ITV consults on DB changes as deficit predicted to worsen
UK - ITV has initiated a consultation with staff members over proposals to cap pensionable salary increases at 1% from January 2010, and is also offering pensioners the option of giving up pension increases on part of their pension in return for a "one-off uplift".
The consultation, which began last week, is in response to a growing deficit in the television company's defined benefit (DB) scheme, which at the end of 2008 had total assets of £2.15bn (€2.5bn) and liabilities of £2.79bn, resulting in a shortfall of £646m.
However, ITV said the deficit "is expected to have worsened since then due to the economic downturn", and the company's interim results on Thursday are expected to reveal an increase in the accounting deficit of the scheme which was reported at £178m in March. (See earlier IPE article: ITV considers DB changes as deficit hits £178m)
In a leaflet explaining the changes, ITV said it needs to make cost savings in response to difficult market conditions. It stated: "As one of our biggest costs, pensions cannot remain immune. Our pension costs have continued to rise in recent years and are now a significant part of our expenditure. ITV needs to make changes not only to contain future costs but also to pay for the benefits that members have already built up."
The proposed changes, set to take effect from 1 January 2010, would see increases to pensionable salary capped at 1%, even if the actual increase to a member's base salary is higher, which means the amount of pension at retirement is likely to be lower than under the current rules.
ITV claimed it had "considered a number of options before putting forward its current proposal" for the arrangements of active members, and had also examined ways of managing the liabilities of other members such as pensioners and deferred members.
It also said it is offering pensioners "the opportunity to give up non-statutory pension increases on part of their pension in exchange for a one-off uplift. Depending on how many pensioners accept this offer, it should deliver a cost saving and help improve the financial health of the scheme".
The company also warned if the changes are not made pension costs and liabilities will continue to rise, so a delay in taking action "will expose members, the scheme and ITV to unnecessary risk. By taking action now, we hope to ensure that our pension arrangements are sustainable in future and show that ITV's financial commitment to pension benefits is appropriate".
ITV revealed the next step will be presentations to staff across the country to explain the impact of the changes with the consultation closing to comment on 25 September 2009 and any changes confirmed to members in November before implementation in January 2010.
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