UK - ITV has agreed a funding plan with trustees concerning the deficit on its defined benefit (DB) scheme. Elsewhere, Scottish commuter airline Loganair has appointed Xafinity for DB pension services.

* A completed partnership arrangement with trustees in relation to its SDN subsidiary has allowed ITV to cut its pensions deficit by £124m (€138m).

The UK commercial television station announced plans in October 2009 to open discussions with trustees to use the assets of SDN Limited - a UK digital terrestrial television (DTT) multiplex operator - to help plug the deficit in the ITV Pension Scheme. (See earlier IPE article: ITV plans to use subsidiary as contingent asset)

This was valued at £436m at the end of 2009 on an IAS19 accounting basis, while the funding deficit at the end of the year was estimated at £550m.

Under the partnership agreement, ITV will make a payment to the scheme of around £150m in 2022 if the scheme is still in deficit. This is in addition to an annual payment of £8.4m for 12 years from 2011.

The scheme will also have a 'partnership' interest in SDN, which will provide the collateral for the payments. Figures supplied by ITV showed SDN revenues in 2009 were £44m, up from £33m the previous year. However, all of the subsidiary's revenues, profits and cashflow will be consolidated into ITV's accounts and the broadcaster will maintain everyday control of the company.

ITV claimed this deal will reduce the funding or actuarial deficit by £124m after taking into consideration the present value of the annual payments and the £150m one-off contribution. This would bring the actuarial deficit down to an estimated £426m. Its IAS19 deficit will be unaffected.

In the meantime, ITV has also outlined the deficit funding plan to the scheme from 2011 to 2014, starting with £35m a year in 2011. The company said this contribution would rise by £5m in 2012 unless ITV implements changes which reduce the deficit by at least £10m. If ITV reports earnings before interest, tax and amortisation (EBITA) before exceptional items of more than £300m, the DB scheme will also receive a further increase in the contribution rate of 10% of EBITA above the £300m level.

These contribution terms replace the previous plans for ITV to pay £30m a year up to 2013 ahead of the next valuation in 2011, and it is expected there will be no further changes to the payment scheduled until 2015.

Graham Parrott, chairman of the trustees, said: "This agreement provides increased security and improved funding to the scheme, whilst recognising that members' best protection lies in the enduring strength of the ITV covenant going forward."

Feargus Mitchell, pensions partner at Deloitte, which advised ITV on the deal, said the use of the partnership deal allowed ITV to improve the funding of the scheme in an "efficient and cost-effective way". He said it has also "facilitated a wider agreement with the trustee that ensures certainty and stability around the funding of the scheme for the next four years".

Deloitte noted the ITV deal follows a similar move by John Lewis Partnership, which has used department stores to back a £95m contribution to its DB scheme. The consulting firm revealed it is currently advising more than 10 companies on similar solutions to fund more than £2bn of UK corporate pension deficits.

"This represents a significant step forward in the funding of pension schemes and enables corporates to unlock the value in their assets for the benefit of both their pension schemes and their wider corporate stakeholders," said Mitchell.

Elsewhere, Loganair, a commuter airline based in Glasgow, has appointed Xafinity Consulting and Xafinity Paymaster to provide a range of pension services for its closed DB scheme.

The company previously employed Aon for the provision of pension administration, actuarial, investment and consultancy services. However, Loganair said it had awarded the open-ended contract to Xafinity on the basis of its ability to provide "an efficient and joined-up service as our closed scheme matures".

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