A Special Message for Freda Page 3
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The BBC Play School Ann makes Scheme remembered a stand deficit page 6 page 8 page 2 December 2010 Number 9 A special message for Freda page 3 With highlights from Ariel BBC Pensions How big is & why do we have Throughout the debate over the proposed pension scheme changes, they’ve been the two questions that just won’t go away. Here Jeremy PROSPERO Peat, chairman of the Pension Fund Trustees, explains the complex December 2010 process necessary for a full valuation of the Scheme. many members the Scheme has and whether What is the valuation there is any change in the life expectancy of Prospero is provided free to members since the last valuation. But we can’t about? do some of the calculations until the retired BBC employees. It can consultation on the BBC’s pension proposals We are legally obliged to have a full actuarial ends and the way forward is clear. Agreeing all also be sent to spouses or valuation of the Pension Fund at least once the relevant details after that will take some time. dependants who want to keep every three years to help ensure that the Scheme has ‘sufficient and appropriate assets to cover its in touch with the BBC. liabilities’. This involves reviewing the Scheme’s The importance of the It includes news about financial position, to determine the appropriate level of contributions for the years ahead. assumptions former colleagues, pension Assumptions need to be made about uncertain issues, and developments at When will we know the future events such as the effect of inflation, the BBC. Prospero includes how long members will live, future salary results and on what increases and investment returns. The Trustees, classified advertisements. with advice from the Scheme actuary, choose To advertise in Prospero or basis will they be the assumptions to be used to carry out the valuation. These must then be agreed with the the BBC Staff magazine, provided? BBC. The starting point for the assumptions underlying the 2010 valuation will be those Ariel, see page 12. Probably not before next summer. But I used in 2007. Any subsequent adjustments uses the agreed assumptions to estimate each can assure all members that the results, when must be justified by changes to legal, individual future pension payment for published, will show the size of the deficit both demographic or economic circumstances. members. The projected future payments are Subscription information for before and after allowance is made for the Small changes in any of these key assumptions then converted back to amounts in current Ariel is on page 12. changes the BBC intends to make to the Scheme. can have a significant effect on the money terms. This part of the process is called valuation results. ‘discounting’ and in effect it is the opposite of The legislation requires the agreed adding interest from one year to the next. Why does it take over a assumptions to be ‘prudent’. What this means The Trustees’ choice of interest rate (or in practice will also depend upon the strength ‘discount rate’ as it is called) will depend on year to produce the of the employer’s ‘covenant’. By ‘covenant’, we their view of the BBC’s covenant; if they think mean the financial strength of the employer that the covenant is weaker than it was in 2007, valuation results? and, in particular, its ability and willingness to they will choose more cautious (ie lower) fund the Scheme in the future. discount rates, which will lead to a higher value Because it’s a long, complex process. The liabilities (the pensions currently being being placed on the liabilities. However, as with Much of the preparatory work has been paid and all benefits to be paid in future) need all the other assumptions, the discount rates completed. For example, we have looked at how to be valued. To do this, the Scheme actuary have to be agreed with the BBC. CROSPERO 153 1 Editorial contributions Devised and compiled by Jim Palm 2 3 Complete the square by using the clues; these apply only to words running across. Then take these words in numerical order and extract Write to: Prospero 45 the letters indicated by a dot. If your answers are correct, these letters BBC Pension and Benefits Centre will spell out a well-known festive first line. Broadcasting House 6 7 Cardiff, CF5 2YQ Please send your answers in an envelope marked Crospero to The Editor, Prospero, BBC Pension and Benefits Centre, Broadcasting 8 Tel: 020 7765 1414 House, Cardiff CF5 2YQ by 7 January 2011. 910 Email [email protected] Clues: 1. Having a lot to say (5); 2. Skin complaint (4); 3. Instrument (4); 4. Film star Shearer (5); 5. Eat away (5); 6. Relating to Earth’s extremities (5); 7. Stair post (5); 8. Poorly (3); 9. Give in (5); 10. Furious 11 Please make sure that any digital (5); 11. They go with buts (3); 12. North African capital city (5); 13. pictures you send are scanned Unspoken (5); 14. Lack of stress (5); 15. Author Nevil (5); 16. 12 13 at 300 dpi. Accomplishment (4); 17. Sussex river (4); 18. Laziness (5) Solution to Crospero 152: Ajar; Oases; Nor; Ant; Nil; Nag; Gee; Sly; 14 15 Anode; Rate; Nabs; Bloodsucker; Hast; Dado; Avows; Ale; Tin; Bop; Yes; Ate; Ore; Skews; Mend. 16 17 The programmes were Jennings at School and Toytown . The winner 18 was John Dean of London. 2 • • December • 2010 BBC Pensions MOONNEEYY MMAATTTTEERRSS the deficit Some important changes to State pensions Following announcements in the to wait to find out? Government’s spending review, cuts to funding and services are under way and of course, State pensions are in the Paying back the deficit before the valuation What happens next? ‘firing line’ for change. There is an accepted view that as we However big the fund deficit is, the BBC is is finalised? We have had a preliminary discussion with the legally obliged to eliminate it as quickly as it can BBC about the key assumptions for the are living longer and the growth in the reasonably afford, over a period agreed between There is no legal requirement for the valuation, to see what the ‘base case’ would be number of pensioners is likely to the Trustees and the BBC. This is called the 2010 valuation to take into account the if there were no Scheme changes. outstrip the growth in the number of ‘recovery plan’. BBC’s proposals and we would have Once we know the outcome of the workers, State pensions as they are Such a recovery plan would consist, at least in preferred the BBC to consider a range consultation process on the proposed changes today, will become unaffordable part, of additional cash contributions. However, of options with the Trustees within the the Trustees will estimate the impact of those in the future. if appropriate, some allowance might be made context of the valuation process. But there is changes on the liabilities, and we’ll need to agree Changes in the State Pension Age for the possibility that investments could no doubt, given the anticipated scale of all aspects of the recovery plan with the BBC. had already been planned but the first perform better in practice than the (deliberately the deficit, that changes are required to the We’ll meet the BBC again in early December, move, to increase the age to 65 for prudent) discount rates used to calculate Scheme for new and existing members when we hope to have further discussions on the deficit. The BBC could also assist the to address the future build up of liabilities. assumptions and agree a final timetable. both men and women, has been recovery plan by giving the Scheme rights over It is also clear that the BBC’s proposals To confirm, once this complex work has been brought forward to November 2018, named assets. will reduce the size of the deficit, which in done we will inform members of the size of the formerly April 2020. It is then proposed turn affects the recovery plan. deficit both before and after allowance is made to increase that age from 65 to 66 for Scheme changes. between December 2018 and Assessing the covenant April 2020. This does not of course affect anyone The Pensions Regulator expects trustees to who is already over the current age but assess the employer’s covenant as part of the A birthday to remember valuation process. An external adviser will help may well be a concern and a planning us form an objective view of the quality of the They came from all corners of the world to and became a ‘travel agent’ for BBC staff issue for those younger and likely to be BBC’s covenant, taking due account of the celebrate Freda Young’s 100th birthday. From visiting abroad. Not surprising then, that her affected. What it means, particularly for recent licence fee settlement. the Snowy Mountains in Australia, San Diego son and grandchildren have scattered across women, is that more of them will have in California, Singapore, Prestwick in Scotland the world. But 2 November 2010 was a date to bridge the gap between age 60, and even… Worthing. to bring them all together for a truly when they might have expected to What happens if I first visited Freda when she was a sprightly memorable celebration, including the receive their State pension, and the 88-year-old, offering to do shopping for any personally signed letter and photograph from time that they will actually receive it.