Alistair Carmichael blasted BP leaders for delinking inflation from its pension scheme payouts, which has slashed the value of the pension paid by 11%.
An MP has criticised BP for ‘dealing from the bottom of the deck’ on UK pensions.
Alistair Carmichael, MP for Orkney & Shetland, warned UK pensions minister Paul Maynard that BP appeared to be “dealing from the bottom of the deck” when it came to its decision to delink inflation from its pension scheme payouts. This has reduced the value of the pensions paid by 11% in real terms in just two years.
Carmichael also read out a heart-breaking statement from a dying BP pensioner who was told his widow would no longer be protected from inflation despite previous assurances.
The MP said this BP issue was the equivalent of a ‘canary in a coalmine’ for defined benefit (DB) pensions in the UK.
Speaking at a debate in Westminster Hall on the regulation of DB pension schemes on Wednesday, Carmichael said: “That’s the human cost of the decisions that BP takes and continues to take. BP and Shell - they are just canaries in a coalmine. What happens to them (BP pensioners) can happen to others. This is a matter to which the government now must have its most urgent attention.”
He also used the meeting to highlight how BP has a well-funded pension scheme which can comfortably afford to pay its pensioners in line with inflation.
Carmichael said: “The funding ratio of the BP Pension Fund stands at 132%. If they were to meet the extra four percent this year, then the funding ratio of the BP Pension Fund would stand at 129%, so there is no reason from the position of the fund why this would be regarded as an unsustainable payment to be made by the fund. But it is something for the pensioners that makes an enormous difference. BP has had a well-funded and managed pension fund from 1990 to 2020. They made virtually no extra payments to the pension fund at all.”
Carmichael also hit out at the government’s light touch approach of pension funds not paying out pensions linked to inflation.
He said: “There is a question of light touch regulation. Light touch regulation only works if you can proceed on the basis of good faith acting by both parties – particularly the companies. But where you have evidence of the lack of good faith, like we have with BP and Shell, is it not then necessary to adjust the system to ensure that the beneficiaries are not suffering as a consequence of that.”
Carmichael also used the debate to highlight the importance of trustee independence.
He said: “When it comes to the question of pension regulation, I think there is a significant number of significant issues for the government to be looking at. Not least of which would be the balance between the companies that have created these funds in the first place and in particular the independence of the trustees.”
BP recently said it would boost its charity – formerly the BP Benevolent Fund – and help some of its UK pensioners with means-tested one-off payments.
However, Carmichael told the minister: “Pensions aren’t charitable handouts. This is money that people have earned in the course of their working lives.”
In response, Maynard said: “Having listened, I will look closely again at the situation regarding the pension schemes I have heard about today to understand fully what has happened and whether the arrangements currently in place in regulation are working as intended.”
The BP Pension Fund has around 58,000 members and 16,000 of them are over the age of 80. The average annual pension paid is around £18,000 per annum.
Speaking on behalf of the BP Pensioner Group, Mike Slingsby, said: “We are grateful to Mr Carmichael and fellow MPs for hosting this important debate – and we’re encouraged by the response of the minister.
“Today has seen the appointment of Murray Auchincloss as BP’s new CEO. We urge him to show real leadership in line with the company’s values by revisiting the decisions made over the past two years that have caused such great anxiety and financial impacts on thousands of his UK pensioners – a significant number of whom are in their 80s and 90s.
“As the only group representing the interests of BP’s pensioners – we stand ready to work with Mr Auchincloss to bring this wholly unnecessary dispute to a close.”
