Anger over BBC pension cuts

Unions have condemned plans to increase the cost of pensions, and raise retirement age for BBC staff to 65.

Under proposals announced today, April 21, current staff under 50 years of age will have to work until 65 before qualifying for a full final salary pension.

New staff joining after September 1 2006 will not be allowed to join the current pension scheme, and will instead be offered a pension based on their average salary during their career, instead of final salary.

Experts estimate that this could cut the value of the pensions they eventually achieve by between 30% and 50%.

Existing staff over 50 years of age are unaffected by the changes, but will also have to pay increased pension contributions, along with younger colleagues, which could reach a figure equivalent to 9% of their salaries each year, double the rate they were paying only two years ago.

BECTU has criticised the BBC for proposing the changes in spite of a recent valuation exercise that revealed pension scheme assets of £6.4 billion, enough to meet all its current liabilities.

The valuation came at the end of a 14-year pension "holiday" during which the BBC took advantage of a cash surplus in the scheme by paying less into it than was needed.

Staff also enjoyed a reduction in their salary-based contributions, but this was much smaller than the savings made by the BBC.

Unions estimate that the current assets of the BBC pension scheme are now more than £1 billion lower than they would have been as a result of the payment holiday.

Unlike many other big UK pension schemes, the BBC's is not in crisis according to the unions, and officials believe that the proposed changes are unneccesary.

Although the scheme's cash surplus has run out, the BBC is not planning to increase its contributions significantly until April 2007, leaving the fund short of two years' worth of income worth roughly £150 million.

From April 2007 the BBC will pay 17.3% of its wage bill into the scheme, as well as a proportion of the £150 million shortfall that pension trustees have been promised will be paid off entirely within eight years.

Staff payments will rise next April from 6% of salary to 7.5%, but the BBC has warned that this could increase to as much as 9% in the following year.

Actuaries have calculated that the pension scheme needs a total income each year worth 24.8% of the BBC's wage bill. If staff contributions increase to 9%, the BBC's payment will be proportionately far lower than it was before the pension holiday began in 1992.

BECTU is calling for the staff to bear the same proportion of pension costs as they did that year, which would mean a contribution of only 6.9% from their wages.

New staff joining after September this year will pay 5.6% of salary, including increased national insurance payments, to belong to the new career average pension scheme. BBC contributions to this scheme are expected to be 11.6%, again including national insurance payments.

The BBC is obliged by law to consult members of its pension scheme before making changes to pensions, and the consultation period will end on June 30.

Union representatives will meet on April 27 to consider their initial response to the changes, although official have already told the BBC that in their view the proposals are unwelcome and unneccesary.