Pensions: Deepwater Horizon

Lord Harrison Excerpts

Wednesday 9th June 2010 Lords Chamber

Asked By

[Lord Harrison]

To ask Her Majesty’s Government what assessment they have made of the impact of the Deepwater Horizon oil spill on British pension savers.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud)]

My Lords, the Deepwater Horizon spill is an environmental and human tragedy. People saving in a pension scheme may be worried by the recent falls in the BP share price and indeed by market speculation about whether BP will pay a dividend this year. However, most pension schemes will be diversified across a range of investments, which will include not only equities but assets such as gilts, property and cash. Those more heavily weighted towards equities should not be too exposed to a single company.

[Lord Harrison]

Given that some one pound in six of the moneys received by pension funds comes from BP, does the Minister accept that these environmental risks can become severe financial risks? In light of that, would his coalition Government consider strengthening the reporting by pension funds to shareholders of these environmental, social and governance risks to ensure that the pension funds are not embarrassed in the way that they could be as a result of the recent tragedy?

[Lord Freud]

My Lords, the noble Lord, Lord Harrison, is right when he says that BP is a major dividend payer. I think that last year it paid approximately 14 per cent of all dividends in the FTSE 100. This raises the question that the noble Lord has just asked: to what extent are pension funds acting responsibly with regard to their ownership responsibilities to companies? There have been improvements in that over the past decade, but the question that we need to consider is whether they have improved enough.

--- Later in debate ---

[Lord Freud]

My Lords, I thank my noble friend for that question. Clearly, the BP board has to make some complicated decisions, which are a mix of the financial and the political. Market estimates of the cost that the company will have to pay are in the region of £15 billion to £20 billion, although that is purely market speculation and I make no comment about what the Government expect them to be. The company will have to decide in that context whether it is appropriate to pay a dividend.

[Lord Harrison]

I am grateful to the noble Lord for his reply to my first question—

[Lord McKenzie of Luton]

My Lords, on the subject of return—