UK - The BBC pension scheme has seen its funding shrink by 1% from 88% to 87% since April 2010, the scheme has said in its trustees’ 2011 summary report.

The drop is mainly due to lower expectations of future long-term investment returns from equities in 2011 compared with last year, it said.

According to the trustees’ report, this situation has led to a 3% decrease of the funding level.

However, the report notes this jump has been partly offset by the deficit reduction contribution of £110m (€125.6m) brought by the BBC, and by a better than expected investment performance over the year to 1 April.

Jeremy Peat, trustee chairman, said: “While our investments grew by more than was expected, lower assumed investment returns have added more to the cost of providing pensions built up to date over the year.

“Following on from the changes introduced by the BBC and the scheme’s closure to new members, the trustees and the BBC are reviewing the scheme’s investment strategy with the aim of reducing the risk of further deficits.”

The report also said the scheme was seeking to reduce its level of investment risk and continued to increase its level of diversification across equities, bonds, property and other investments. 

“Spreading investments over a greater number of different types of assets, both within and outside global stock markets, should provide the scheme with more protection from future market volatility,” it said.

The BBC pension scheme is currently allocating 25% to UK equities, 25% to overseas equities, 30% to bonds, 10% to property and 10% to alternative assets.

Meanwhile, trustees of the Morris Ashby Limited Pension Scheme have entered into a pension insurance buyout agreement with Pension Insurance Corporation (PIC).

The small pension fund, which has 480 members, has liabilities of £38m.

The pension fund’s former owner, JL French UK, used to make die-castings before its insolvency in 2006.

Following the insolvency, the pension fund had been under Pension Protection Fund (PPF) assessment.

Esther White, trustee chairman, said: “Despite being in the PPF’s assessment period for a number of years, we had to move quickly to lock into a level of benefits as pension insurance became affordable.”

Finally, Key Retirement Solutions has warned that annuity rates have fallen around 3% over the past two months, with pensioners panicking over stock market volatility.

According to the consultancy, this move, which follows the drop of 12% recorded by the FTSE 100 over the same period, could lead to an annual loss of £207 for pensioners and a loss of £5,000 over 25 years.

Key Retirement said annuity rates fell because they were linked to the interest rates paid on government bonds or gilts, which have hit record lows in recent weeks as investors seek a safe haven from the euro-zone debt crisis, pushing prices up.

Analysts are predicting annuity rates could continue to fall after having hit an all-time low after a 20% drop in the past three years, further adding to the cost of delay.