BP share price slide hits UK pension funds
Wednesday 02 June 2010
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.
- 1 Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
- 2 Pope Francis issues top 10 tips for happiness
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 The secret report that helps Israel hide facts
- 5 Now diplomacy has failed, boycotting Israel might be the only way we can protect the people of Gaza
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000