The BBC’s proposals to cut back its final salary pension plan are being held up as a model that could be applied right across the public sector.
As such it is a pension plan model that in future could be extended to the pension schemes of the civil service, the NHS, local government, the fire service and the police.
The BBC is proposing to cut the link between pensionable pay and actual pay, so that the final salary pension plan will not be based on your salary at retirement, but on your salary this year. To put it another way, perhaps the term ‘current salary’ pension plan might now be more appropriate.
For the BBC and other pension schemes adopting the model, any future increases or promotion-related raises in salary would no longer be taken into account, when calculating the retirement income from company pension schemes.
For BBC employees, and for public sector workers in future who may be subject to the same pensions model, pensionable salary may run well behind what they are earning at retirement, and the farther you are from retirement today, the larger the gap will be. For many, income from company pension schemes may also have failed to keep in step with inflation, which is predicted to run at around 2.5% for the foreseeable future.
The BBC’s strategy addresses the deficits in final salary pension plans that have been experienced by many large employers over the past 5 years, as stock market investments in particular have failed to provide their company pension scheme with sufficient returns to meet salary guarantees to retiring staff. The new approach is an attempt to find a compromise between capping the deficits that are mounting within final salary company pension schemes, and closing them completely to new members, as so many companies already have done.
