BP Freezes Pension Contributions

Oil conglomerate BP has today become the latest in a long line of companies to announce they will freeze pension contributions over the course of the next year after it revealed that its current fund was valued in excess of 135% of current fund liabilities.

According to the rules of the pension scheme, the company can freeze its contributions to the pension fund whenever the value of the funds surpasses 115% of total liabilities, and it is thought that the move is designed to preserve funds in the current market climate.

The move follows similar steps by Shell and Royal Dutch in recent weeks, which would imply that whilst those private pension funds may be more than adequately funded, companies across industry sectors are looking to preserve capital rather than divert resources further to their pension funds.

Whilst the company will make no contributions over the year, it has said that it will be closely watching the value of the fund throughout to ensure that it at no point falls from what is currently recorded, with a view to ensuring it remains above the 115% threshold in order to account for the range of possible eventualities in terms of its longer term value.

At last valuation the fund was assessed as being valued at over £14.5 billion, far in excess of the actuarially calculated £11 billion liability of the fund, which obviously includes certain value judgements and can at best reflect an estimate of outgoings.

Meanwhile, market analysts are predicting that whilst this may prove a political hot potato, it is likely to be a move followed by other firms operating private pension funds over the year as a result of the current wider economic environment.

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