules of the Scheme?
• BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years. But they have received the benefits promised under the rules of the Scheme.
• 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. Surpluses do not have a 'purpose'. They can (and do) very easily turn to deficits, depending on fund movements and market conditions. Defined benefit schemes normally have surpluses at any given point in time for one reason only: the employer has paid in more cash than needed to provide the benefits promised under the rules of the scheme at that particular point in time. 
• This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase. Which is very disappointing for pensioners, but it's a discretionary increase, not a right.

What exactly is the basis of your challenge when the scheme appears to have been administered in accordance with the rules? If there is something in the rules to support your challenge, perhaps you could include it here?

Coming back to Marcon with more information about the basis of BP's challenge.  Here is a statement issued today by the BP Pensioner Group about oral evidence given this morning by a representative of the group to the UK Parliament Work & Pensions Select Committee Inquiry.
BP Pensioner Group Oral Evidence to UK Parliament Work & Pensions Select Committee Inquiry (18/10/2023) - BP Pensioner Group
Also giving evidence were pensioner representatives from the Hewlett-Packard Pensioners Association and the Royal Ordnance Pensioners Association.
Here is a link to the video recording of the session :
Parliamentlive.tv - Work and Pensions Committee
A very worrying precedent for the possible future direction of other DB schemes that are closed to new participants is outlined by the BP Pensioner representative who states that the BP Pension Fund trustee recently admitted that it was in talks with insurance companies inviting them to ‘buy-in’ to the Fund and that buy-in arrangements are invariably the first step leading to a complete sell off of pension funds to insurance companies.
This perhaps goes some way to explaining why, in the last two pension increase cycles, despite record profits and an exceedingly healthy surplus, BP has not kept its long held assurances to its pensioners to make inflation-matching pension increases.  By limiting future liabilities, such as inflation matching increases, the BP pension fund becomes an even more attractive buy-in prospect.

Marcon

allsort said:

Marcon said:

• 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. How often has inflation exceeded the increases guaranteed under the rules of the Scheme?
• BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years. But they have received the benefits promised under the rules of the Scheme.
• 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. Surpluses do not have a 'purpose'. They can (and do) very easily turn to deficits, depending on fund movements and market conditions. Defined benefit schemes normally have surpluses at any given point in time for one reason only: the employer has paid in more cash than needed to provide the benefits promised under the rules of the scheme at that particular point in time. 
• This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase. Which is very disappointing for pensioners, but it's a discretionary increase, not a right.

What exactly is the basis of your challenge when the scheme appears to have been administered in accordance with the rules? If there is something in the rules to support your challenge, perhaps you could include it here?

Coming back to Marcon with more information about the basis of BP's challenge.  Here is a statement issued today by the BP Pensioner Group about oral evidence given this morning by a representative of the group to the UK Parliament Work & Pensions Select Committee Inquiry.
BP Pensioner Group Oral Evidence to UK Parliament Work & Pensions Select Committee Inquiry (18/10/2023) - BP Pensioner Group
Also giving evidence were pensioner representatives from the Hewlett-Packard Pensioners Association and the Royal Ordnance Pensioners Association.
Here is a link to the video recording of the session :
Parliamentlive.tv - Work and Pensions Committee
A very worrying precedent for the possible future direction of other DB schemes that are closed to new participants is outlined by the BP Pensioner representative who states that the BP Pension Fund trustee recently admitted that it was in talks with insurance companies inviting them to ‘buy-in’ to the Fund and that buy-in arrangements are invariably the first step leading to a complete sell off of pension funds to insurance companies.
This perhaps goes some way to explaining why, in the last two pension increase cycles, despite record profits and an exceedingly healthy surplus, BP has not kept its long held assurances to its pensioners to make inflation-matching pension increases.  By limiting future liabilities, such as inflation matching increases, the BP pension fund becomes an even more attractive buy-in prospect.

Thank you. The update is much appreciated and I'll have a look at your link as soon as I have time to do so.

I think you might have misunderstood the buy-in concept. You say the trustee has 'admitted' it was in talks with insurance companies, as if that's somehow a bad thing. In reality it almost invariably increases security for scheme members - in other words, they are even more sure of getting the benefits promised under the rules of the scheme. This is far from setting a precedent; the buy-in market has been hugely active in the last few years and some very large schemes indeed have gone down that route.

A buy-out is the next logical step. No company is going to want to run a closed DB scheme for ever, not least because the membership numbers can only dwindle, and the costs of running the scheme in terms of professional services and administration become ever more disproportionate to the numbers.

What's the position if this scheme winds up in surplus - who decides what happens to the surplus at that point, assuming there is one?

allsort

Marcon said:

allsort said:

Marcon said:

• 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. How often has inflation exceeded the increases guaranteed under the rules of the Scheme?
• BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years. But they have received the benefits promised under the rules of the Scheme.
• 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. Surpluses do not have a 'purpose'. They can (and do) very easily turn to deficits, depending on fund movements and market conditions. Defined benefit schemes normally have surpluses at any given point in time for one reason only: the employer has paid in more cash than needed to provide the benefits promised under the rules of the scheme at that particular point in time. 
• This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase. Which is very disappointing for pensioners, but it's a discretionary increase, not a right.

What exactly is the basis of your challenge when the scheme appears to have been administered in accordance with the rules? If there is something in the rules to support your challenge, perhaps you could include it here?

Coming back to Marcon with more information about the basis of BP's challenge.  Here is a statement issued today by the BP Pensioner Group about oral evidence given this morning by a representative of the group to the UK Parliament Work & Pensions Select Committee Inquiry.
BP Pensioner Group Oral Evidence to UK Parliament Work & Pensions Select Committee Inquiry (18/10/2023) - BP Pensioner Group
Also giving evidence were pensioner representatives from the Hewlett-Packard Pensioners Association and the Royal Ordnance Pensioners Association.
Here is a link to the video recording of the session :
Parliamentlive.tv - Work and Pensions Committee
A very worrying precedent for the possible future direction of other DB schemes that are closed to new participants is outlined by the BP Pensioner representative who states that the BP Pension Fund trustee recently admitted that it was in talks with insurance companies inviting them to ‘buy-in’ to the Fund and that buy-in arrangements are invariably the first step leading to a complete sell off of pension funds to insurance companies.
This perhaps goes some way to explaining why, in the last two pension increase cycles, despite record profits and an exceedingly healthy surplus, BP has not kept its long held assurances to its pensioners to make inflation-matching pension increases.  By limiting future liabilities, such as inflation matching increases, the BP pension fund becomes an even more attractive buy-in prospect.

Thank you. The update is much appreciated and I'll have a look at your link as soon as I have time to do so.

I think you might have misunderstood the buy-in concept. You say the trustee has 'admitted' it was in talks with insurance companies, as if that's somehow a bad thing. In reality it almost invariably increases security for scheme members - in other words, they are even more sure of getting the benefits promised under the rules of the scheme. This is far from setting a precedent; the buy-in market has been hugely active in the last few years and some very large schemes indeed have gone down that route.

A buy-out is the next logical step. No company is going to want to run a closed DB scheme for ever, not least because the membership numbers can only dwindle, and the costs of running the scheme in terms of professional services and administration become ever more disproportionate to the numbers.

What's the position if this scheme winds up in surplus - who decides what happens to the surplus at that point, assuming there is one?

If you have time to view the parliamentary select committee footage you'll hear talk of the "unseemly struggle for the surplus", which in the case of BP is a whopping £20bn.

Marcon

allsort said:

Marcon said:

allsort said:

Marcon said:

• 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. How often has inflation exceeded the increases guaranteed under the rules of the Scheme?
• BP’s pensioners have now suffered an 11% reduction in the real value of their pension over the past two years. But they have received the benefits promised under the rules of the Scheme.
• 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. Surpluses do not have a 'purpose'. They can (and do) very easily turn to deficits, depending on fund movements and market conditions. Defined benefit schemes normally have surpluses at any given point in time for one reason only: the employer has paid in more cash than needed to provide the benefits promised under the rules of the scheme at that particular point in time. 
• This is the first time that a bp CEO has taken such a decision to block the recommended discretionary increase. Which is very disappointing for pensioners, but it's a discretionary increase, not a right.

What exactly is the basis of your challenge when the scheme appears to have been administered in accordance with the rules? If there is something in the rules to support your challenge, perhaps you could include it here?

Coming back to Marcon with more information about the basis of BP's challenge.  Here is a statement issued today by the BP Pensioner Group about oral evidence given this morning by a representative of the group to the UK Parliament Work & Pensions Select Committee Inquiry.
BP Pensioner Group Oral Evidence to UK Parliament Work & Pensions Select Committee Inquiry (18/10/2023) - BP Pensioner Group
Also giving evidence were pensioner representatives from the Hewlett-Packard Pensioners Association and the Royal Ordnance Pensioners Association.
Here is a link to the video recording of the session :
Parliamentlive.tv - Work and Pensions Committee
A very worrying precedent for the possible future direction of other DB schemes that are closed to new participants is outlined by the BP Pensioner representative who states that the BP Pension Fund trustee recently admitted that it was in talks with insurance companies inviting them to ‘buy-in’ to the Fund and that buy-in arrangements are invariably the first step leading to a complete sell off of pension funds to insurance companies.
This perhaps goes some way to explaining why, in the last two pension increase cycles, despite record profits and an exceedingly healthy surplus, BP has not kept its long held assurances to its pensioners to make inflation-matching pension increases.  By limiting future liabilities, such as inflation matching increases, the BP pension fund becomes an even more attractive buy-in prospect.

Thank you. The update is much appreciated and I'll have a look at your link as soon as I have time to do so.

I think you might have misunderstood the buy-in concept. You say the trustee has 'admitted' it was in talks with insurance companies, as if that's somehow a bad thing. In reality it almost invariably increases security for scheme members - in other words, they are even more sure of getting the benefits promised under the rules of the scheme. This is far from setting a precedent; the buy-in market has been hugely active in the last few years and some very large schemes indeed have gone down that route.

A buy-out is the next logical step. No company is going to want to run a closed DB scheme for ever, not least because the membership numbers can only dwindle, and the costs of running the scheme in terms of professional services and administration become ever more disproportionate to the numbers.

What's the position if this scheme winds up in surplus - who decides what happens to the surplus at that point, assuming there is one?

If you have time to view the parliamentary select committee footage you'll hear talk of the "unseemly struggle for the surplus", which in the case of BP is a whopping £20bn.

Thank you - I will when I can. What I'm particularly interested in is what the rules of the scheme actually say on the point: does the employer have the right to a return of surplus, or do the trustees have any say in the matter?

ewaste

The evidence given in the Committee was around £3Bn of a surplus should the BP scheme buyout, £20Bn is the overall size of the UK scheme.

From what was said the Trust Deed and Rules of the scheme currently give the employer discretion regarding any surplus, including discretionary benefits. Although BP had a history of awarding discretionary increases albeit, it seems, when the scheme was still open. 

It was an interesting watch but some of the concerns raised were pretty much along the lines of we want our slice of the pie. It's all very much about morality and fairness, although insomuch as it relates to the pensioners point of view, rather than the actual rules of the schemes. 

Marcon

ewaste said:

The evidence given in the Committee was around £3Bn of a surplus should the BP scheme buyout, £20Bn is the overall size of the UK scheme.

From what was said the Trust Deed and Rules of the scheme currently give the employer discretion regarding any surplus, including discretionary benefits. Although BP had a history of awarding discretionary increases albeit, it seems, when the scheme was still open. 

It was an interesting watch but some of the concerns raised were pretty much along the lines of we want our slice of the pie. It's all very much about morality and fairness, although insomuch as it relates to the pensioners point of view, rather than the actual rules of the schemes. 

Thank you - I rather thought that might be the case. Interesting how members are always happy to have a share of the surplus, but don't often seem keen to help remedy a deficit!

9elf

allsort said:

I'm a BP pensioner and received an update from the BP Pension Fund Trustee today.  It advises that, because of the prevailing economic situation of the highest inflation in the UK for 30 years, the Trustee decided it was appropriate to ask BP for consent to award a discretionary increase beyond the maximum 5% to which most members are entitled in line with inflation, which is measured by the rise in the Retail Price Index for the UK over the previous calendar year.  The Fund's finances are described as "very strong" but increases above the 5% level require BP's consent as they are neither envisaged nor guaranteed under the rules.

Very surprisingly (to me at least), given that in 3Q 2022, BP reported its biggest quarterly profit in 14 years, with underlying profits hitting $8.45bn (£6.9bn) between April and June - more than triple the amount it made in the same period in the previous year, BP declined to support a discretionary increase above the 5% cap, citing concern for a subset of BP retirees around the world "many of whom participate in retirement plans that are defined contribution in nature or do not have guaranteed pension increases" as the rationale for declining this request.

This is corporate genius - despite the BP Pension Fund Trustee stating that in its view "a discretionary increase was appropriate in current circumstances", BP manages to worm its way out of this on the grounds of concern for a subset of its global retirees.

It does the beg the question, "if not now, when"?  Presumably the answer to which is "never" and the concept of the discretionary pension increase in extraordinary times is just a ruse.

I wonder if the fear from BP is less about a concern of fairness towards the other global retiree groups but of the potential legal action that may follow from those groups not given the same treatment.