BP 2014 Annual Report Download - page 85

Corporate governance
These measures continue to be aligned with BP’s strategic priorities of
safe, reliable and compliant operations, major project delivery, disciplined
financial choices and growing our exploration position.
TSR and RRR will be assessed on a relative basis compared with the other
oil majors Chevron, ExxonMobil, Shell and Total with the following vesting
schedule.
The committee has agreed targets and ranges for measures that will be
used to assess performance at the end of the three-year performance
period and will be disclosed retrospectively.
Pension
Recognizes competitive practice in home country.
Policy summary
Operation and opportunity
฀
฀pension plan and receive a cash supplement of 35% of salary in lieu of future service
accrual when they exceed the annual allowance set by legislation.
฀
that apply to executives with an accrual rate of 1.3% of final earnings (salary plus bonus) for each year of service.
Performance framework
฀
฀
Framework
Executive directors are eligible to participate in group pension schemes
that apply in their home countries which follow national norms in terms of
structure and levels.
US pension
Bob Dudley participates in the US plans. Pension benefits in the US are
provided through a combination of tax-qualified and non-qualified benefit
plans, consistent with applicable US tax regulations. The BP retirement
accumulation plan (US pension plan) is a US tax-qualified plan that features
a cash balance formula and includes grandfathering provisions under final
average pay formulas for certain employees of companies acquired by BP
(including Amoco and ARCO) who participated in these predecessor
company pension plans. The TNK-BP supplemental retirement plan is a
lump sum benefit based on the same calculation as the benefit under the
US pension plan but reflecting service and earnings at TNK-BP.
The BP excess compensation (retirement) plan (excess compensation plan)
provides a supplemental benefit which is the difference between (1) the
benefit accrual under the US pension plan and the TNK-BP supplemental
retirement plan without regard to the IRS compensation limit (including for
this purpose base salary, cash bonus and bonus deferred into a
compulsory or voluntary award under the deferred matching element of
the EDIP), and (2) the actual benefit payable under the US pension plan and
the TNK-BP supplemental retirement plan, applying the IRS compensation
limit. The benefit calculation under the Amoco formula includes a reduction
of 5% per year if taken before age 60.
The BP Supplemental Executive Retirement Benefit plan (SERB) is a
supplemental plan based on a target of 1.3% of final average earnings
(including, for this purpose, base salary plus cash bonus and bonus
deferred into a compulsory or voluntary award under the deferred matching
element of the EDIP) for each year of service (without regard for tax limits)
less benefits paid under all other BP (US) qualified and non-qualified
pension arrangements. The benefit payable under SERB is unreduced at
age 60 but reduced by 5% per year if separation occurs before age 60.
Benefits payable under this plan are unfunded and therefore paid from
corporate assets.
UK pension
Iain Conn and Dr Brian Gilvary participate in a UK final salary pension
scheme in respect of service prior to 1 April 2011. This scheme provides a
pension relating to length of pensionable service and final pensionable
salary. The disclosure of total pension includes any cash in lieu of additional
accrual that is paid to individuals in the UK scheme who have exceeded the
annual allowance or lifetime allowance under UK regulations. Both Iain
Conn and Dr Brian Gilvary fall into this category and in 2014 received cash
supplements of 35% of salary in lieu of future service accrual.
Relative performance ranking
BP’s ranking place versus oil majors
Vesting percentage for each
relative performance measure
First 100%
Second 80%
Third 25%
Fourth or fifth Nil
In the event of retirement before age 60, the following early retirement
terms would apply:
 On retirement between 55 and 60, in circumstances approved by the
committee, an immediate unreduced pension in respect of the proportion
of their benefit for service up to 30 November 2006, and subject to such
reduction as the scheme actuary certifies in respect of the period of
service after 1 December 2006. The scheme actuary has, to date,
applied a reduction of 3% per annum for each year retirement precedes
60 in respect of the period of service from 1 December 2006 up to the
leaving date; however a greater reduction can be applied in other
circumstances.
 On leaving before age 55, in circumstances approved by the
committee, a deferred pension payable from 55 or later, with early
retirement terms if it is paid before 60 as set out above.
Irrespective of this, on leaving in circumstances of total incapacity, an
immediate unreduced pension is payable from their leaving date.
On leaving BP, Iain Conn is entitled to a deferred pension payable from age
55 or later. The early retirement terms applying to this pension are as set
out above.
2014 outcomes
In 2014, Mr Dudley’s accrued pension increased, net of inflation, by
$130,000; Dr Gilvary’s by £1,100 and Mr Conn’s by £900. These increases
have been reflected in the single figure table on page 75 by multiplying
them by twenty in accordance with the requirements of the UK regulations.
Dr Gilvary and Mr Conn participate in the UK pension arrangements
described above. Both individuals have exceeded the annual or lifetime
allowance under UK pensions legislation and, in accordance with the policy,
receive a cash supplement of 35% of salary. These cash supplements have
been separately identified in the single figure table on page 75.
Mr Dudley participates in the transitional arrangements in the US plans
described above. These are aimed at an accrual rate of 1.3% of final
earnings (which include salary and bonus), for each year of service.
The committee continues to keep under review the increase in the value of
pension benefits for individual directors. There are significant differences in
calculation of pensions between the UK and the US. US pension benefits
are not subject to cost of living adjustments after retirement as they are in
the UK. Equally, transfer values are frequently influenced by changes in
interest rates and discount factors.
The committee will continue to make the required disclosures in
accordance with the UK regulations; however, given the issues and
differences set out above, the committee would note that 12 to 14 would
be a typical annuity factor in the US compared with the factor of 20 upon
which the UK regulations are based.
BP Annual Report and Form 20-F 2014 81