BP Annual Report and Form 20-F 2011 - Company Reporting

Directors’ remuneration reportPensionsExecutive directors are eligible to participate in the appropriate pensionschemes applying in their home countries. Details are set out in thetable below.UK directorsUK directors are members of the regular BP pension scheme. The corebenefits under this scheme are non-contributory. They include a pensionaccrual of 1/60th of basic salary for each year of service, up to a maximumof two-thirds of final basic salary and a dependant’s benefit of two-thirds ofthe member’s pension. The scheme pension is not integrated with statepension benefits.The rules of the BP pension scheme were amended in 2006 suchthat the normal retirement age is 65. Prior to 1 December 2006, schememembers could retire on or after age 60 without reduction. Special earlyretirement terms apply to pre-1 December 2006 service for members withlong service as at 1 December 2006.Until the end of March 2011, pension benefits in excess of theindividual lifetime allowance set by legislation were paid via an unapproved,unfunded pension arrangement provided directly by the company.With the reduction in the annual allowance applicable to plans suchas the BP pension scheme in 2011 the company reviewed the optionsavailable for employees who might wish to limit the increase in the value oftheir pension to remain within the new limit. To provide employees withflexibility, should they wish to limit the value of the increase in theirpension to within the new limit, those impacted are able to elect a loweraccrual rate and in addition receive a cash supplement so that the total costto BP remains equivalent to the cost of providing 1/60th of basic salary.Some employees have had to cease pension accrual for future service toremain within the new annual allowance. For these employees the cashsupplement is equal to 35% of basic salary.Mr Conn has elected to cease to accrue pension benefits for futureservice in order to keep within the new annual allowance and has receiveda cash supplement of 35% of his basic salary from 1 April 2011. This isincluded in the remuneration table on page 141.US directorsMr Dudley and Dr Grote participate in the US BP retirement accumulationplan (US pension plan), which features a cash balance formula. Pensionbenefits are provided through a combination of tax-qualified andnon‐qualified benefit restoration plans, consistent with US tax regulationsas applicable.BP also provides a supplemental executive retirement benefits plan(supplemental plan), which is a non-qualified arrangement that becameeffective on 1 January 2002 for US employees with salary above aspecified salary grade level. Mr Dudley and Dr Grote are eligible toparticipate under the supplemental plan. The benefit formula is a target of1.3% of final average earnings (base pay plus bonus) for each year ofservice, inclusive of all other BP (US) qualified and non-qualified pensionarrangements. This benefit is unfunded and therefore paid from corporateassets.Mr Dudley retains the heritage Amoco retirement plan, whichprovides benefits on a final average pay formula of 1.67% of highestaverage earnings (base pay plus bonus in accordance with standard USpractice) for each year of service, reduced by 1.5% of the primary socialsecurity benefit for each year of service. The highest benefit of the plansproduced by the different formulas will be payable and this is currently thebenefit determined under the Amoco heritage terms.Their pension accrual for 2011, shown in the table below, takes intoaccount the total amount that could be payable under relevant plans.Other benefitsExecutive directors are eligible to participate in regular employee benefitplans and in all-employee share saving schemes applying in their homecountries. Benefits in kind are not pensionable.Pensions (audited)Service at31 Dec 2011Accrued pensionentitlementat 31 Dec 2011Additional pensionearned during the Transfer value ofyear endedaccrued benefit31 Dec 2011 a at 31 Dec 2010 (A) bTransfer value ofaccrued benefitat 31 Dec 2011 (B) bthousandAmount of B-A lesscontributions made bythe director in 2011R W Dudley (US) 32 years $948 $244 $10,336 $15,244 $4,908I C Conn (UK) 26 years £307 £20 £5,373 £6,582 £1,209Dr B E Grote (US) 32 years $1,328 $47 $16,501 $18,251 $1,750aAdditional pension earned during the year includes an inflation increase of 4.8% for UK directors and 3.6% for US directors.bTransfer values have been calculated in accordance with guidance issued by the actuarial profession.148 BP Annual Report and Form 20-F 2011