The latest interim funding report of the BBC has revealed that the scheme's shortfall has risen to £2.6bn at 1 April 2012, an increase of more than a billion pounds from last year's figures.
This is mostly due to a 10% increase in liabilities which cancelled out £170m in deficit recovery contributions.
This year the funding level fell from 87% to 78% due to poor expectations of investment returns and the current low gilt yields. The BBC says it has now cut its exposure to equities and hired Legal & General to run a £1.6bn liability driven investment (LDI) strategy, in an effort to reduce its risks.
Last year the BBC saw a 5.8% return on its investments, which were down 3 percentage points from the year previous. To prevent a situation of further shortfalls the BBC made extra contributions, closed the scheme to new joiners and altered how benefits within the BBC build up, but unfortunately these changes made no visible improvements to the balance sheet so far.
"It has been a difficult year for pension schemes and ours is no exception," says the BBC's chair of trustees Bill Matthews. "The Eurozone crisis and lower prospects for economic growth have dominated the news in 2011 and 2012. At the same time, interest rates are very low. These factors significantly increased the expected cost of benefits built up to date."
Matthews says the trustees are disappointed that economic headwinds have blown the scheme's funding off course but says that the BBC's support for the scheme remains strong.
In a blog on the BBC's website, Zarin Patel is the chief financial officer at the BBC, writes: "Firstly it is important to note that this is an interim funding check, not a full funding valuation. The next full valuation is due in 2013 and at that point the Pension Trustees and the BBC will, if necessary, agree a new schedule of contributions to address any deficit."
Patel says the pension trustees rightly recognise that the BBC's support for the scheme remains strong and that they are "fully committed" to the deficit recovery plan agreed with the Pension Trustees following the 2010 valuation.
First published 13.08.2012
azeevalkink@wilmington.co.uk
