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Pensions and other post-retirement benefits (Tables)
 12 Months Ended
Dec. 31, 2017
Employee Benefits [Abstract]  
Disclosure of defined benefit plans
The assumptions are reviewed by management at the end of each year, and are used to evaluate the accrued benefit obligation at 31 December and pension expense for the following year.
 
 
 
 
 
 
 
 
 
 
%
Financial assumptions used to determine benefit obligation
 
 
 
UK
 
 
US
 
 
Eurozone
 
 
2017
2016
2015
2017
2016
2015
2017
2016
2015
Discount rate for plan liabilities
 
2.5
2.7
3.9
3.5
3.9
4.0
1.9
1.7
2.4
Rate of increase in salaries
 
4.1
4.6
4.4
4.1
4.2
3.9
3.0
3.0
3.2
Rate of increase for pensions in payment
 
2.9
3.0
3.0
—
—
—
1.4
1.5
1.6
Rate of increase in deferred pensions
 
2.9
3.0
3.0
—
—
—
0.6
0.5
0.6
Inflation for plan liabilities
 
3.1
3.2
3.0
1.7
1.8
1.5
1.6
1.6
1.8
 
 
 
 
 
 
 
 
 
 
%
Financial assumptions used to determine benefit expense
 
 
 
UK
 
 
US
 
 
Eurozone
 
 
2017
2016
2015
2017
2016
2015
2017
2016
2015
Discount rate for plan service cost
 
2.7
4.0
3.9
4.1
4.2
3.8
2.1
2.7
2.3
Discount rate for plan other finance expense
 
2.7
3.9
3.6
3.9
4.0
3.7
1.7
2.4
2.0
Inflation for plan service cost
 
3.2
3.1
3.1
1.8
1.5
1.6
1.6
1.8
2.0
BP’s most substantial pension liabilities are in the UK, the US and the Eurozone where our mortality assumptions are as follows:
 
 
 
 
 
 
 
 
 
 
Years

Mortality assumptions
 
 
 
UK

 
 
US

 
 
Eurozone

 
 
2017

2016

2015

2017

2016

2015

2017

2016

2015

Life expectancy at age 60 for a male currently aged 60
 
27.4

28.0

28.5

25.1

25.7

25.7

25.1

25.0

24.9

Life expectancy at age 60 for a male currently aged 40
 
29.0

30.0

31.0

26.8

27.5

27.5

27.6

27.6

27.5

Life expectancy at age 60 for a female currently aged 60
 
28.8

29.5

29.5

28.4

29.3

29.2

29.0

28.9

28.8

Life expectancy at age 60 for a female currently aged 40
 
30.5

31.9

31.9

30.0

31.0

30.9

31.4

31.3

31.2
Disclosure of fair value of plan assets
The fair values of the various categories of assets held by the defined benefit plans at 31 December are presented in the table below, including the effects of derivative financial instruments. Movements in the fair value of plan assets during the year are shown in detail in the table on page 165.
 
 
 
 
 
 
$ million

 
 
UKa

USb

Eurozone

Other

Total

Fair value of pension plan assets
 
 
 
 
 
 
At 31 December 2017
 
 
 
 
 
 
Listed equities – developed markets
 
9,548

2,158

537

376

12,619

   – emerging markets
 
2,220

220

83

53

2,576

Private equityc
 
2,679

1,461

—

—

4,140

Government issued nominal bonds
 
2,663

1,777

941

545

5,926

Government issued index-linked bonds
 
16,177

—

2

—

16,179

Corporate bonds
 
4,682

2,024

546

272

7,524

Propertyd
 
2,211

6

71

30

2,318

Cash
 
390

80

21

98

589

Other
 
104

53

23

45

225

Debt (repurchase agreements) used to fund liability driven investments
 
(5,583
)
—

—

—

(5,583
)
 
 
35,091

7,779

2,224

1,419

46,513

At 31 December 2016
 
 
 
 
 
 
Listed equities – developed markets
 
11,494

2,283

436

363

14,576

   – emerging markets
 
2,549

220

54

46

2,869

Private equityc
 
2,754

1,442

1

—

4,197

Government issued nominal bonds
 
489

1,438

821

448

3,196

Government issued index-linked bonds
 
9,384

—

4

—

9,388

Corporate bonds
 
4,042

1,732

427

259

6,460

Propertyd
 
1,970

6

45

28

2,049

Cash
 
547

105

17

83

752

Other
 
(68
)
90

74

83

179

Debt (repurchase agreements) used to fund liability driven investments
 
(2,981
)
—

—

—

(2,981
)
 
 
30,180

7,316

1,879

1,310

40,685

At 31 December 2015
 
 
 
 
 
 
Listed equities – developed markets
 
13,474

2,329

423

371

16,597

   – emerging markets
 
2,305

226

49

50

2,630

Private equityc
 
2,933

1,522

1

4

4,460

Government issued nominal bonds
 
393

1,527

685

492

3,097

Government issued index-linked bonds
 
6,425

—

5

—

6,430

Corporate bonds
 
4,357

1,717

551

367

6,992

Propertyd
 
2,453

6

48

58

2,565

Cash
 
564

116

10

139

829

Other
 
110

67

102

50

329

Debt (repurchase agreements) used to fund liability driven investments
 
(1,791
)
—

—

—

(1,791
)
 
 
31,223

7,510

1,874

1,531

42,138

a 
Bonds held by the UK pension plans are denominated in sterling. Property held by the UK pension plans is in the United Kingdom.
b 
Bonds held by the US pension plans are denominated in US dollars.
c Private equity is valued at fair value based on the most recent third-party net asset valuation.
d Properties are valued based on an analysis of recent market transactions supported by market knowledge derived from third-party valuers.
The current asset allocation policy for the major plans at 31 December 2017 was as follows:
 
 
UK
US
Asset category
 
%
%
Total equity (including private equity)
 
43
50
Bonds/cash (including LDI)
 
50
50
Property/real estate
 
7
—
Disclosure of net defined benefit liability (asset)
 
 
 
 
 
 
$ million

 
 
 
 
 
 
2017

 
 
UK

US

Eurozone

Other

Total

Analysis of the amount charged to profit (loss) before interest and taxation
 
 
 
 
 
 
Current service costa
 
357

292

85

46

780

Past service costb
 
12

—

5

(1
)
16

Settlementb
 
—

—

13

—

13

Operating charge relating to defined benefit plans
 
369

292

103

45

809

Payments to defined contribution plans
 
31

191

7

38

267

Total operating charge
 
400

483

110

83

1,076

Interest income on plan assetsa
 
(845
)
(266
)
(37
)
(48
)
(1,196
)
Interest on plan liabilities
 
831

393

121

71

1,416

Other finance (income) expense
 
(14
)
127

84

23

220

Analysis of the amount recognized in other comprehensive income
 
 
 
 
 
 
Actual asset return less interest income on plan assets
 
2,396

826

30

43

3,295

Change in financial assumptions underlying the present value of the plan liabilities
 
(236
)
(514
)
336

(47
)
(461
)
Change in demographic assumptions underlying the present value of the plan liabilities
 
734

72

—

(23
)
783

Experience gains and losses arising on the plan liabilities
 
91

(40
)
(36
)
14

29

Remeasurements recognized in other comprehensive income
 
2,985

344

330

(13
)
3,646

Movements in benefit obligation during the year
 
 
 
 
 
 
Benefit obligation at 1 January
 
29,908

10,533

6,820

1,715

48,976

Exchange adjustments
 
2,886

—

915

89

3,890

Operating charge relating to defined benefit plans
 
369

292

103

45

809

Interest cost
 
831

393

121

71

1,416

Contributions by plan participantsc
 
16

—

2

6

24

Benefit payments (funded plans)d
 
(1,903
)
(641
)
(75
)
(89
)
(2,708
)
Benefit payments (unfunded plans)d
 
(5
)
(239
)
(302
)
(20
)
(566
)
Acquisitions
 
—

1

—

—

1

Disposals
 
—

(1
)
(9
)
—

(10
)
Remeasurements
 
(589
)
482

(300
)
56

(351
)
Benefit obligation at 31 Decembera e
 
31,513

10,820

7,275

1,873

51,481

Movements in fair value of plan assets during the year
 





Fair value of plan assets at 1 January
 
30,180

7,316

1,879

1,310

40,685

Exchange adjustments
 
3,048

—

264

72

3,384

Interest income on plan assetsa f
 
845

266

37

48

1,196

Contributions by plan participantsc
 
16

—

2

6

24

Contributions by employers (funded plans)
 
509

12

87

29

637

Benefit payments (funded plans)d
 
(1,903
)
(641
)
(75
)
(89
)
(2,708
)
Remeasurementsf
 
2,396

826

30

43

3,295

Fair value of plan assets at 31 Decemberg
 
35,091

7,779

2,224

1,419

46,513

Surplus (deficit) at 31 December
 
3,578

(3,041
)
(5,051
)
(454
)
(4,968
)
Represented by
 





Asset recognized
 
3,838

260

43

28

4,169

Liability recognized
 
(260
)
(3,301
)
(5,094
)
(482
)
(9,137
)
 
 
3,578

(3,041
)
(5,051
)
(454
)
(4,968
)
The surplus (deficit) may be analysed between funded and unfunded plans as follows
 





Funded
 
3,838

238

(106
)
(101
)
3,869

Unfunded
 
(260
)
(3,279
)
(4,945
)
(353
)
(8,837
)
 
 
3,578

(3,041
)
(5,051
)
(454
)
(4,968
)
The defined benefit obligation may be analysed between funded and unfunded plans as follows
 





Funded
 
(31,253
)
(7,541
)
(2,330
)
(1,520
)
(42,644
)
Unfunded
 
(260
)
(3,279
)
(4,945
)
(353
)
(8,837
)
 
 
(31,513
)
(10,820
)
(7,275
)
(1,873
)
(51,481
)
a 
The costs of managing plan investments are offset against the investment return, the costs of administering pension plan benefits are generally included in current service cost and the costs of administering other post-retirement benefit plans are included in the benefit obligation.
b 
Past service costs and settlements have arisen from restructuring programmes and represent charges for special termination benefits representing the increased liability arising as a result of early retirements mostly in the UK and Eurozone.
c 
Most of the contributions made by plan participants into UK pension plans were made under salary sacrifice.
d 
The benefit payments amount shown above comprises $3,235 million benefits and $2 million settlements, plus $37 million of plan expenses incurred in the administration of the benefit.
e 
The benefit obligation for the US is made up of $8,085 million for pension liabilities and $2,735 million for other post-retirement benefit liabilities (which are unfunded and are primarily retiree medical liabilities). The benefit obligation for the Eurozone includes $4,586 million for pension liabilities in Germany which is largely unfunded.
f 
The actual return on plan assets is made up of the sum of the interest income on plan assets and the remeasurement of plan assets as disclosed above.
g 
The fair value of plan assets includes borrowings related to the LDI programme as described on page 164.
22. Pensions and other post-retirement benefits – continued
 
 
 
 
 
 
$ million

 
 
 
 
 
 
2016

 
 
UK

US

Eurozone

Other

Total

Analysis of the amount charged to profit (loss) before interest and taxation
 
 
 
 
 
 
Current service costa
 
333

310

76

71

790

Past service costb
 
17

(24
)
7

1

1

Settlement
 
—

—

9

(1
)
8

Operating charge relating to defined benefit plans
 
350

286

92

71

799

Payments to defined contribution plans
 
30

194

7

33

264

Total operating charge
 
380

480

99

104

1,063

Interest income on plan assetsa
 
(1,086
)
(287
)
(47
)
(51
)
(1,471
)
Interest on plan liabilities
 
1,005

417

159

80

1,661

Other finance (income) expense
 
(81
)
130

112

29

190

Analysis of the amount recognized in other comprehensive income
 
 
 
 
 
 
Actual asset return less interest income on plan assets
 
4,422

330

53

8

4,813

Change in financial assumptions underlying the present value of the plan liabilities
 
(6,932
)
(239
)
(622
)
4

(7,789
)
Change in demographic assumptions underlying the present value of the plan liabilities
 
430

9

12

(5
)
446

Experience gains and losses arising on the plan liabilities
 
55

(62
)
26

15

34

Remeasurements recognized in other comprehensive income
 
(2,025
)
38

(531
)
22

(2,496
)
Movements in benefit obligation during the year
 
 
 
 
 
 
Benefit obligation at 1 January
 
28,974

10,643

6,640

2,089

48,346

Exchange adjustments
 
(5,688
)
—

(282
)
23

(5,947
)
Operating charge relating to defined benefit plans
 
350

286

92

71

799

Interest cost
 
1,005

417

159

80

1,661

Contributions by plan participantsc
 
18

—

2

6

26

Benefit payments (funded plans)d
 
(1,192
)
(821
)
(78
)
(117
)
(2,208
)
Benefit payments (unfunded plans)d
 
(6
)
(284
)
(301
)
(24
)
(615
)
Acquisitions
 
—

—

4

—

4

Disposals
 
—

—

—

(399
)
(399
)
Remeasurements
 
6,447

292

584

(14
)
7,309

Benefit obligation at 31 Decembera e
 
29,908

10,533

6,820

1,715

48,976

Movements in fair value of plan assets during the year
 
 
 
 
 
 
Fair value of plan assets at 1 January
 
31,223

7,510

1,874

1,531

42,138

Exchange adjustments
 
(5,916
)
—

(76
)
15

(5,977
)
Interest income on plan assetsa f
 
1,086

287

47

51

1,471

Contributions by plan participantsc
 
18

—

2

6

26

Contributions by employers (funded plans)
 
539

10

57

45

651

Benefit payments (funded plans)d
 
(1,192
)
(821
)
(78
)
(117
)
(2,208
)
Disposals
 
—

—

—

(229
)
(229
)
Remeasurementsf
 
4,422

330

53

8

4,813

Fair value of plan assets at 31 Decemberg
 
30,180

7,316

1,879

1,310

40,685

Surplus (deficit) at 31 December
 
272

(3,217
)
(4,941
)
(405
)
(8,291
)
Represented by
 
 
 
 
 
 
Asset recognized
 
530

—

22

32

584

Liability recognized
 
(258
)
(3,217
)
(4,963
)
(437
)
(8,875
)
 
 
272

(3,217
)
(4,941
)
(405
)
(8,291
)
The surplus (deficit) may be analysed between funded and unfunded plans as follows
 
 
 
 
 
 
Funded
 
519

(36
)
(316
)
(83
)
84

Unfunded
 
(247
)
(3,181
)
(4,625
)
(322
)
(8,375
)
 
 
272

(3,217
)
(4,941
)
(405
)
(8,291
)
The defined benefit obligation may be analysed between funded and unfunded plans as follows
 
 
 
 
 
 
Funded
 
(29,661
)
(7,352
)
(2,195
)
(1,393
)
(40,601
)
Unfunded
 
(247
)
(3,181
)
(4,625
)
(322
)
(8,375
)
 
 
(29,908
)
(10,533
)
(6,820
)
(1,715
)
(48,976
)
a 
The costs of managing plan investments are offset against the investment return, the costs of administering pension plan benefits are generally included in current service cost and the costs of administering other post-retirement benefit plans are included in the benefit obligation.
b 
Past service costs have arisen from restructuring programmes and represent a combination of credits as a result of the curtailment in the pension arrangements of a number of employees mostly in the US and charges for special termination benefits representing the increased liability arising as a result of early retirements mostly in the UK and Eurozone. The UK also includes $12 million of cost resulting from benefit harmonization within the primary plan.
c 
Most of the contributions made by plan participants into UK pension plans were made under salary sacrifice.
d 
The benefit payments amount shown above comprises $2,754 million benefits and $14 million settlements, plus $55 million of plan expenses incurred in the administration of the benefit.
e 
The benefit obligation for the US is made up of $7,902 million for pension liabilities and $2,631 million for other post-retirement benefit liabilities (which are unfunded and are primarily retiree medical liabilities). The benefit obligation for the Eurozone includes $4,289 million for pension liabilities in Germany which is largely unfunded.
f 
The actual return on plan assets is made up of the sum of the interest income on plan assets and the remeasurement of plan assets as disclosed above.
g 
The fair value of plan assets includes borrowings related to the LDI programme as described on page 164.
22. Pensions and other post-retirement benefits – continued
 
 
 
 
 
 
$ million

 
 
 
 
 
 
2015

 
 
UK

US

Eurozone

Other

Total

Analysis of the amount charged to profit (loss) before interest and taxation
 
 
 
 
 
 
Current service costa
 
485

371

96

96

1,048

Past service costb
 
12

(27
)
47

(7
)
25

Settlement
 
—

—

(1
)
(3
)
(4
)
Operating charge relating to defined benefit plans
 
497

344

142

86

1,069

Payments to defined contribution plans
 
31

205

8

41

285

Total operating charge
 
528

549

150

127

1,354

Interest income on plan assetsa
 
(1,124
)
(289
)
(37
)
(55
)
(1,505
)
Interest on plan liabilities
 
1,146

423

151

91

1,811

Other finance expense
 
22

134

114

36

306

Analysis of the amount recognized in other comprehensive income
 
 
 
 
 
 
Actual asset return less interest income on plan assets
 
315

(139
)
25

33

234

Change in financial assumptions underlying the present value of the plan liabilities
 
2,054

607

592

213

3,466

Change in demographic assumptions underlying the present value of the plan liabilities
 
—

60

15

—

75

Experience gains and losses arising on the plan liabilities
 
336

(48
)
47

29

364

Remeasurements recognized in other comprehensive income
 
2,705

480

679

275

4,139

a The costs of managing plan investments are offset against the investment return, the costs of administering pension plan benefits are generally included in current service cost and the costs of administering other post-retirement benefit plans are included in the benefit obligation.
b Past service costs have arisen from restructuring programmes and represent a combination of credits as a result of the curtailment in the pension arrangements of a number of employees mostly in the US and Trinidad and charges for special termination benefits representing the increased liability arising as a result of early retirements mostly in the UK and Eurozone.

Disclosure of sensitivity analysis for actuarial assumptions
A one-percentage point change, in isolation, in certain assumptions as at 31 December 2017 for the group’s plans would have had the effects shown in the table below. The effects shown for the expense in 2018 comprise the total of current service cost and net finance income or expense.
 
 
 
$ million

 
 
One percentage point
 
 
 
Increase

Decrease

Discount ratea
 
 
 
Effect on pension and other post-retirement benefit expense in 2018
 
(366
)
298

Effect on pension and other post-retirement benefit obligation at 31 December 2017
 
(7,532
)
9,751

Inflation rateb
 
 
 
Effect on pension and other post-retirement benefit expense in 2018
 
241

(200
)
Effect on pension and other post-retirement benefit obligation at 31 December 2017
 
5,373

(4,690
)
Salary growth
 
 
 
Effect on pension and other post-retirement benefit expense in 2018
 
78

(68
)
Effect on pension and other post-retirement benefit obligation at 31 December 2017
 
837

(747
)
a 
The amounts presented reflect that the discount rate is used to determine the asset interest income as well as the interest cost on the obligation.
b 
The amounts presented reflect the total impact of an inflation rate change on the assumptions for rate of increase in salaries, pensions in payment and deferred pensions.
Disclosure of information about maturity profile of defined benefit obligation
The expected benefit payments, which reflect expected future service, as appropriate, but exclude plan expenses, up until 2027 and the weighted average duration of the defined benefit obligations at 31 December 2017 are as follows:
 
 
 
 
 
 
$ million

Estimated future benefit payments
 
UK

US

Eurozone

Other

Total

2018
 
1,101

847

369

109

2,426

2019
 
1,087

815

359

110

2,371

2020
 
1,108

798

346

109

2,361

2021
 
1,148

853

336

109

2,446

2022
 
1,176

784

332

112

2,404

2023-2027
 
6,319

3,701

1,559

563

12,142

 
 
 
 
 
 
Years

Weighted average duration
 
19.8

9.5

14.3

13.1