BBC Pension

I’m using this blog to record my thoughts about the changes that have been announced to the BBC final salary scheme. These comments are only relevant if you’re on the defined benefit (DB) scheme.

In summary the changes are:

The final salary scheme has been effectively abolished

From now on our salary for pension purposes cannot rise by more than 1% a year (regardless of inflation), so the link to final salary is gone

Even 1% a year is not guaranteed. It’s not averaged out, so if you get 0% one year and 3% the next year, for pension purposes your salary rises by 1%

We still add extra years to our pensionable service. So if you have currently been in the scheme 20 years you’re current salary multiple is 20/60 multiplied by your salary today, plus however many 1% increments you get added between now and retirement. If you take your pension in ten years you’ll get half (30/60) times your salary today, plus however many 1% increments you’ve managed to add before retirement.

BBC Pension age remains at 60

For someone on a £50K salary, each extra year increases your pension by £833 per annum. At the same time your pension contribution on a currently salary of £50K is about £3500. In theory if you take your pension for 5 years you’ve got your money back, but of course that doesn’t account for inflation. Your £3500 contribution will in all likelihood have much great purchasing power at the time you pay it into the scheme than at the time when you draw the pension

The new defined contribution (DC) scheme will preserve the value of your existing pension, and increase it in line with inflation. But you will no longer add years to the final salary, so it is effectively frozen in value (but at least inflation protected). Any increase in pension beyond the value of what you have now will have to come from the DC scheme

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