BP to close final salary pension scheme

Wednesday, 03 June 2009 09:51

BP is to close its final salary pension scheme to new employees.

The oil giant is to shut the scheme to employees starting after April 1st 2010.

A pension and benefits scheme to replace the current scheme is still being negotiated.

BP spokesperson Robert Wine said: “We will see savings in the decade to come.

“Looking ten years ahead, we are looking at savings of around $10 million a year, which is not something to be sneezed at even for a company the size of BP.”

The decision was taken as the costs of such schemes grow as members live longer.

The BP pension scheme has over 69,000 members and for figures due out later this month for 2008 is set to still be in surplus.

“It is a well funded and managed scheme,” Mr Wine said.

The firm is set to offer new recruits a range of more flexible options, he added.

BP’s final salary scheme was one of the final of such pension schemes available – as firms close them down to new members of staff as the cost of running the schemes has escalated in recent years.

Marcus Hurd, head of corporate solutions at consultants Aon, explained dropping a final salary pension scheme is easier for a company during a recession.

“Companies are able to make tough decisions, which is harder when the market is rising,” he said.

“It is not just the cost, but also the regulation. There is now a lot of pressure from the Pensions Regulator on trustees.”

He added firms are also more willing to loss the risk connected to defined benefit pension schemes – although the risk will not immediately diminish overnight.

Mr Hurd added most companies over the coming six months with final salary pension schemes would be likely to be reviewing them.

“We are moving slowly into an era employers may only do half the job of providing pensions,” he said.

“There will be more onus on employees to save for themselves.”

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