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24 September 2014
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10.07.03

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BBC committed to final salary pension scheme

The BBC is reassuring its staff about the strength and good management of their occupational pension scheme, ahead of the publication of accounts which will show a deficit under FRS17.

The BBC's Annual Report and Accounts to be published next Tuesday (15 July) will record a £1,070 million deficit in the BBC pension fund.


However, this deficit is a snapshot figure calculated on 31 March this year in accordance with the contentious FRS17 accounting standard.

At the end of March the FRS17 valuation of both the Pension Scheme's assets and liabilities were affected by the conditions in the equity and bond markets.


In the stronger equity market conditions at the end of June, a similar snapshot valuation would have shown an improvement of around £245 million.

The actuarial valuation of 1 April 2002, which more appropriately takes account of long term trends, showed a surplus of £441 million, enough to cover 109% of benefits due to members in future, and the draft actuarial valuation for April 2003 still shows a surplus.

BBC Director of Finance John Smith and Director of Human Resources Stephen Dando have written to BBC staff to assure them that pension pay-outs will in no way be affected by this method of accounting, and that the BBC remains committed to retaining the defined benefit (final salary) scheme.

John Smith said: "The fund is healthy: it earns more income from its investments and contributions than it pays out."

Stephen Dando said: "We see it as a key part of the overall remuneration package and it is one of the benefits of working for the BBC which we wish to maintain.

In a prudent step to safeguard the future health of the Scheme, both the BBC and employees' contributions will increase in future years.


The BBC's increase has already begun to kick in with a half a percentage point rise on 1 April 2003. Staff have already been told that their contributions will increase by half a percentage point in April 2004 and April 2005.


The letter to staff says that the BBC now assumes employee contributions will need to increase by at least another half a percent in April 2006, taking them to 6% of salary. The increase will be decided after the 2005 actuarial valuation.

John Smith said: "Pension schemes are long-term arrangements. Many current members of our Scheme will not start to receive their pensions for 30 or more years and they or their dependants may still be receiving them in 60 years time.


"It is essential, therefore, that we take a long-term view. We must not get swayed by the ups and downs of the stock market and the short-term impact this has on the Scheme's value. The important thing is that the scheme is affordable over the long term."


Notes to Editors

The BBC will increase the amount it pays into the fund by half a percent of pensionable pay this year and again in each of the next two years.


Contributing scheme members were informed earlier this year that for the next two years (from April 2004) the amount they pay will increase by half a per cent a year as well.


In a new measure, the BBC is now assuming that at least another half a percent increase in employee contributions will be needed in April 2006 (i.e. to 6%) depending on the results of the 2005 actuarial valuation.


The maximum members' pension contributions under the Pension Scheme rules is 7.5% and the BBC stands behind its commitment to make up any difference.

The BBC conforms with accounting standard FRS17 to stay in line with the accounting practices of British plc companies.

Using the FRS17 calculation, next week's BBC Annual Report and Accounts will show total market assets for the Pension Scheme of £4,903 million at March 31 2003.


Liabilities calculated on the same date were £5,973 million. The equivalent figures in last year's report were assets of £6,219 million and liabilities of £5,254 million.

A valuation under the terms of FRS17 carried out at the end of June 2003 would have indicated a deficit of around £825 million, a reduction of around £245 million on the figure in the Annual Report and Accounts.



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