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Latest NewsPay & benefitsPensions

BP follows Shell with one-year pension holiday, despite stock market woes

by Mike Berry 22 Jan 2008
by Mike Berry 22 Jan 2008

Pension holidays could be making a comeback, following reports that BP is to take a break from paying into its scheme.

The oil giant has followed in the steps of rival Shell and is taking a one-year contribution holiday from its £14.7bn pension scheme after a valuation last year revealed it was funded to 135% of its liabilities.

Pension holidays in the 1990s were once seen seen as a key factor that contributed to many pension scheme tumbling into the red with huge deficits.

Paul McGlone, principal and actuary at Aon Consulting, said: “Shell and now BP’s announcement may seem radical – however this is not the case. This is a strategy that a number of smaller companies are already pursuing.

“With schemes being funding more prudently than previously, there is a rational case for considering this strategy. There is, after all, little benefit in continuing to put additional cash into a scheme that is well funded as once cash is in the scheme it can become trapped.”

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Meanwhile, Aon said as a result of the sharp stock market fall yesterday, UK pension deficits rose by £15bn, the highest single-day rise since June 2001.

The deficit for the top 200 UK schemes now stands at £42bn, wiping out all the gains made in 2007, Aon said.

Mike Berry

previous post
Private pensions may close once personal pensions start, expert warns
next post
Pensions workloads to rise with auto enrolment to personal pensions

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