BBC scheme seeks to cap inflation increases with risk-transfer exercise
The BBC Pension Scheme is hoping that as much as 10% of its membership will sign away the need to offer inflation-proofed benefits as part of a planned pension increase exchange (PIE).
The £10.8bn (€13.1bn) scheme, which closed to new entrants in late 2010, is planning to offer around 16,900 members the chance to take part in the PIE, which, at retirement, sees members offered higher up-front benefits at the cost of future statutory increases to inflation.
As part of the three-month exercise, which the scheme expects to launch in November, the national broadcaster is tendering for independent financial advisers to support the fund’s 65,000-strong membership.
According to the tender notice, the fund hopes 20-40% of those eligible to take part in the PIE – close to 17,000 members – will take up the offer, although a further 4,900 members over 80 could also be offered the opportunity to take part.
PIEs have previously sparked some controversy and were criticised by then-pensions minister Steve Webb over the language used in literature for the exercises.
Due to government and industry criticism, incentive exercises such as PIEs and enhanced transfer values (ETVs) are now subjected to a code of conduct.
The code banned the use of cash incentives for participation and made providing independent financial advice to members compulsory.
As part of a separate exercise, the fund also said it would start laying out its flexible retirement offer (FRO), offering members over 55 the chance to access their defined benefit (DB) pension in line with the new pension freedoms introduced in April.
The tender also said the FRO would be part of its usual communication with all active members in future, but added that up to 30% of the 3,500 members able to take part would transfer their benefits out of the DB fund into a defined contribution (DC) vehicle of their choice.
The use of FROs was expected to increase after the UK government added flexibility to DC schemes, with savers no longer being forced to purchase an annuity.
Members of the BBC scheme will be consulted regarding the additional freedoms of DC schemes, including accessing pensions as cash, in order to increase participation.
Both exercises would allow the BBC to reduce its deficit, which, according to the most recent actuarial valuation, stands at approximately £1.7bn.