The oil giant BP has become the latest major company to freeze contributions into its pension fund, following in the footsteps of its main rival, Royal Dutch Shell, which sparked controversy when it revealed it was taking a so-called "pensions holiday" in October last year.
David Nicholas, a spokesman for BP, confirmed yesterday that the company would not be making any contributions to its £27bn pension fund in 2008, after the scheme's latest actuarial valuation, in October last year, revealed that it was funded to 135 per cent of its liabilities, on an IAS 19 basis.
"Under the agreement bet-ween the trustees and the company, if the funding level goes over the 115 per cent level at its annual valuation, the company is not compelled to make a contribution to the fund," he said. "If it has fallen back to below 115 per cent at its next annual valuation, in October, the company will resume contributions in 2009."
Although both BP and Shell remain within their rights to freeze contributions when their schemes are in surplus, the move has raised alarm bells among pension fund trustees across the country, who fear a repeat of the events of the 1990s, when many companies took pension contribution holidays, only to see their surpluses wiped out by the bear market between 2000 and 2003, during which time the level of the FTSE 100 more than halved.
BP's scheme is likely to have already fallen back below the 115 per cent funding threshold, after the rout in equity markets in recent weeks.Reuse content