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DG's pension peace plan (Read 4956 times)
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DG's pension peace plan
Sep 13th, 2010, 9:27am
 
This is taken from the BBC News website:

BBC sets out new pension option

The BBC has set out an alternative proposal to staff as it looks to overhaul its pension scheme.
Under the new option, pensions will be based on average pay over a career, and the BBC will not put an annual 1% cap on growth of pensionable pay.

However, employees will have to work to the age of 65 rather than 60 and put a greater proportion of their salary into a pension pot.

BBC staff voted to strike over the previous pension plans.

In June, the BBC announced plans to overhaul its pension scheme to try to tackle an estimated £2bn deficit.

The corporation said the changes were essential to tackle the ballooning deficit in the pension scheme, which stood at £470m two years ago.

These proposals included closing the final-salary pension scheme to new joiners and imposing a cap on the amount pensionable salaries of existing members can grow to 1% per year.

Alternatively, members could leave the final-salary scheme and join a new defined contribution scheme which is also being offered to new recruits.

Earlier this month, it was announced that BBC staff members had voted in favour of strike action in response to these plans.

Bectu and the National Union of Journalists said more than 90% of members had voted for a walk out. But the unions postponed the decision on whether to strike for two weeks while it discussed alternative proposals with the BBC.

The fresh plans, which BBC director general Mark Thompson set out in an e-mail to staff on Monday, suggest adding an extra option of a pension based on a career average of salary.

Employees could leave the final-salary scheme and join the so-called CAB 2011 scheme.

The benefits would be based on average pay from joining CAB 2011 to the end of working for the BBC.

There would be no cap on how far this average could grow if members receive pay rises or get a promotion.

However, these employees would have to pay higher contributions than the current career-average (CAB) scheme, which is due to close to new members. Contributions will be 7% compared with 4% in the current CAB scheme.

Accrued pensions would rise at 1.67% of salary per year, and those drawing the pension would see their pot increase at the lower of Consumer Prices Index inflation or 2.5%.

"It is not a panacea, but in the terms I have set out above it is affordable, and I believe it goes a significant way to addressing the concerns you've expressed to us during the consultation," Mr Thompson said.

The moves are the first major changes by a publicly-funded organisation to pensions.
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Re: DG's pension peace plan
Reply #1 - Sep 13th, 2010, 12:42pm
 
This is the text of an email from the DG to all staff:

This email is going to everybody

Dear All,


When I last wrote to you on the 1st September, I said that we were listening carefully to the concerns which many of you had raised about our initial pension proposals and that we were exploring ways of addressing them -- while still achieving pension arrangements at the BBC that will be sustainable and affordable in the long term.

Some of the proposals -- for instance to close the Defined Benefit scheme to new members -- have not proven controversial for most of you.  But you have expressed serious concern about some aspects of the proposals which effect current members of the Defined Benefit scheme.  You’ll remember that we proposed two choices for these current members:  either to stay in the Defined Benefit scheme but with a 1% annual cap on the future growth of pensionable pay; or to transfer to a new Defined Contribution scheme.

Many of you told us that you feared that the 1% cap might erode the pension you’d already built up in real terms (because your pensionable pay might grow more slowly than inflation) and that it would also mean that future salary growth (for instance through promotion) would not be fully reflected in pensionable pay.  The terms of the proposed new Defined Contribution scheme are competitive and some of you have acknowledged that ¾ but many of you have also said that you don’t want to take the risk of transferring to a Defined Contribution scheme, no matter how good it is.  In the light of these concerns, we’ve decided to keep the existing two proposed choices on the table but to add a new third option for current members, a new Career Average Benefits option which we’ve called CAB 2011.

If a current member opted for CAB 2011, this is how it would work. First you would leave your existing Defined Benefit section in the BBC Pension Scheme.  As a result, you would become a ‘deferred’ member and pensionable pay you had accrued up to that point would rise broadly in line with inflation.  You would then immediately join the new CAB 2011 arrangement in which you would build up benefits year by year for your remaining time at the BBC. The benefits would be based on your average pay from the time you joined CAB 2011 to the time you left the BBC. There would be no cap on how far this average could grow if your salary grew over the period either because of annual or other pay rises or because of promotion.

We are still working through the full details of CAB 2011, but we are proposing that it should have a pensionable age of 65, that pensions would accrue at the same rate as the current CAB scheme (1.67% of salary per year, in other words 1/60ths), that pensions in payment should increase by the lower of Consumer Price Inflation and 2.5%.  To be affordable, member contributions to CAB 2011 will have to be higher than for the current career average scheme, for which they are 4% of salary.  For CAB 2011, we are proposing that member contributions should be 7% of salary.  

CAB 2011 is a significant addition to our proposals for pension reform.  We have shared it with the joint unions and will continue to discuss it with them over the coming days.  We also want to leave plenty of time for everyone in the BBC to understand it and weigh it alongside the other proposals.  There will therefore be an additional consultation period which will run from the 16 September until mid-November.  During this fresh consultation period we will be providing more information on the new option and offering you the chance to attend a new round of revised pension seminars.  The pension modeller is also being updated to reflect the new option and we hope to have this ready by the end of the month.

To kick off the next consultation period I am holding a Ringmain event on Thursday 16 September between 11.30 and 12.30 where I, Lucy Adams and some of our pensions specialists will be on hand to try and answer as many of your immediate questions about this new third option as we can.  

Pension reform at the BBC is inevitable.  We have a large current deficit in our Scheme and face long term pressures which, without action now, would undermine the Scheme and compromise the broader finances of the BBC. That is why we’ve tabled our proposals for reform this summer.  CAB 2011 is an important addition to those proposals.  It is not a panacea, but in the terms I’ve set out above it is affordable, and I believe it goes a significant way to addressing the concerns you’ve expressed to us during the consultation.

All the best,

Mark Thompson

Director-General
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