Pension Giving to Take a taxi? Scheme children page 9 deficit page 8 page 3 July 2010 Number 5 ‘Good morning, good With highlights from Ariel morning, good morning’ 70 th anniversary of ITMA page 6 News Deficit increases As predicted the Pension Scheme deficit has increased. The credit crunch and falling bond yields are to blame. The latest summary funding statement issued Key points from the summary report were: by the BBC Pension Scheme to members last • The trustees wanted to avoid ‘locking in month gave the grim news that the funding losses’ by selling equities at the lowest point deficit has increased from £470 million at of the financial turmoil. As the stock markets 1 April 2008 to around £2 billion at 1 April 2009. improved, however, the scheme made more In his communication to members, Jeremy sales of equities, with more to come Peat, Chairman of the Trustees, referred to the • During the year the trustees have continued ‘extraordinary external pressures affecting the to move to more stable long-term investments global economy’, which were in part to blame and have looked to protect the scheme against for the increase in the deficit. extreme currency fluctuations PROSPERO At the latest funding check on 1 April 2009, • In the longer term, the trustees would like to not only had the value of the scheme’s assets see a greater level of investment in July 2010 reduced as a result of falling investment returns, index-linked government bonds (see but its liabilities also increased due to a fall in box below) the yield on index-linked gilts. • The long-term aim is to create a portfolio that The 2009 funding update, he writes, took is much less vulnerable to sharp falls in equity Prospero is provided free to place at time when world stock markets were at markets and a better match for the scheme’s a low point. And, although they have recovered liabilities. retired BBC employees. It can to a large extent since then, other pressures on • The scheme has a positive cash flow, which the scheme have resulted in its liabilities means it can withstand falling markets also be sent to spouses or increasing. This means that the full 2010 without being forced to sell assets dependants who want to keep valuation, which is currently under way, is As reported on page 3, the BBC has been unlikely to show a marked improvement in the reviewing how active members’ benefits will in touch with the BBC. It funding position. build up in future and what pension offering includes news about former Jeremy will be retiring from the Board of the new employees will receive. The trustees will It is important to highlight and emphasise BBC Trust at the end of the year, when his term continue talking to the BBC about how it that the Scheme can meet its pension colleagues, pension issues, of office ends. However, he has agreed to stay on would meet any deficit costs shown up in the commitments as they arise without having to as Chairman of BBC Pension Trust Ltd until the full valuation and are working on a plan to sell assets and will continue to pay benefits in and developments at the 2010 valuation is complete. secure long-term funding. line with the Scheme rules. BBC. Prospero includes classified advertisements. To advertise in Prospero or The lowdown 2010 Pensioners the BBC Staff magazine, Ariel, see page 12. on ‘linkers’ Liaison Meeting Pension schemes like to invest in index-linked gilts This year’s Pensioners Liaison Meeting will be held the Subscription information for (commonly known as ‘linkers’), because they are a way of BBC’s Mailbox Building, Royal Mail Street, Birmingham protecting the assets from being eroded by inflation. B1 1AY on Tuesday, October 5, from 1.30pm to 3.30pm. Ariel is on page 12. Like other gilts, index-linked gilts are basically an IOU from the Government. In return for the investor lending the If you attend, you will have the opportunity to put questions Government money, it agrees to pay interest (called a about the Scheme to the Head of Pensions, Manager, coupon) until it returns the money at a future date. However, Pensions Investments and a Trustee. with index-linked gilts, both the interest payments on the debt and the repayment value rise and fall in line with There are limited spaces which will be given on a inflation (usually measured by the Retail Price Index, or RPI). ‘first come, first served’ basis. So, in effect, investors in index-linked gilts are betting on inflation rising rather than falling. To book call the pensions service line on 029 2032 2811 (Monday to Friday, 8.30am to 5.30pm). CROSPERO 149 1 Editorial contributions Devised and compiled by Jim Palm 24 Complete the square by using the clues; these apply only to words running across. Then take these words in numerical order and Write to: Prospero extract the letters indicated by a dot. If your answers are correct, 56 BBC Pension and Benefits Centre these letters will spell out a BBC programme of yesteryear. Broadcasting House 77 Please send your answers in an envelope marked Crospero to The Cardiff, CF5 2YQ Editor, Prospero, BBC Pension and Benefits Centre, Broadcasting 8 Tel: 020 7765 1414 House, Cardiff CF5 2YQ by July 16. Clues: 1. American award (5); 2. Middle-east Country (4); 3. 910 Email [email protected] Particular (4); 4. Eats (5); 5. Performing platform (5); 6. Disconcert (5); 7. Bird (5); 8. Top flier (3); 9. Fish (5); 10. Not yet (5); 11. Mine (3); 11 12. Christmas show (5); 13. Make euphoric (5); 14. U.S. State (5); Please make sure that any digital 15. Dramatic character (5); 16. Rim (4); 17. Ready for business (4); pictures you send are scanned 18. Skin inflammation (5). 12 13 at 300 dpi. Solution to Crospero No. 148 : Omen; Ordeal; Iron; Amy; Axes; 14 15 Knurl; Elan; Long; Ceased; ashen; Enzyme; Gown; USSR; Tryst; Ibex; Ooh; Seen; Renews; Reds. The characters were NORMAN Mixed Sources 16 17 Product group from well-managed AND HENRY BONES. forests, controlled sources and recycled wood or fiber WWW.fsc.org Cert no. SA-COC-1468 The winner of Crospero 148 is Mr John Dean of London. 18 © 1996 Forest Stewardship Council 2 • • July • 2010 BBC Pensions The Coalition BBC consults with Government’s first Budget As this issue of Prospero was going active members to print, the new Chancellor George Osborne was delivering his ‘emergency budget’ to tackle the UK's budget deficit and to restore confidence in the economy. As well as an increase in VAT over proposed changes and changes to personal allowances and income tax affecting everyone, the Coalition Government’s Budget Existing and prospective members of the BBC Pension Scheme received contains some key measures that will affect pensioners. a letter last month confirming what many may have expected, following Basic State Pensions news of the Scheme’s £2bn deficit in the last interim valuation. linked to earnings From April 2011, the link to earnings for To reduce the deficit and continue the • Employees who are currently members of the Scheme under the changed terms the Basic State Pension (BSP) will be current arrangements, without making Scheme will continue to build up benefits outlined above. restored as part of a ‘triple guarantee’. any changes to the Scheme, would require under the current structure. However, from As a BBC pensioner, the proposed changes Each year the BSP will be increased by the BBC’s contributions to rise from 1 April 2011 future salary increases for will not affect the pension you receive from the highest of price inflation, earnings around 3.5% to around 10% of the licence calculating pension benefits will be limited to the Scheme, which will continue to be paid inflation and 2.5%. The April 2011 fee. This, the BBC believes, is unaffordable 1% per annum, no matter what actual salary as normal. The package of changes will only and would not be acceptable to licence increases an employee receives. affect the future build-up of pension by increase to the BSP will be based on fee payers. • New joiners will be given the option to join a active members who are still paying into the increase in the Retail Prices Index Instead, it has proposed a package of changes new, flexible, defined contribution plan. This the Scheme. (RPI), if higher, but in subsequent years which, it says, will both reduce the existing will give employees a choice over the levels of Starting from 1 July 2010, a 90-day the Consumer Prices Index (CPI) will be deficit and help ensure the Scheme remains contributions they make and the BBC will consultation period will give these members the used in the triple guarantee as the affordable and sustainable into the future. match or better these contributions up to a opportunity to share their views on the proposed measure of price inflation. The increase These are: certain level. changes. During this period, the BBC is in the CPI tends to be much lower than • The Scheme will be kept open to current • Existing pension Scheme members will also be planning to run pension seminars and provide the increase in the RPI because it members but will be closed to new joiners given the choice of joining the new defined online support, to help staff understand how the excludes household costs such as from 1 December 2010. contribution plan or remaining in the existing changes will affect them.