No support by BP for discretionary pension increase above the 5% cap in 2024

allsort

Back in April 2023, I wrote a thread expressing my surprise that a request by the BP Pension Trustee to BP to support a pension increase above the 5% cap, for the second year running, in an era of immense profits for BP, was declined.

This year, BP pensioners were recently informed that a request for a 2% above cap pension increase for the coming year, an attempt to restore in part an 11% drop in the value of pensions over the past two years, was again declined by BP. 

Last year I mused about the potential for an above cap increase saying, given BP's giant profits,  “It does 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.”

This seems to have been borne out by February’s BP-hosted pensioner information session when, answering a pre-submitted question, BPs new Chief Financial Officer couldn't describe any circumstance where a discretionary request might be granted in the future. BP isn’t alone in this refusal to support pensioners in times of significant inflation, companies including Pfizer, KPMG and Amex have done likewise. 

A very well resourced, well informed, influential and effective subset of BP pensioners, the BP Pensioner Group https://bppensionergroup.org/ has taken up the legal cudgel with the company on behalf of BP pensioners, having engaged specialist lawyers and a KC, using crowd sourced funding.  The premise being that for years, BP documented its willingness to support an above cap pension increase but, when most needed, this pledge has been forgotten.

Let’s see where this goes.  Meanwhile, the story has caught the interest of the Times and the FT, the former pointing out this week in an article by Patrick Hosking, Financial Editor that BP is among a host of DB pension funds that have accrued an estimated £359 billion aggregate surplus in the UK’s traditional pension schemes, money that the government would like to see “..going into productive investment in the UK, rather than retreating to gilts.”  The gloves are off in the unseemly struggle for the surplus.

Marcon

allsort said:

Back in April 2023, I wrote a thread expressing my surprise that a request by the BP Pension Trustee to BP to support a pension increase above the 5% cap, for the second year running, in an era of immense profits for BP, was declined.

This year, BP pensioners were recently informed that a request for a 2% above cap pension increase for the coming year, an attempt to restore in part an 11% drop in the value of pensions over the past two years, was again declined by BP. 

Last year I mused about the potential for an above cap increase saying, given BP's giant profits,  “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.”

This seems to have been borne out by February’s BP-hosted pensioner information session when, answering a pre-submitted question, BPs new Chief Financial Officer couldn't describe any circumstance where a discretionary request might be granted in the future. BP isn’t alone in this refusal to support pensioners in times of significant inflation, companies including Pfizer, KPMG and Amex have done likewise. 

A very well resourced, well informed, influential and effective subset of BP pensioners, the BP Pensioner Group https://bppensionergroup.org/ has taken up the legal cudgel with the company on behalf of BP pensioners, having engaged specialist lawyers and a KC, using crowd sourced funding.  The premise being that for years, BP documented its willingness to support an above cap pension increase but, when most needed, this pledge has been forgotten.

Let’s see where this goes.  Meanwhile, the story has caught the interest of the Times and the FT, the former pointing out this week in an article by Patrick Hosking, Financial Editor that BP is among a host of DB pension funds that have accrued an estimated £359 billion aggregate surplus in the UK’s traditional pension schemes, money that the government would like to see “..going into productive investment in the UK, rather than retreating to gilts.”  The gloves are off in the unseemly struggle for the surplus.

If they are well informed, they'd know they are fighting a lost cause.

Tommyjw

Remember the last thread, and left a similar comment to the above. I feel sorry for anyone who has put money to this, in particular, as you'd have more luck chucking it all on the lottery.

I mean in not a lawyer but "doing X is completely at our discretion" in a legal document seems pretty air tight in to them having complete ability to decide if they do or don't.

Linton

BP's management's role is to get the best result for its shareholders.  It is difficult to see how giving unnnecessary pension increases to ex-employees advances its shareholder's interests either directly or indirectly.

AlanP_2

Be grateful you have a 5% cap, I had an old DB pension that was all discretionary increases apart from any statutory elements. 

Luckily I was able to take the CETV before it came in to payment but many ex-colleagues have had about a 1% increase over 12 years.

Been taken to the ombudsman and they found in favour of company and discussed in Westminster.

I hope your attempts through the courts have more joy but don't pin your hopes on it.

Marcon

AlanP_2 said:

Be grateful you have a 5% cap, I had an old DB pension that was all discretionary increases apart from any statutory elements. 

Luckily I was able to take the CETV before it came in to payment but many ex-colleagues have had about a 1% increase over 12 years.

Been taken to the ombudsman and they found in favour of company and discussed in Westminster.

I hope your attempts through the courts have more joy but don't pin your hopes on it.

As OP admitted in their thread last 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'.

Yet not so long ago the scheme was in deficit: https://www.pensionsage.com/pa/BP-DB-pension-deficit-falls-by-1-15bn.php

Perhaps those who are shouting for discretionary increases when a scheme is in surplus should be willing to accept a reduction in their pension when a scheme is in deficit? Thought not!

This allegedly '...very well resourced, well informed, influential and effective subset of BP pensioners...' might wish to take note. Simply making a lot of noise doesn't change the facts.

Aretnap

Linton said:

BP's management's role is to get the best result for its shareholders.  It is difficult to see how giving unnnecessary pension increases to ex-employees advances its shareholder's interests either directly or indirectly.

Speaking as one of the many people whose own pension is dependant in part on the return BP makes for its shareholders, I have to agree that this is the correct priority.

LHW99

Aretnap said:

Linton said:

BP's management's role is to get the best result for its shareholders.  It is difficult to see how giving unnnecessary pension increases to ex-employees advances its shareholder's interests either directly or indirectly.

Speaking as one of the many people whose own pension is dependant in part on the return BP makes for its shareholders, I have to agree that this is the correct priority.

You will not be the only person in this position, which is something the media like to overlook when whipping up support for windfall taxes or increases in Corporation tax. Profitable companies can increase their dividends, and hopefully also invest to grow their company.

Almost everyone with a pension will have at least some holdings in companies that they hope will make their pension fund(s) increase one way or another.

leosayer

I'm not unsympathetic to the cause but it must be so far down the priority list that it just won't register. 

When you look at the amount of things that BP could invest in, the number of current employees around the world they have and the risks they have to mitigate, it hard to see how this could ever gain traction unless the lawyers can demonstrate that a firm commitment was made.

Marcon

AlanP_2 said:

Be grateful you have a 5% cap, I had an old DB pension that was all discretionary increases apart from any statutory elements. 

Luckily I was able to take the CETV before it came in to payment but many ex-colleagues have had about a 1% increase over 12 years.

The CETV will have taken into account the lack of guaranteed increases, and been calculated on the basis of no increases - so the fact you transferred out doesn't automatically improve the position (probably the reverse!).

coastline

Yeah not all DB pensions are gold plated as many people think. Maybe public sector but the private sector is very often subject to discretionary increases. Some years I've had no increases and weeks ago just a 2% rise. After been deferred for years and together with the little or no annual rises it's been disappointing. That's the way it goes and nothing is going to change it . Maybe there was a matching contribution from the employer but this is common with DC pots today. Considering mine was deferred a transfer years ago might have produced a better outcome. When I've looked back at the paperwork the transfer value lumped into a FTSE 100 tracker would have been better bet. That hasn't been the most rewarding market either. I could have taken the natural yield and been better off. True. 

A couple of articles from way back. Millions of people say aged 60-90 in this group. Industrial decline was a big factor decades ago where redundancy led to workers scrambling for any kind of work to make ends meet. Some will have retrained but many were left on the scrapheap. 

 So who the devil has ruined your pension? | Money | The Guardian

The Decline of Defined Benefit Schemes (opalliance.org.uk)