Calm response to BBC pension gap
BECTU has told BBC members not to panic over a £1bn hole in their pension fund.
The Corporation's Annual Accounts, due out next week, will reveal a pension shortfall of £1.07bn, roughly 20% of the fund, according to the new FRS17 accountancy standard.
From last year the controversial FRS17 has required pension liabilities to be shown as part of company balance sheets.
However, it forces accountants to calculate pension fund values, and predict future trends like growth of earnings and inflation, in a different way from two other, longer established, tests that pension funds must pass.
These are the traditional actuarial review, where the BBC's last check in 2002 showed a 9% surplus, and the more recent Minimum Funding Requirement (MFR) test, which also showed the BBC scheme to be healthy.
The FRS17 test values the assets of pension schemes on the basis of a one-day snapshot of share prices and bond yields - a method widely criticised in the finance industry because it introduces "pot luck" into a process that pensions experts believe should take account of long-term trends over decades, not prices on just one day of the year.
Despite reassuring members that there is no pension crisis at the BBC, the union has for some years been closely monitoring the scheme's health, in particular the impact of the BBC's ten year contribution holiday during which its payments into the fund were dramatically reduced to 4.5% of payroll.
This year, after discussions with the unions, BBC management announced that there would be increases in contributions from both the BBC and staff to build up the fund's reserves before a surplus, which justified the contribution holiday, runs out later this decade.
BBC payments into the scheme will rise gradually to 6% by 2005, and staff contributions will increase from 4.5% to 5.5% over the same period.
A further three-yearly actuarial review of the BBC pension scheme is due in 2005, and its report will lead to renewed debate about future funding requirements. Two factors which the fund's trustees will scrutinise most closely will be any further improvement in life expectancy - which along with falling share prices accounts for many of the UK pension industry's problems - and the rate at which so-called "New Scheme" members have grown.
Since 1989, new pension scheme joiners have been offered a package that is marginally less beneficial than their predecessors - lower spouses' pensions and lower entitlement to buy extra benefits. The fund's long-term liabilities to New Scheme pensioners are cheaper to fund than its obligations to older members of the pension scheme, and with nearly half of the BBC's staff on the new package, this could be an important factor in the 2005 assessment.
News of the pension gap came in a message to all staff from the BBC's heads of finance and HR, and was accompanied by a firm commitment to retain the BBC's current final-salary pension scheme. BECTU has welcomed the Corporation's decision to keep out of a stampede currently underway among other UK employers, many of whom are cutting pension benefits or closing schemes, either completely, or just to new staff.