The BBC’s DB schemes' liabilities, specifically the BBC Pension Scheme, had the largest impact on the corporation's balance sheet, with its DB deficit growing by 14 per cent over the past year, its annual report has revealed.

According to the BBC’s Annual Report and Accounts 2016/17, at 31 March 2017, the accounting deficit, as defined by IAS 19, increased by 14 per cent to £1.149bn from £1.011bn a year ago.

Scheme assets increased from £12.82bn in 2016 to £15.75bn in 2017, but liabilities also rose from £13.82bn in 2016 to £16.889bn this year. The percentage by which scheme assets cover liabilities, however, remained unchanged year-on-year at 93 per cent.

“The movement in the IAS 19 Employee Benefits estimate of the defined benefit scheme liability during the year, specifically the BBC Pension Scheme, is the item which singularly has the greatest impact on the balance sheet position of the Group,” the report said.

The pension liabilities comprise of both the BBC Pension Scheme, which increased to £1.141bn in 2017 from £1.003bn in 2016, and the unfunded scheme, which also rose from £7.3m to £8.4m in the year. The assumptions for the unfunded scheme is the same as the main scheme, but as the scheme is unfunded there are no assets.

Furthermore, the corporation’s pension costs for the main DB scheme grew from £154.5m in 2016 to £183.2m in 2017, while for other BBC schemes, costs fell slightly from £29.8m last year to £29.5m in 2017.

Assessing the BBC’s cash balance of £256m at the end of the year, £79m less from 2016, the report noted that cash generated from operations has been counterbalanced by a £220m pension deficit payment made in March 2017.

The BBC added that its “current strong financial position,” however, “leaves the corporation in a good position to meet its future obligations”. As the DB scheme is now closed to new entrants, contribution levels from employees will decrease, the report stated.

The BBC added that its deficit increase over the year “was due to a net loss from changes in the valuation assumptions of £248 million, an annual operating charge of £193 million and net finance costs of £32 million, offset by contributions paid of £335 million. This accounting valuation is only a ‘snapshot’ at a particular date, and is therefore sensitive to short-term market fluctuations. It has no impact on the actual cash cost of paying down the pension scheme deficit, which is reviewed at triennial actuarial valuations.”

In the corporation’s Audit and Risk Committee report, it was noted that: “The BBC has a significant pension deficit. The assumptions used to arrive at the value of the pension deficit are highly judgemental, and the degree of public interest in the deficit means that it is important there is sufficient and comprehensible disclosure of pension balances to enable understanding of the impact of these balances on both pensioners and the licence-fee payer.”

The BBC responded to this by testing appropriateness of these assumptions using its pension specialists and considering consistency with the prior year, current market information and knowledge of the BBC pension scheme.

The corporation also tested the completeness and accuracy of the membership data used by the actuary and tested the valuation of the pension scheme assets by obtaining third party confirmations of the amounts and re-performance of the valuation of a sample of assets and performed full scope audit procedures over this risk area in one location, which covered 100 per cent of the risk amount, among other general tests.

Moreover, the report noted that in light of the BBC’s funding shortfall of £1,769 million as at 1 April 2016, a new repayment plan has been agreed between the BBC and the pension scheme trustees until 31 December 2028. The plan is “considered to represent an affordable plan to address the deficit, without compromising services to audiences or pension scheme members".

The BBC’s next formal actuarial evaluation will be performed as at 1 April 2019.

Share Story: