Pensioners complained that BP’s decision to reject a request for an inflation-linked increase in payments is “not acceptable” in the face of healthy profits and rising payouts to shareholders.
BP (LON:BP) this week announced net profits of just under $2.6bn for Q2, further angering a growing group of pensioners who say they have seen the value of their plan slashed by over 10% in the face of rising inflation.
At the same time, the supermajor said it would increase its dividend by 10% to 7.2 cents per share and announced a further $1.5bn in share buybacks to be completed before its Q3 results.
Despite its profitability, nearly 70,000 members of a UK defined benefit scheme were told that the company would not make discretionary increases above the scheme’s cap of a 5% RPI-linked increase.
It follows an appeal to BP’s board and chief executive Bernard Looney last year in which the scheme’s independent trustees sought a further 4% increase to disbursements in light of rising living and energy costs.
The company 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.
The group contests that the failure to match inflation has resulted in an effective 11% reduction in their real-terms income over the past two years, and that the proposals would have a minor effect on the fund, which currently holds a £6bn surplus.
Over that same period, they point out that Mr Looney has received a 477% increase in his own total remuneration, which topped £10m in 2022.
Buy-in blow up
It was later reported 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 campaign group allege that these discussions and the possible sale are “the real reason” why BP has refused to keep its payouts aligned with inflation.
BP said last month that, as part of the potential 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 that any buy-in deal will be reached.
Speaking on behalf of the BP Pensioner Group, Nick Coleman said this week: “The refusal of BP’s chief executive to even discuss his decision to reject the independent Pension Fund Trustees recommendation is not acceptable and falls short of the standards expected of a leader of a company such as BP.
“The impact of that decision falls upon 60,000 members of the Pension Fund – the same people who spent much of their working lives creating the company that he now leads.
“We urge the CEO and board to reconsider this decision and engage with BP’s pensioners so this dispute can be swiftly resolved.”
The group held a “social media day of action” during the company’s 1 August results day in a bid to send “a strong signal” that the campaign did not intend to back down.
The pensioners’ group – whose ranks have swelled from 1,300 last month to over 1,700 today – says it intends to announce the next step in a possible legal challenge against the decision soon.
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