Britannia Radio

From The Sunday Times

May 2, 2010

Licence fee to plug BBC's £1bn pension hole

Robert Watts

THE BBC will have to divert licence-fee money into its pension fund after it discovered a £1billion "black hole", worsened by gold-plated payouts to staff.

It may need to pour in extra "deficit payments" of as much as £100m a year - nearly equivalent to the annual budget of Radio 4 - meet the shortfall.

News of the black hole will renew public disquiet at the lucrative retirement benefits racked up by its top executives.

The combined value of the retirement pots of five senior BBC executives is £35m - led by Mark Byford, the deputy director-general, who has accrued an annual retirement income of £229,500 from a pot that would cost almost £8m to buy on the open market.

RELATED LINKS

• ’Terminal’ cuts loom at World Service

A full actuarial valuation of the BBC's defined benefit pension scheme was conducted in April and will be published later this year. An individual close to the BBC who is aware of the findings said the deficit is £1.5billion "give or take £100m". He said there was now considerable debate within the BBC's high command about how to deal with it.

Tough rules brought in by Labour oblige employers to pour in extra cash to pension funds with deficits.

Jeremy Hunt, the shadow culture secretary, said: "Just like the rest of the public sector, the BBC needs to have a realistic plan to tackle its pensions deficit."

The BBC calculated its pension fund had a deficit of £470m in April 2008, compared with a surplus of £275m in 2007. But sharp falls in share prices and bond yields have caused the deficit in the corporation's fund to triple in just two years, according to one source.

Nick Silver, an actuary and fellow of the Institute of Economic Affairs, said: "It appears that the assets of the [BBC's] scheme performed very badly between March 2008 and 2009. This was probably as a result of them being heavily invested in equities." The scheme's latest accounts show that 52% of the fund is invested in shares.

At the latest count there were 17,774 BBC staff paying into the fund and 21,833 former workers claiming their pension. A further 19,137, mostly former staff who no longer pay into the scheme, will receive a BBC pension in the future.

Jeremy Peat, chairman of the BBC's pension fund trustees, has written to members explaining that April's valuation will also make "more prudent assumptions" about life expectancy.

A BBC spokesman said the £1.5billion deficit figure was "speculative".