BP 2011 Annual Report Download - page 150

Directors’ remuneration report
148 BP Annual Report and Form 20-F 2011
Pensions
Executive directors are eligible to participate in the appropriate pension
schemes applying in their home countries. Details are set out in the
table below.
UK directors
UK directors are members of the regular BP pension scheme. The core
benefits under this scheme are non-contributory. They include a pension
accrual of 1/60th of basic salary for each year of service, up to a maximum
of two-thirds of final basic salary and a dependant’s benefit of two-thirds of
the member’s pension. The scheme pension is not integrated with state
pension benefits.
The rules of the BP pension scheme were amended in 2006 such
that the normal retirement age is 65. Prior to 1 December 2006, scheme
members could retire on or after age 60 without reduction. Special early
retirement terms apply to pre-1 December 2006 service for members with
long service as at 1 December 2006.
Until the end of March 2011, pension benefits in excess of the
individual lifetime allowance set by legislation were paid via an unapproved,
unfunded pension arrangement provided directly by the company.
With the reduction in the annual allowance applicable to plans such
as the BP pension scheme in 2011 the company reviewed the options
available for employees who might wish to limit the increase in the value of
their pension to remain within the new limit. To provide employees with
flexibility, should they wish to limit the value of the increase in their
pension to within the new limit, those impacted are able to elect a lower
accrual rate and in addition receive a cash supplement so that the total cost
to BP remains equivalent to the cost of providing 1/60th of basic salary.
Some employees have had to cease pension accrual for future service to
remain within the new annual allowance. For these employees the cash
supplement is equal to 35% of basic salary.
Mr Conn has elected to cease to accrue pension benefits for future
service in order to keep within the new annual allowance and has received
a cash supplement of 35% of his basic salary from 1 April 2011. This is
included in the remuneration table on page 141.
US directors
Mr Dudley and Dr Grote participate in the US BP retirement accumulation
plan (US pension plan), which features a cash balance formula. Pension
benefits are provided through a combination of tax-qualified and
non-qualified benefit restoration plans, consistent with US tax regulations
as applicable.
BP also provides a supplemental executive retirement benefits plan
(supplemental plan), which is a non-qualified arrangement that became
effective on 1 January 2002 for US employees with salary above a
specified salary grade level. Mr Dudley and Dr Grote are eligible to
participate under the supplemental plan. The benefit formula is a target of
1.3% of final average earnings (base pay plus bonus) for each year of
service, inclusive of all other BP (US) qualified and non-qualified pension
arrangements. This benefit is unfunded and therefore paid from corporate
assets.
Mr Dudley retains the heritage Amoco retirement plan, which
provides benefits on a final average pay formula of 1.67% of highest
average earnings (base pay plus bonus in accordance with standard US
practice) for each year of service, reduced by 1.5% of the primary social
security benefit for each year of service. The highest benefit of the plans
produced by the different formulas will be payable and this is currently the
benefit determined under the Amoco heritage terms.
Their pension accrual for 2011, shown in the table below, takes into
account the total amount that could be payable under relevant plans.
Other benefits
Executive directors are eligible to participate in regular employee benefit
plans and in all-employee share saving schemes applying in their home
countries. Benefits in kind are not pensionable.
Pensions (audited)
thousand
Service at
31 Dec 2011
Accrued pension
entitlement
at 31 Dec 2011
Additional pension
earned during the
year ended
31 Dec 2011a
Transfer value of
accrued benefit
at 31 Dec 2010 (A)b
Transfer value of
accrued benefit
at 31 Dec 2011 (B)b
Amount of B-A less
contributions made by
the director in 2011
R W Dudley (US) 32 years $948 $244 $10,336 $15,244 $4,908
I C Conn (UK) 26 years £307 £20 £5,373 £6,582 £1,209
Dr B E Grote (US) 32 years $1,328 $47 $16,501 $18,251 $1,750
a Additional pension earned during the year includes an inflation increase of 4.8% for UK directors and 3.6% for US directors.
b Transfer values have been calculated in accordance with guidance issued by the actuarial profession.