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BP shares affect pension funds

06 July 2010 / by Lois Avery

BP shares have halved in value since April’s giant oil spill, sparking fears that pensions may be affected by the drop in price.

Pension funds with exposure to BP shares are likely to have been affected by the company’s dramatically reduced share price, which has plummeted to 330p since the Deepwater Horizon explosion sent oil pouring into the Gulf of Mexico.

The company has been in financial turmoil ever since, with pressure from US politicians and shareholders.

It has already cost billions and the cost is likely to rise even further once compensation claims begin paying out, forcing BP to consider selling off assets to help pay for the cleanup.

But now there are concerns among investors that the weak share price will have a negative impact on UK pension funds, many of which are likely to be exposed to BP shares, along with other stocks.

According to the Telegraph, their own default pension fund has a 2.7 per cent stake in BP and companies like Shell, Vodophone and GlaxoSmithKline also make up the majority of UK FTSE 100 tracker funds.

Despite the blow to pension savers, experts say it could be a reminder to investors to diversify their investment portfolio in order to avoid taking a big hit if one large share faces problems.

Peter McGahan of Worldwide Financial Planning said: "If you do try to diversify you should make sure you do not double up on more than one fund investing in the same stock. For example, if you invest in a commodity fund, a FTSE tracker and a UK income fund, you might have 5pc to 10pc in BP across all of them, meaning you are not diversifying your portfolio at all."

© Fair Investment Company Ltd


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