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Deficit is over £1.5bn (Read 4867 times)
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Deficit is over £1.5bn
Mar 23rd, 2011, 3:23pm
 
BBC pension deficit is 'just over £1.5bn'

A long-awaited valuation of the BBC's current pension deficit is understood to have put it at just over £1.5bn.

However according to sources, the corporation's pension black hole will reduce to around £1.1bn after controversial planned reforms.

Although still a big deficit, it is less than the £2bn some within the BBC had feared. Last June a letter was sent to staff warning that a 2009 interim valuation showed that the BBC's pension scheme's deficit had increased from £470m in 2008 to around £2bn.

Last summer there was widespread anger after BBC management announced it wanted to scrap its generous final salary pension scheme to plug a £1.5bn-£2bn pension deficit. In November several news bulletins were forced off air after staff voted for industrial action.

However, a compromise was reached with some unions and a new scheme was offered, dubbed CAB 2011, with some concessions.

If the pension deficit had turned out at lower than £1.5bn then the BBC had said it would reopen negotiations with technicians' union Bectu.

The BBC declined to comment.


By:- Tara Conlan

Source:-
http://www.guardian.co.uk/media/2011/mar/23/bbc-pension-deficit
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Re: Deficit is over £1.5bn
Reply #1 - Mar 23rd, 2011, 4:35pm
 
And this is from "Ariel":-

Pension scheme deficit confirmed


The Pension Trustees have just released details of the full triennial valuation of the BBC pension fund, revealing that the financial hole in the scheme in April 2010 stood at £1.6bn, almost exactly the amount estimated by management when it proposed swingeing changes to pension provision.

The Trustee's statement also shows that factoring in those changes to the scheme reduced the deficit by 0.5bn at a stroke, to £1.1bn, but the BBC is still going to have to put in almost £1bn over the next eleven years to make up the shortfall.

The losses wrought on the scheme in the last three years by the credit crisis of 2008/9 is clear, in April 2007 it had a surplus of £0.3bn, which had turned into a £2bn deficit by 2009. Rising costs also contributed to the black hole as pensioners are living longer.

The full scale of the deficit was the subject of much debate as the BBC and staff discussed the closure of the final salary option and the switch from any form of final salary pension to a choice of defined contribution options.

The Unions and many scheme members wanted the BBC to wait to make any changes until the triennial valuation was available - management said with an estimated deficit of anything from £1.5 to £2bn it had to act quickly, but promised to re-visit the proposals if it proved to be less than £1bn.

The Trustees say the main reasons for the calamitous drop in the scheme are lower than expected investment returns over the period, but they have also had to take into account predictions that future investments will attract lower returns and that inflation will rise. They also factored in rising life expectancy, which has seen predicted male lifespans increase by two years in just the last three years.

The document shows that by the end of 2010 the scheme's assets had increased by half a billion, to £8.7bn - mainly due to improving markets - but liabilities also increased, and will continue to do so as pensioner live longer.

Jeremy Peat, chairman of the Trustees, told Ariel they had to err on the side of caution when making their assumptions for the future of the fund, and had taken expert advice from the scheme actuary to reach those assumptions.

He said: 'What matters to me now is two things, that we have a recovery plan and that our members think very seriouslyl about the options they face, take appropriate advice and then make their best judgements.'

He says the Scheme, with the support of the BBC, will run until the last pensioner or dependent dies, which will probably be around the end of the century.


Source:-
http://www.bbc.co.uk/ariel/12839949
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Re: Deficit is over £1.5bn
Reply #2 - Mar 23rd, 2011, 6:59pm
 
This is the text of an email from the DG:

From: Mark Thompson
Sent: 23 March 2011 16:19
Subject: Pensions Valuation Announcement


This email is going to everyone

Dear All,

Earlier this afternoon Jeremy Peat, the Chairman of The BBC Pension Scheme Trustees, emailed all members to announce that the 2010 pension valuation has been finalised. There are two parts to this announcement.

First, the pensions deficit before the BBC's proposed changes are factored in has been formally assessed at £1.6 billion as at April 2010. This is in line with our original estimate of a deficit of between £1.5 and £2 billion which we shared with you as part of our original announcement about pension reform last June.

But the changes to pension arrangements which were negotiated and agreed last autumn have had a significant impact on the final valuation of the deficit. Because these reforms reduce the expected future liabilities of the scheme they also have the effect of reducing the deficit we now face. The Chairman of the Pension Scheme Trustees has announced this afternoon that the agreed valuation gives £500 million of ‘credit’ for these reforms and that therefore the final deficit is not £1.6 billion, but £1.1 billion. This remains a substantial sum, but the effect of the reforms is that half a billion pounds which would otherwise have had to be paid into the pension fund to reduce the deficit can instead be used on programmes and services for the public. Without the reforms, many hundreds of BBC jobs would have been lost.

Secondly, we have agreed with the Trustees a repayment plan over an eleven year period to repay the £1.1 billion deficit. The BBC will make an initial payment of £110 million this year followed by a payment of £60 million in 2012 and 2013, £100 million for the next three years and £75 million for the following five years. I believe this repayment plan is fair to both pension scheme members and to the licence fee payer.

So what happens now? The proposed changes to the Scheme that we announced last year will now be implemented. Our priority is to ensure that Scheme members have the appropriate levels of support and information to make the right choice as to which pension option is best for them. There are three options for existing members of our defined benefit Scheme to consider. They are:

Option 1: To remain in the Scheme with a 1% limit on future pensionable salary increases from April 2011.

Option 2: To join the new career average benefits arrangement, CAB2011, between April 2011 and December 2011.

Option 3: To join ‘LifePlan’, the new defined contribution plan, at any point in the future.

To help you make the right decision about what to do, we have put in various levels of support including further pensions seminars, one-to-ones with a pensions consultant and a new pensions modeller to show how these changes will affect you. You can find information on the changes, including all the support available on the pensions website.

I have called an all-staff ringmain session at 5 o'clock today to take you through what today's announcement means in detail. This is at short notice as details of the announcement were leaked to a national newspaper. Following today's ringmain session, we will follow up with additional sessions if required..

All the best,
Mark Thompson
Director-General

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