A group of pensioners have issued legal letters to BP pension trustees and management over its decision not to grant requests for additional disbursements earlier this year.
The group, which represents some 2,500 members of a company-backed defined benefit pension scheme, confirmed it had sent confidential legal letters on Friday and said it would look to “escalate” legal proceedings unless it received satisfactory answers from executives.
Pensioners and trustees for the fund appealed to BP’s (LON:BP) board and chief executive last year seeking a total 9% increase to disbursements in light of rising living and energy costs.
While a 5% uplift was accepted – the maximum annual increase guaranteed under the scheme’s rules – their additional 4% cost-of-living request was denied in April by then CEO Bernard Looney and the board.
The company has said any pensioners experiencing hardship can apply for a one-off payment from its benevolent fund, and that it will be holding information sessions for pension holders in the new year.
Yet BP Pensioners Group (BPPG) maintains that soaring inflation and living costs have led to an 11% fall in the value of the pension in real terms, and have secured legal counsel to further their fight for a discretionary payout.
The letters rely on statements and other evidence made by the company BP and scheme trustees about how pension increases would be dealt with. They also demand explanations for why increases have been provided “at substantially lower levels than could have been provided for under the scheme.”
“If adequate responses are not received, the Pensioner Group considers it will have little option than to escalate its own legal response until/unless pension increases at an adequate level are restored,” the group said in a statement.
Increases pose ‘material liability’ for BP
The final salary scheme, thought to host around 58,000 members, closed to new entrants around 2010 and in 2021 stopped members from adding to their accrued pot. However, fund members say it retains a £5 billion surplus.
It was reported this year that the supermajor is in talks with multiple insurers over a buy-in deal for the £30bn scheme in what could be the largest pensions agreement of its kind in the industry.
The news appeared to confirm long-running fears amongst BPPG members of a sell-off of the fund.
BP said in June that it was “a difficult decision” not to grant the award, and that it had to balance the interests of stakeholders around the world, including employees and retirees.
In a November statement the company noted that discretionary increases were given between 1989 and 1991 when RPI was last above 5%, but contended that the pension landscape “has changed significantly” since that time and this “historic approach…has not been in place for many years.”
As far back as 2007, it said pensioners were told to ordinarily expect increases to follow RPI, subject to a maximum increase of 5%.
It claimed that providing the extra 4% increase would have created an additional material liability of approximately £400m that would hit BP’s profit and loss. It said the availability of a fund surplus “does not mean that it should be used to fund discretionary increases,” and noted that fund payments were expected to continue until 2080.
It added that the BP Benevolent Fund – now to be renamed the BP Helios Fund – had received additional funds and could offer a “one-off, tax-free, cost-of-living assistance grant” to UK BP pensioners on lower incomes experiencing hardship.
It’s understood these are means-tested payments of up to £2,500.
Former BP senior manager and BPPG spokesman Mike Slingsby, said: “It is a matter of deep regret that after seven months of innumerable letters, emails and telephone calls, neither BP’s leadership nor the Trustee Chairman have seen fit to hold a single direct conversation or meeting with the Pensioner Group, which represents some 2,500 members of the BP Pension Fund.
“This has forced us, reluctantly, to take formal legal steps against the Company that we served loyally for much of our careers and lives.”
The group also dismissed the “tone-deaf” offer of a means-tested grant payment.
“While we welcome help to any pensioner in hardship, resorting to a one-off charity handout shows a leadership failure to grasp the seriousness of this wholly unnecessary dispute in which BP’s pensioners have seen the value of their pensions significantly cut in real terms,” Mr Slingsby added.
“A charity offer is completely inadequate, and the company leadership appears to be tone deaf – despite claiming it is listening to its pensioners.”
BP says it will be holding an information session for all UK defined benefit pension plan holders some time in the new year, and will update members accordingly.
In the meantime, the supermajor’s search for a new CEO is now set to last until the first quarter of 2024, with an appointment possibly timed to coincide with the announcement of its full-year earnings in February.