BBC to cut programme budget to fill £2bn black hole in pension fund

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The BBC will be forced to cut millions of pounds from its programme budgets to plug an estimated £2 billion black hole in its pensions scheme.

The public broadcaster has warned its pension scheme members that in April last year the fund was £470 million in the red. Industry experts said that the plunging stock markets around the world since then would have increased the deficit by a further £1.6 billion.

Jeremy Peat, the chairman of the trustees, admitted that the corporation had set aside “additional funds” from its £3.6 billion licence fee income to reduce the liability.

When the BBC announced that it had a £150 million deficit in 2007 it agreed to pay £23 million a year extra. Paying double to help to shore up the larger hole would be roughly equal to the entire budget of Radio 1 or Radio 3, or 18 months worth of peak-time drama on BBC One.

The disclosure of the deficit follows the revelations about the pension pots accumulated by senior BBC executives.

Mark Byford, the deputy director general, and Alan Yentob, the arts presenter and creative director, have the two biggest pensions in the public sector. Mr Byford is due to receive at least £229,500 a year from a pension pot of £8 million and Mr Yentob £216,667 from a £6.3 million pot.

Pension payments cost the BBC £184 million in the year to April 2008, roughly equivalent to the £1.3 million licence fees paid by the population of Birmingham and Cardiff.

The corporation’s finances have been under closer scrutiny in the past few weeks after the release of the expenses paid out to its senior executives. After a series of freedom of information requests the BBC revealed that its top executives had spent at least £363,000 on expenses over the past five years ranging from a £1,277 trip on a private jet used by Mark Thompson, the Director-General, to a £99.99 bottle of champagne given to Bruce Forsyth on his 80th birthday.

Other public corporations, including the Royal Mail, which has a £7 billion deficit, have also been attempting to deal with shortfalls in their pension schemes brought on by the turbulence of the financial markets.

So serious is BBC’s shortfall that it is considering pledging some of its assets, including its White City headquarters in West London, as a guarantee for its pension fund.

John Whittingdale, the Conservative chairman of the Commons Culture Select Committee, said he would question Mr Thompson on the deficit next week, adding: “The BBC is not the only public sector organisation in this position, but I think the public will find it hard to accept cuts to programming budgets to pay for generous public sector pensions.”

The eight-page letter from Mr Peat to BBC pension scheme members does not calculate the deficit for April 2009, but does say that the value of the assets in the pension scheme plunged by £1.67 billion to £8.1 billion.

He revealed that the BBC “has agreed to meet increased contributions” for the scheme, which has 58,744 members.

Only 17,774 staff are currently paying into the fund, with more than 21,000 former workers already drawing a pension.

From April this year the BBC increased its contributions to the pension scheme by 0.75 per cent of an employee’s salary. From next April that will go up by a further 0.75 per cent.

Mr Peat wrote that the deficit “will undoubtedly have deteroriated” by the time the shortfall as of April 1 2009 is calculated, because the value of shares in the pension fund’s portfolio is considerably lower.

In a statement, the BBC said: “The BBC pension scheme, like many other schemes, has not been immune from the turbulence that has affected markets around the world. The scheme’s investment strategy has been reviewed during the year and the trustees are confident that their approach to funding remains the best option to ensure the scheme’s continued stability.

“The scheme has a positive cash flow and its investments are long term in nature so it does not need to sell equities at depressed prices to fund payment of pensions. The BBC’s covenant and support for the scheme remains strong. The BBC pension scheme has contingency plans in place to ensure it can respond to developments promptly and the trustees continue to monitor the position closely.”


Source:timesonline

rolfw

Oh great, so the licence fee is not going to go to making television programmes, but to the pension fund for all of these underpaid TV executives.

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