Today the Βι¶ΉΤΌΕΔ has put forward a series of proposals to change the Βι¶ΉΤΌΕΔ Pension Scheme. If accepted, these would be the most extensive changes to the Scheme in its history. These are tough decisions, and the first major reform of pensions in the public sector. But we believe we have no option if we are to avoid a new burden on the licence fee payer while ensuring that staff, many of whom have paid into their pensions for years, continue to receive what they are due.
Why are we proposing this? The Scheme's assets, like those of many other pension schemes, have been affected by market volatility following the global economic downturn. Although financial markets have improved during 2009/10, the investments in the Scheme have not returned to previously expected levels and the outlook for the future remains uncertain. In addition, with people living longer, the cost of funding their pensions inevitably increases.
An interim valuation by the Scheme's Trustees has put the estimated deficit at nearly £2bn. This does not mean that we are short of money to pay pensions now. But our forecasts show that we need to build up more reserves for the future.
The Βι¶ΉΤΌΕΔ is not alone in this - pension schemes in both the private and public sector are facing similarly difficult decisions. John Hutton is leading a review of public sector pensions, and last week the Prime Minister warned public sector workers that their pensions would be considerably less generous in the future.
In the private sector, BA has announced measures to reduce their scheme's £3.7bn deficit, and 87% of private sector defined benefit schemes are now closed to new members. Companies such as IBM, Vodafone and Trinity Mirror only offer defined contribution pensions to all employees.
What are we proposing? The changes would affect all active members of the Βι¶ΉΤΌΕΔ Pension Scheme. The Defined Benefit Scheme would remain open to all existing members. Benefits would, however, be subject to a 1% limit on all future pensionable salary increases.
The Defined Benefit Scheme would be closed to anyone joining the Βι¶ΉΤΌΕΔ after 1 December 2010. From this point anyone would be able to join a new Defined Contribution Scheme. Under this scheme, contributions are agreed in advance, but the final benefits will vary.
Current Scheme members have the choice of remaining in the Defined Benefit Scheme or moving to the Defined Contribution Plan.
This has not been a sudden decision. When changes were made to the Scheme in 2006, we made it clear we would need to review the Scheme's performance. Our original aim of reviewing it in 2013 has had to be brought forward because of the impact of market performance and growing life expectancy.
We have spent over 18 months working to find the best solution for our staff. For the next 90 days, the Βι¶ΉΤΌΕΔ will consult fully on these proposals with staff, the unions, musicians unions and Equity.
I believe the solutions we have proposed today will deliver a Pension Scheme that is sustainable, affordable and flexible for Βι¶ΉΤΌΕΔ staff and the licence fee payer.
Zarin Patel is the Βι¶ΉΤΌΕΔ's Chief Financial Officer
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