BBC takes axe to pensions in bid to plug £2bn deficit

Warning: Robert Peston wrote in a blog that BBC would be angry with the changes
12 April 2012

The BBC was facing revolt from thousands of staff today after taking an axe to its final-salary pension scheme.

Many staff will be worse off in retirement under the proposals as the corporation looks to counteract a £2 billion deficit in its pension fund.

The plans would see the terms of the BBC's final-salary scheme, which closed to newcomers in 2006, radically changed so the pensionable salary of staff will in the future rise by no more than one per cent a year.

The rise will be capped at this amount even if the employee gets a substantial pay rise, nor will it be protected against inflation.

There are 18,000 staff who are still contributing to the scheme who would be affected. A recent review of the pension fund revealed it had ballooned from £470 million in 2008 to £2 billion this year.

The BBC's business editor Robert Peston wrote a lengthy blog this morning warning that the broadcaster is facing a "massive outcry" among staff.

Mr Peston said: "If an employee is promoted and receives a 10 per cent increase in salary, that won't generate a 10 per cent increase in pension, as it would have done in the past: it'll only generate a one per cent increase.

"For those relatively early in their careers at the BBC, who expect their salaries to rise sharply, the impact will be so great that they would probably be bonkers to make any future contributions to the scheme."

The BBC will launch a 90-day consultation with staff and trade unions. Gerry Morrissey, BECTU general secretary, said: "BECTU and our sister unions have been campaigning in advance of the announcements for the pension schemes to remain open and we welcome the fact that current staff will continue to accrue benefits.

"However the restriction on future pensionable salary increases of one per cent will permanently break the link between an individual's salary and their final pension."

Zarin Patel, the BBC's chief financial officer, defended the proposals.

"This has not been a sudden decision. We have spent over 18 months working to find the best solution for our staff. For the next 90 days, the BBC will consult fully on these proposals. I believe the solutions we have proposed today will deliver a pension scheme that is sustainable, affordable and flexible for BBC staff and the licence fee payer," she said.

How staff will feel the pinch

The BBC is not closing its final salary pension scheme entirely but it is limiting the amount by which future pensions increase in line with salary to just one per cent a year.

This means that an employee currently on a salary of £30,000 retiring in 10 years time will have the "final salary" on which their pension will be based capped at around £33,000 (a one per cent rise every year for 10 years). If they work for 40 years that means a pension of £24,200.

Under the old scheme if their actual final salary had gone up to £40,000 their pension would have been £26,600.

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