BP is to take a contribution holiday from its BP Pension Fund and its Burmah Castrol Pension Fund during 2008, due to a high funding level in October 2007.
Under the firm's Statement of Funding and Investment Principles (SFIP), the company is not required to contribute to the fund if the percentage of itss assets as measured against its liabilities goes over 115% at the annual assessment date at the end of September. In October 2007, the funding level of the BP Pension Fund was certified at 135% and the funding level of the Burmah Castrol Pension Fund was 128%.
Although the company does not intend to contribute to the fund during 2008, the trustees, company and scheme actuary will continue to monitor the funding levels on a monthly basis. The company will resume contributions in 2009 if the funding levels of its pensions schemes have fallen beneath 115%.
Shell also announced it was to take a contribution holiday in October last year.
Paul McGlone, principal and actuary at Aon Consulting, said: "With schemes being funded 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.
"A contribution holiday can be one way of ensuring a scheme does not become over funded. It might not suit all schemes, but nowadays schemes are better able to stand any shocks to the system, and as schemes become increasingly mature, contributions become financially less significant than other factors such as investment strategy."