BP (LON: BP) is in talks on an insurance deal for its £30bn final salary pension scheme, it has been reported, in what could be the largest pensions agreement of its kind in the industry.
The FT said trustees of the oil giant’s UK defined benefit scheme, with 69,000 members, are in talks with multiple insurers over a buy-in deal, citing people familiar with discussions.
In a statement a group representing 1,300 members said it is “appalled” by the news and is seeking advice on legal action.
“The Trustees primary duty is to its members’ interests – and the failure to inform
members of plans for such a radical step is completely unacceptable.”
It went on to add: “As a consequence of these developments, the Pensioner Group of 1,300 has decided today to proceed to seek a formal Legal Opinion from a pensions and trust law specialist on a number of aspects relating to both the Trustees and BP’s management of the Fund over the past two years.”
Rising interest rates have seen corporate pension schemes move into surplus, opening the market for insurers to take on responsibility for all or a portion of liabilities.
Last month, Energy Voice reported on members’ concerns the fund could be sold off as it declined to keep payments in line with interest rates.
BP told the FT that, as part of the considered deal, there would not be a full sale of the scheme, and it would “continue to operate as normal under the oversight of its independent trustee board”.
There is no guarantee a deal will be reached.
A row has broken out as furious scheme members say BP has failed to keep pension payments in line with inflation for two years, resulting in an effective 11% reduction in real-terms income.
A campaign group comprised of nearly 1,000 scheme members said it feared the decision not to increase payments “is associated with BP thinking or indeed planning to sell off the fund that contains our collective money/assets and to capture some of the fund’s surplus for itself”.
The UK defined benefit scheme closed to new entrants around 2010, and in 2021 stopped members from adding to their accrued pension.
“This has effectively moved the scheme into a mature stage where a ‘hive off’ is easier to accomplish,” the group alleged.
Members of BPs UK final salary scheme have been seeking a 4% increase to disbursements in light of the cost of living crisis, which BP denied.
The decision comes despite assertions from pension holders that the fund is in “its strongest financial position in many years” and holds a £6 billion surplus”.
Accessing that surplus is only possible with the wind up or full buyout of the scheme – not currently under consideration.
One former exec told the FT that any attempt to access that surplus from BP would leave the company facing “20 years” of angry interventions at its AGMs.