UK Pensions Consultation Forum: ‘working for everyone’s benefit’

1. UK Pensions Consultation Forum:‘working for everyone’s benefit’ G-09, St James’s Square, London, 9:30 – 12:30, 14 July 2010

2. Agenda 1. Welcome and introduction (Chairman) 2. Review actions and approve ‘key points bulletin’ from meeting on 25 February 2010 3. Impact of GoM incident on employer covenant and the status of the Pension Funds (Ronnie Murray) 4. Burmah Castrol Pension Fund (Ronnie Murray & Susan Hughes) 5. Changes to pensions taxation (Ronnie Murray) 6. Flexible benefits update (Ronnie Murray & Susan Hughes) 7. BP Pension Fund - update - Changes to death grant (Susan Hughes) - Levelling option in BP Pension Scheme (Ronnie Murray) - TUPE changes (Ronnie Murray) - Pension issues for women on maternity leave (Susan Hughes & Patrick Gibbons) 8. Update on transfer project (Ronnie Murray) 9. Re-structure of BP UK Pensions & Benefits team (Ronnie Murray) 10. MND selection for BP Pension Fund Trustee board (Martin Bradshaw, MND) 11. Any other business

3. 2. Review actions / Notices Review actions - Add Key Points Bulletin from 6 January meeting to PensionLine - Issue Key Points bulletin from meeting on 25 February - Send out meeting and agenda for 14 July meeting Notices • Apologies and guests • New rep required for IST following Matt Hein’s resignation from BP • New rep required for Lubes following departure of Duncan Simcock • Peter Munro standing down as Rep for Alternative Energy - 3 Reps from E&P Continental Shelf have appointed 3 new deputies: Martin Fragell, Stuart Bowman and John Fletcher - Philip Hudson attending with Andrew Bunby (Hull)

4. 3. Impact of GoM incident on employer covenant and status of Pension Funds GoM incident is a source of concern to all members e.g. impact on their pensions of BP’s financial liabilities, over both the short and longer term Many questions coming into Pensions & Benefits team and Trustee office Messages of reassurance from BP Trustee CEO and Burmah Castrol Trustee Chairman with accompanying generic letter from Tony Hayward to all 80,000 members: - Funds in strong financial position – funding levels >100% - Underlying cash generation of BP is robust - BP committed to covenant that underpins funding of Pension Funds Other information: summary funding statement from BCPF sent out early July and BP ‘Pensions Highlights’ expected mid-August However, still lots of questions. . . . 4

5. 3. Impact of GoM incident on employer covenant and status of Pension Funds • The structure of the employer’s legal obligations to a registered pension scheme and its ability to meet them – it is a crucial element in protecting members’ benefits. (The Pensions Regulator) • BP’s ability and readiness to provide financial and other resources to support the Fund • Covenant is central to Fund, so structured approach for monitoring it • Contributions from BP resumed in 2010 • Amount is set out in Schedule of Contributions. BP has already paid £250m due to Fund during 2010 to BP Pension Fund • Current funding position – BP 103% (30/9/09); BC 104.9% (31/12/09) • Fund assets are ring-fenced – cannot be used by BP if it needs more cash • Fund assets do not include BP shares – trust deed prohibits it • Credit rating agency downgrades have lead to review of SFIP by Trustee

6. 4. Burmah Castrol Pension Fund MND elections recently completed Letters to all BCPF members in March advising 3 MND vacancies Invitation to request nomination pack by mid April 1 active employee and 3 pensioners stood for election Vikki Pickering automatically re-elected as the employee MND Election for 2 other vacancies between 3 pensioners Ballot undertaken using Electoral Reform Services – closing date for votes was 18 June Appointments confirmed at end of June with John Binks and Adrian Jefferies being re-appointed All members were written to with the result of the ballot 6

7. 5. Changes to pensions taxation • Background: • April 2009 budget announced proposals to change the taxation of pensions for high earners (defined as those with income in excess of £150,000 per annum) to limit the benefit of higher rate income tax relief on contributions to registered pension plans with effect from April 2011 • Transitional arrangements (anti-forestalling) were put in place up to April 2011 and remain unchanged • Threshold for assessing liability reduced to £130,000 income in December 2009 and the ‘value’ of Company contributions was to be included in assessing income for calculation of the tax charge • Government consulted on the methodology of limiting the tax relief with industry from December to March 2010 • Finance Act 2010 following April 2010 Budget formally enacted the proposals and also introduced wide ranging anti-avoidance regulations to limit options for alternative financing approaches • New Government announced in emergency budget in June 2010 a repeal of FA 2010 and replaced the methodology of limiting tax relief for higher earners with an alternative measure subject to this generating the same tax savings (£3.5 bn per annum) • Agreed to engage with industry to develop details of new proposals to be effective April 2011.

8. 5. Changes to pensions taxation • How the new tax regime will be structured: • Government must raise at least £3.5bn in revenue from this measure • Approach is to radically reduce the current level of the Annual Allowance (AA) from £255,000 to somewhere between £30,000 and £45,000 per annum • The new AA restriction will include the ‘value’ of Company contributions • For Defined Benefit plans, the ‘value’ of the Company contribution will continue to be assessed on the value of the pension accruing in the tax year • The previously agreed anti-forestalling legislation continues in force until at least April 2011

9. 5. Changes to pensions taxation • What is still to be confirmed in relation to the new regime: • What the new level of the AA will be (proposal between £30,000 and £45,000) • How the accrual of defined benefit pensions will be valued – currently based on a factor of 10 • Factors could be fixed or variable, based on age and time to retirement (10-25) • If the value of past service will be taken into account in the accrual calculation as this will create significant tax liabilities for long serving employees with high or promotional salary increases • How ‘spikes’ in pension accrual will be viewed (due to say a promotion) • Whether alternative rewards (other than cash) will be considered as tax avoidance

10. 2010 July – August: HM Treasury engage with Pensions industry September: Formula agreed and FA 2010 repealed November- December: window available for YBYW year 2 decisions 2011 April: Legislation effective 5. Changes to pensions taxation Proposed timeline:

11. 6. Flexible benefits update • Overview • 90% of UK employees visited Your benefits, your way website during enrolment period • 75% of UK employees submitted flex benefit selections • Over 70,000 visits to the Your benefits, your way website during enrolment • £30 million spend on flex benefits – 5% of UK base pay • 2,800 calls / emails to helpdesk – About 25% fewer than expected norm for a flex benefit roll out

12. Benefits take up Benefits take up as % of submissions * Childcare voucher numbers includes voucher numbers at start of enrolment

13. 6. Flexible benefits update Update on switch from DB to DC By 10 March (enrolment close), 48 employees had completed ‘DC expression of interest’ form 44 have received 1-2-1s with WEALTH at work (Waw) pension specialist to discuss pension options 4 chose not to proceed to 1-2-1 stage 40 out of 44 have now received individual reports from Waw including recommendation as to whether employee should opt out of their DB scheme To date, 11 employees have chosen to opt out – they have received leaver letters from DB scheme, have the flex allowance and are eligible to join the DC scheme 15 out of 40 have returned P&B survey: all agreed that Waw specialist was approachable and understood BP’s pension arrangements; 86% agreed he understood their situation; 79% agreed he answered all their Qs and that the meeting was useful; finally, 86% found the report’s recommendations useful 13

14. 6. Flexible benefits update • Feedback • Any feedback from representatives? • Employee feedback sought via survey sent out on 11 June • Views wanted on enrolment process, communications used and ideas for improving the plan going forward • Closing date for responses was 25 June – results expected soon • Looking ahead to 2011 flex plan • No new benefits for year 2 • Some refinements to existing benefits • Greater education around the benefits on offer • Enrolment commences November • Employee input welcome for benefits on offer in year 3

15. 7. BP Pension Fund - update • Proposed changes to the death grant • Pensioners who die before their 75th birthday will continue to have the death grant paid from the Fund • Pensioners who die after age 75 receive the death grant payable from the Company. This is both taxable in the hands of the recipient and on the Company • Proposal is that pensioners, upon reaching their 75th birthday, will received a payment from the Company equal to the amount of the death grant payable. The payment will be subject to PAYE tax. No subsequent payment upon death will be made • Logistics of making this payment is under discussion with the Company and is subject to further review • Levelling option in BP Pension Scheme • Levelling quotations removed for members retiring on or after 1 April 2010 • No change to Rules, but change to current working practices: calculations simplified and reduction in confusion as pensioners reach SPA • TUPE (Transfer of Undertakings Protection of Employment) Regulations • Designed to protect employees when business is sold • Employment is transferred at point of sale, so employees not made redundant • TUPE’d out employees are ‘standard’ leavers but get continuity of service and same T&Cs • Pension issues for women on maternity leave

16. 8. Update on transfer project • 947 BP and 27 Burmah Castrol Pension Fund employees requested transfer in packs by 31 December 2009. • From 974 employees, there was a total of 1,685 individual transfers. • Closing date for receipt of all the information was 17 May 2010 • 876 BP and 21 Burmah Castrol Pension Fund employees had received transfer in quote letters by COB on 9 July 2010 • Approximately, 120 more letters to be calculated and issued by COB on 16 July • Approximately, 180 cases of monies received so far from transfers that have proceeded • Deadline for all transfer monies to be received into BP or Burmah Castrol Pension Fund accounts and cleared is before 16 October 2010

17. Any other business Date and location of next meeting: 17 November 2010, SJS, London