BBC pension fund deficit almost doubles due to interest rates
UK - Britain's public service broadcaster BBC has seen its pension deficit almost double in the space of a year despite an overall increase in scheme assets, according to an interim actuarial valuation.
Reporting on the defined benefit (DB) scheme's health at the beginning of April this year, actuary Alison Blay said that in the wake of the financial crisis interest rates had already been declining, but they had now hit "unprecedented low levels".
As a result, the fund's liabilities rose by £1.6bn (€1.9bn) in the 12 months to April, with the fund's assets only increasing by £400m to £9.3bn over the same period.
As a result, funding declined from 87% to 78%, with the deficit now estimated at £2.6bn.
"It may take a long time for interest rates to recover, and it may get worse before it gets better, which is why the continued support of the BBC is so important," Blay said.
She added that the interim assessment did not re-examine the BBC Pension Scheme's longevity assumptions, unlike next year's triennial valuation.
Bill Matthews, who was named chair of trustees in November last year, said it had been a "difficult year" for pension funds overall and that his scheme was not exempt from his assessment.
"The trustees are disappointed that economic headwinds have blown the scheme's funding off course," he said.
"The Pensions Regulator has recognised that current market conditions have made the situation very difficult for trustees and scheme sponsors."
The BBC has paid £170m of £900m in deficit reduction payments over the last two years, with the recovery plan initially agreed in 2010 when the shortfall stood at only £1.1bn.
In a statement in response to the valuation, broadcasting union Bectu said it had been told no further changes to the scheme's overall structure would be proposed in an effort to reduce the shortfall.
The union and state broadcaster had only in 2010 agreed changes to the fund that saw the creation of a second career average revalued earnings (CARE) section, with a controversial 1% cap on pensionable pay recently contested in a High Court case.
Addressing the court case in the interim valuation, the scheme said it had been advised by lawyers to continue administering the scheme based on the new agreement "unless and until there is a conclusive ruling that the contractual variation was invalid".
It added: "The continuing dispute, as to the validity of the variation, is not for the trustees to resolve. The case has been referred back to the Pensions Ombudsman.
"If it is ultimately decided that the BBC's actions were invalid and scheme benefits should be recalculated, the trustees will comply."