BBC to close scheme to new members as deficit hits £2bn
UK - The BBC has initiated a three month consultation on changes to its £8.23bn (€10.16bn) defined benefit (DB) pension scheme following a deficit increase to around £2bn in 2009 from £470m in 2008.
In the BBC pension fund's 2010 summary sent to scheme members the trustees noted that the scheme's funding position had suffered from the external pressures affecting the global economy, and as of 1 April 2009 the deficit had almost quadrupled to £2bn.
Jeremy Peat, chairman of the trustees, noted that a full triennial valuation would be conducted in 2010 and that although markets had recovered somewhat over the last year, "they did not reach the levels seen in the past" while liabilities had increased significantly due to a fall in the yield on index linked gilts. Therefore he admitted: "We expect that this [valuation] will reveal a sizeable deficit and so the BBC will need to pay extra contributions."
The pension scheme, valued at £8.23bn in March 2010, currently has an asset allocation of 56% in equities, 22% bonds, 10% in property, 9% in alternatives and the remainder in cash. Although the summary report noted that the scheme has gradually been reducing its equity allocation as markets have improved "in favour of a range of investments that perform very differently from equities. The long-term objective is to create a portfolio that is much less vulnerable to sharp falls in equity markets and a better match for the scheme's liabilities".
However, the size of the deficit has led the BBC Trust to initiate a consultation on proposed changes to its pension arrangements including the closure of the scheme to new members from December 2010 in favour of a new defined contribution scheme, and a cap on pensionable pay of 1%.
In a statement the trustees of the scheme said: "The BBC has notified the trustees of the proposed changes it wishes to introduce to contain the costs and risks of its pension arrangements.
"The trustees have taken their own advice from their legal and actuarial adviser and have been advised that they have no active part to play in the role of limiting pensionable salary growth. They also have no role in relation to the design of the proposed new BBC DC scheme that will be offered to new joiners."
However trade union BECTU, one of three unions representing BBC workers alongside the NUJ and Unite, has condemned the changes, even though the BBC has agreed to keep the DB scheme open to existing members and maintain the current retirement age with no changes to accrual rates or employee contributions.
Gerry Morrissey, BECTU general secretary, said: "BECTU and our sister unions at the BBC have been campaigning in advance of the announcements for the pension schemes to remain open and we welcome the fact that current staff will continue to accrue benefits. However the restriction on future pensionable salary increases of 1% will permanently break the link between an individual's salary and their final pension."
"In addition, the employment benefits package will not be as attractive to new employees and we believe that the BBC will struggle to attract staff with the appropriate skills levels."