BP share price slide hits UK pension funds





The steep slide in BP's share price is bad news for UK pension funds - the vast majority of which will hold a stake in the company.





Defined benefit pension schemes are typically thought to have around 1.5% of their assets invested directly in BP, accounting for around 6% of all the money they hold in UK equities.



But some funds may hold considerably more, for example a pension scheme that tries to replicate the performance of the FTSE 100 would have around 6% of its total assets invested in the company.



BP's share price has now fallen by around a third since the Deepwater Horizon rig exploded and sank on April 20, killing 11 workers.



It is difficult to put a figure on exactly how much this will have wiped off the value of pension schemes, but it is thought to be hundreds of millions of pounds, if not billions of pounds, once the impact on defined contribution schemes and personal pensions is also factored in.



Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: "The poor performance of a big stock like BP can have a disproportionate impact on funds.



"There have also been other falls in the stock market as well. If the market had been doing well in recent months, it might not have been such a big issue."



David Paterson, head of corporate governance at the National Association of Pension Funds, said around 1.5% of a typical defined benefit pension scheme's assets would be held in BP shares.



But he said: "The vast majority of pension schemes will have diversified portfolios, so the impact of either good news or bad news is quite diluted when you adjust it for the size of the holding."



Another concern for pension schemes is whether BP's generous dividend will come under threat as a result of the oil spill.



Last year BP paid out £10 billion in dividends, accounting for £1 out of every £7 paid out in dividends by FTSE 100 companies.



The high yield has made the stock particularly popular with pension funds, as it means investors benefit from a strong annual income, as well as any long-term growth in the share price.



The group has not announced any plans to reduce its dividend, but there are fears that the growing cost of the disaster, which had reached 990 million US dollars (£682.3 million) by yesterday, excluding the impact on BP's share price, will force it to cut the pay-out.

Suggested Topics
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

    Britain's Atlantis

    Scientific study beneath North Sea could revolutionise how we see the past
    The Queen has 'done and said nothing that anybody will remember,' says Starkey

    The Queen has 'done and said nothing that anybody will remember'

    David Starkey's assessment
    Oliver Sacks said his life has been 'an enormous privilege and adventure'

    'An enormous privilege and adventure'

    Oliver Sacks writing about his life
    'Gibraltar is British, and it is going to stay British forever'

    'Gibraltar is British, and it is going to stay British forever'

    The Rock's Chief Minister hits back at Spanish government's 'lies'
    Britain is still addicted to 'dirty coal'

    Britain still addicted to 'dirty' coal

    Biggest energy suppliers are more dependent on fossil fuel than a decade ago
    Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

    Orthorexia nervosa

    How becoming obsessed with healthy eating can lead to malnutrition
    Lady Chatterley is not obscene, says TV director

    Lady Chatterley’s Lover

    Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
    Farmers in tropical forests are training ants to kill off bigger pests

    Set a pest to catch a pest

    Farmers in tropical forests are training ants to kill off bigger pests
    Mexico: A culture that celebrates darkness as an essential part of life

    The dark side of Mexico

    A culture that celebrates darkness as an essential part of life
    Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

    Being sexually assaulted was not your fault, Chrissie Hynde

    Please don't tell other victims it was theirs
    A nap a day could save your life - and here's why

    A nap a day could save your life

    A midday nap is 'associated with reduced blood pressure'
    If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

    If men are so obsessed by sex...

    ...why do they clam up when confronted with the grisly realities?
    The comedy titans of Avalon on their attempt to save BBC3

    Jon Thoday and Richard Allen-Turner

    The comedy titans of Avalon on their attempt to save BBC3
    The bathing machine is back... but with a difference

    Rolling in the deep

    The bathing machine is back but with a difference
    Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

    Conservatives plot a motoring revolution

    Draft report reveals biggest reform to regulations since driving test introduced in 1935