New valuation wipes £500m off BBC pension deficit

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Proposed changes to the BBC 's pension scheme will help reduce its pension deficit by half a billion pounds and save hundreds of jobs, director general Mark Thompson said this week.

In an email to staff, Thompson announced that the deficit, previously estimated to stand at between £1.5 billion and £2 billion, had been formally assessed at £1.6 billion in April 2010.

But he added that the changes to the pension arrangements, which were negotiated and agreed last year, will "reduce the expected future liabilities of the scheme" and as a result reduce the deficit further to £1.1 billion.

"The chairman of the Pension Scheme Trustees has announced this afternoon that the agreed valuation gives £500 million of 'credit' for these reforms and that therefore the final deficit is not £1.6 billion, but £1.1 billion.

"This remains a substantial sum, but the effect of the reforms is that half a billion pounds which would otherwise have had to be paid into the pension fund to reduce the deficit can instead be used on programmes and services for the public. Without the reforms, many hundreds of BBC jobs would have been lost."

In another email to staff, Jeremy Peat, chairman of the trustees, said a recovery plan has been agreed with the BBC "to make good the deficit over the next 11 years".

"The BBC will pay an initial payment of £110m this year followed by a payment of £60m in each of 2012 and 2013; £100m for the next three years and £75m for the following five years.

"I believe this schedule of payments strikes a balance between doing what is appropriate for members and ensuring that the BBC's relationship with licence fee payers is not damaged." he added.

The proposed changes to the pension scheme will now be implemented, which offer three options for existing members of the BBC's defined benefit scheme; to remain in the scheme with a 1 per cent limit on future pensionable salary increases from April 2011, to join the new career average benefits arrangement, CAB2011, between April 2011 and December 2011 or to join 'LifePlan', a new defined contribution plan, at any point in the future.

Staff were given more details on what the announcement would mean for them in a session late yesterday, brought forward after details of the announcement were leaked to the press.

Representatives of the National Union of Journalists, whose members at the BBC took strike action in November over the pension proposals , are due to meet on 30 March to discuss this week's announcement.

The union voted to accept an agreement with the BBC over changes to the broadcaster's pension scheme in December, but warned it would review its position "in light of the actual deficit being agreed with Trustees and the full scheme rules being published".