BBC will cut gold-plated pension plans

Steve Dinneen
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THE BBC hopes to plug its yawning £2bn pension deficit by introducing sweeping changes to its retirement scheme.

The state broadcaster says it could save an astonishing third of the cost of its annual pension payments by introducing measures such as axing its lucrative final salary pension scheme to new employees.

The scheme will remain open to existing members but from 1 April 2011 only one percentage point of any pay rise will count towards the definition of the final salary upon which the pension is based.

More than 18,000 members of staff will be affected by the biggest changes to the scheme in decades.

The corporation said it will undertake a 90-day consultation on the proposals after its pension-scheme deficit ballooned from £470m in 2008.

Zarin Patel, BBC chief financial officer, said the changes are entirely inward looking and are not a knee-jerk reaction to pension trends.

She said the changes reflect “increased volatility” in the market, claiming the corporation must “take action now to make sure the scheme is sustainable in the long term”.

The pension deficit currently stands at a staggering two thirds of the BBC’s total income, which, as Patel points out, is a fixed sum.

The firm also said it will explore whether it can raise its retirement age from 60 to allow workers to increase their pension payouts.

The BBC says the affected staff will be able to tailor their pension scheme to their personal needs.

The broadcaster received £3.5bn in licence-fee income in its last financial year. The licence fee is a tax levied on all television-owning households in Britain, currently costing £146 per year, which provides the bulk of the BBC’s income. Patel denied the pension scheme currently accounts for £8 of this fee.

The BBC is under pressure from rivals led by satellite broadcaster BSkyB – which argues its state funding distorts the market – to scale back its ambitions.

BBC staff are already up in arms over the corporation’s announcement it will freeze all pay over £37,000 until 2011 and offer a flat-rate increase of £475 for those under that pay band.

The move has been seen as a response to government calls for restraint. Cameron’s coalition has previously suggested it will move to curb the organisation’s powers. BBC journalists, including business editor Robert Peston, have hit out at the changes.