BBC pensions: good and bad news

BECTU has criticised the BBC for pocketing a £184m Pension Fund windfall whilst forcing up members contributions.

The BBC Pension Fund has announced that its pension fund has a surplus, which is good news.

Even better for the BBC is the news that the fund has performed so well in the two years since the last valuation that an extra £184m in repair payments are no longer needed.

However the bad news is that the BBC still wants union members to put more money into the pension scheme while it pockets the £184m windfall.

BECTU Assistant General Secretary Luke Crawley said: "It is unacceptable that union members should be asked to put more of their money into a scheme which has a surplus.

“It adds insult to injury to try and increase members' contributions when the only benefit will be a reduction in the BBC's pension bill."

£275m surplus

Unlike many other final salary pension schemes the latest actuarial valuation places the BBC scheme in the unusual position of having a surplus.

In 2005 there was a small surplus of £15m.

By 2007 this had grown to a much healthier surplus of £275m.

Compared to the over all value of the scheme at around £8 billion this is not a huge amount but it makes the BBC the envy of many FTSE 100 companies with pension deficits which can be measured in billions.

Following the previous valuation in 2005 repair payments were needed because of the delay in increasing the BBC contributions to the full amount.

These payments started in April 2007 but the investment performance of the scheme since 2005 has been so good that these payments are no longer needed.

In fact the pension scheme has refunded the first payment of £23m to the BBC.

These repair payments were to be spread over 8 years and the original annual sum of £23m was to be index-linked so it actually adds up to a windfall of more than £184m.

Despite all this good fortune the BBC still thinks that staff member contributions should be going up and intends to raise them from 6% of pay to 6.75% in April 2009 and to 7.5% in April 2010.

The only beneficiary will be the BBC that can then pay less into the scheme.

BBC windfall

This £23m windfall is worth around 3% of the pay bill to the BBC so in effect it is getting a reduction in its payments of around 3% per year for the next eight years.

The latest valuation required the BBC to pay an additional 0.56% on its contributions but with the windfall it is still making a saving of 2.5% per annum or £19m every year.

BECTU believes that it is wrong that the BBC should refuse to share any of the windfall.

The union finds it even more galling the fact that the increase in members' contributions is not because the scheme is short of money but because the BBC wants to make savings on its pension bill.

An increase of 0.75% in member contributions means the BBC is £5.6m a year better off.

Retirement at 65

In a further development the BBC Pension Scheme Trustees have written to scheme members saying that that the increase in normal pension age to 65 for all scheme members will be confirmed in 2010.

This is factually incorrect.

As members will know the original proposal to increase the normal pension age to 65, was withdrawn by the BBC in 2006 following the threat of industrial action.

BECTU has raised this matter with the BBC and they have made it clear that there is no assumption in this recent valuation (2007) that all scheme members will retire at 65 rather than 60.

However the BBC has also said that whilst they wish to progress the issue of retirement age in 2010 they fully accept that it will be subject to consultation with the Joint Unions.

After the industrial campaign in 2006 BECTU is aware of the strength of feeling amongst union members against this proposal.

What next?

The union reached an agreement with the BBC in January of this year which specifically acknowledged that contribution increases from the staff might have to happen but both sides acknowledged that this should be reviewed when the actuarial valuation was published in June.

The BBC now says that there is no need to review the position and the increases will go ahead.

BECTU and the other unions at the BBC have made it clear to the BBC that this is unacceptable.

Union members voted to accept the January deal, which included a below-inflation pay rise of 2% this August, on the basis that the poor licence fee settlement meant the BBC was strapped for cash.

Now it seems there is a considerable sum of money from the pensions windfall but the BBC will not revisit the issue.

BECTU intends to launch coordinated pay campaigns for BBC, BBC Worldwide and BBC Resources, early next year and sees no reason to ballot members now over a pensions proposal which will have no impact until 1 April 2009.

The pay claim in each area will address this year's below-inflation settlement and also factor in the proposal to increase members' pension contributions.

BECTU believes the collective strength of members across the Corporation will be necessary to produce a satisfactory outcome and if the BBC does not take the unions’ claims seriously then industrial action is a likely result.