Summary Report with news from the Trustees 2017

Welcometo our new-look summary report, which gives you the highlights from the BBC Pension Scheme (the Scheme).

It has been another busy year for the Scheme. Whilst the active membership continues to decline slowly since the Scheme closed to new members in 2010, the Scheme now pays pensions to nearly 24,000 pensioners and dependants and still has more than 50,000 individual members and beneficiaries overall.

The Trustees have completed the important three-yearly actuarial valuation. As at 1 April 2016 the funding position had improved with the shortfall reduced to £1.8bn (2013:£2.0bn) and the Trustees have now agreed with the BBC a revised funding plan which targets reaching a fully funded position by 31 December 2028. Further details of the valuation and the new funding plan are set out in this report.

Against a background of turbulent events at home and abroad, the Scheme’s investment

portfolio performed strongly, achieving a return of 24.1% in the year to 31 March 2017.The Trustees are very conscious that future performance is unlikely to remain at this sort of level, and continue to seek out the best available investments consistent with our funding strategy. The overall size of the fund is now £15.7bn. Whilst the fund has increased, we have also seen a substantial increase in the liabilities.

Over the 12 months to the end of March 2017 the team dealt with more than 12,000 emails and nearly 16,000 phone calls, and we took the first steps towards offering members online self-service. We have also paid special attention this year to reviewing our defences against cyber attacks, to protect members’ personal data and our financial systems from increasing on-line threats.

Bill Matthews

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Bill Matthews Chairman of Trustees

At a glance·There are over 50,000

members in the Scheme.

·The 2016 funding level was 88% (2013: 83%).

·The Scheme’s assets stand at a record £15.7bn as at 1 April 2017.

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Valuation ReportWhat is a valuation?Every three years the Trustees arrange a full actuarial valuation of the Scheme. The valuation gives a snapshot of the cost of providing benefits to be paid to members (‘the liabilities’) and how that compares with the value of the assets.

The latest full valuation was carried out with an effective date of 1 April 2016, and showed that the Scheme had a shortfall of £1.8bn as shown in the table below.

A shortfall doesn’t necessarily mean that the Scheme won’t be able to pay members’ benefits. With advice from the Scheme Actuary, the Trustees

and the BBC agree a prudent set of assumptions to measure the value of the liabilities and set a funding plan to reach a fully funded position.

What has changed?Between 2013 (when the last full valuation was carried out) and 2016, the liabilities increased by £2.3bn, mainly as a result of falling long-term interest rates which increased the value placed on the liabilities. However, the assets increased by more (£2.5bn) because of higher than expected investment growth and payment of BBC contributions, which means the funding level has improved overall.

What’s being done about the shortfall?The Trustees and the BBC have agreed a revised contribution plan for the Scheme to address the shortfall so that, if the funding position develops as currently projected, the Scheme would be fully funded by 31 December 2028. The revised contribution plan requires the BBC to pay an average of £195m to the Scheme each year between now and 2028.

The Trustees will continue to monitor carefully the development of the funding position. We are also reviewing with the BBC the financial management plan which includes progressive reduction of investment risks, and outlines what actions could be taken if the funding position should worsen.2016 Valuation results 2016 Valuation

(1 April 2016)2013 valuation(1 April 2013)

Assets £12.8bn £10.3bnLiabilities £14.6bn £12.3bnShortfall £1.8bn £2bnFunding Level 88% 83%

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Valuation Report

Shortfall on winding upAs part of the valuation, the actuary also looks at the funding level if the Scheme was wound up.

Including this information does not mean that the BBC or the Trustees are planning to wind up the Scheme. The Trustees are required by law to give you this information.

If the Scheme had wound up as at 1 April 2016, the actuary estimated that the Trustees would have had to pay an insurance company £20.8bn to provide all the benefits in full. This would have meant that the Scheme had a shortfall of around £7.9bn (2013: £9.1bn), and a funding level of 62% (2013: 53%).

The Trustees aim to have enough money to pay pensions and other benefits to members as they fall due, rather than having to pay an insurance company to provide the benefits, which can be very expensive.

2017 Funding Update

Assets £15.7bnLiabilities £17.3bnShortfall £1.6bnFunding Level 91%

The full 2016 valuation report and 2017 funding update are available at: bbc.co.uk/mypension

2017 Funding updateThe actuary also carries out less detailed but more regular ‘annual check-ups’ on the Scheme’s funding position. As at 1 April 2017 the funding level had improved to 91%.

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Additional Information

Payments to the BBCThe Trustees must also tell you by law whether there have been any surplus payments to the BBC out of the Scheme in the last 12 months. The Scheme does not currently have a surplus and no surplus payments have been made to the BBC.

Pension Protection FundThe Pension Protection Fund (PPF) was set up in 2005 to compensate members of eligible UK pension schemes which are wound up when the employer is insolvent and the scheme does not have enough assets to cover members’ benefits. All eligible pension schemes are required to contribute to the PPF by paying a levy each year. The BBC reimburses the Scheme for the cost of the PPF levy in addition to the other contributions it makes to the Scheme.

Further information is available at: pensionprotectionfund.org.uk

The Pensions RegulatorLegally we need to tell you if the Pensions Regulator has used its powers in relation to the Scheme over the last year – for example, the Pensions Regulator has powers that could change the way future benefits build up, change the way the funding target is worked out, or amend the employer contribution rate. The Regulator has not used its powers in relation to the Scheme.

You can find out more about the Regulator at: thepensionsregulator.gov.uk

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Finances

Opening net assets of the Scheme at 1 April 2016 £12.9bn

Total income 0.6bn

Total expenditure (0.5bn)

Change in market value of investments 2.8bn

Closing net assets of the Scheme at 31 March 2017 £15.8bn

Accounts summary

Value of the Scheme

2012 2013 2014 2015 2016 2017

£15.8bn

£12.9bn£12.9bn

£10.8bn£10.3bn

£9.3bn

Investments at a glanceThe Trustees agree and monitor how the money in the Scheme is invested. They have delegated day-to-day management to our in-house investment team.

The fund has performed well as the following highlights show:

· The investments produced a return of 24.1% in the year to 31 March 2017

· Overall the assets grew by £2.9bn during the same period (income plus change in market value of investments, less expenditure)

· In the last five years the value of the Scheme’s assets has grown by 70%

More information about the Scheme’s investments is available at: bbc.co.uk/mypension

The figures shown on this page include members’ Additional Voluntary Contributions.

The full Report and Accounts is available at: bbc.co.uk/mypension

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Member Self Service

This year we launched our online service to Pensioners myPension Online. Pensioners can view their payslips and P60s and update their bank details and address.

We are now ready to launch this service to our deferred members where they will be able to view and update their personal information online. We will also be launching this service to active members in the coming months.

The website is an exciting development for the Scheme but we understand that not everyone wants to go online for their pension information. That’s fine, and you can carry on getting information in the same way as before if you prefer. We just want to give our members the flexibility to get their pension information in a way that suits them best.

Deferred members will be sent information on how to register for the service in their annual benefit statement. If you are a Pensioner and would like access to the service, please call the pension service line on 029 2032 2811 or visit our website: bbc.co.uk/mypension.

Answering your questionsIf you have a question about the Scheme or your pension, please call the pension service line.

The pension service line is open between 8:30 and 17:30, Monday to Friday on: 029 2032 2811

If you would rather write to the team, please email: mypension@bbc.co.uk or send a letter to:

Pension and Benefits CentreBroadcasting HouseCardiff CF5 2YQ

Before you contact us though, do remember that there is plenty of information about the Scheme at: bbc.co.uk/mypension

2017 Pensioners’ Liaison MeetingThis year’s Pensioners’ Liaison Meeting will be held on Thursday 26 October 2017 from 11:00 – 13:00 at:

The Media Cafe, Broadcasting HousePortland Place, London W1A 1AA

If you attend, you can put questions about the Scheme to the Chief Executive Officer, a Scheme Trustee and members of the pension executive.

Spaces are limited and will be booked on a ‘first come, first served’ basis.

To book a place, call the pension service line on: 029 2032 2811

Help and Support

2017 Pension IncreaseOld and New Benefits

2.5%Career Average Benefits (2006)

Career Average Benefits (2011) 1.6%

These increases are based on the rise in the Retail Prices Index (RPI) or (for CAB2011) the Consumer Prices Index (CPI) for the previous calendar year ending 31 December.8 Produced by Pension and Benefits Centre - August 2017