BBC may end defined-benefit pensions for new staff

A tattered flag flies in a strong breeze above the BBC headquarters in London November 21, 2008.

LONDON (Reuters) - The BBC may close its defined-benefit pension scheme for new joiners, following similar action by private-sector rivals, as they wrestle with rising longevity and volatile markets.

The publicly funded BBC said on Tuesday it would undertake a 90-day consultation on the proposal and other measures after its pension-scheme deficit ballooned to about 2 billion pounds in 2009 from 470 million pounds in 2008.

"The proposed changes will help to ensure that the BBC pension scheme remains sustainable, flexible and affordable for the future," the world's largest broadcasting organisation said in a statement.

Defined-benefit schemes, which use salaries to calculate guaranteed levels of pension payments, are the most generous form of pension arrangement. Many firms are ditching such schemes as employees live longer.

The BBC received 3.5 billion pounds in licence-fee income in its last financial year. The licence fee is a tax levied on all television-owning households in Britain, currently costing 146 pounds per year, which provides the bulk of the BBC's income.

The BBC is under pressure from rivals led by satellite broadcaster BSkyB (BSY.L) -- who argue its state funding distorts the market -- to scale back its ambitions.

The new government elected in May is widely expected to move to curb the BBC's powers.

As well as core broadcasting operations in free-to-air UK television, the BBC has successful commercial operations overseas and owns the iPlayer, an online catch-up service for BBC programming that is one of Britain's most popular websites.

The BBC itself signalled a retreat from some commercial operations in March.

The broadcaster said on Tuesday that existing members would remain in the defined-benefits scheme under its proposals, with a new, flexible defined-contribution scheme to be introduced for new joiners.

Current members of the existing scheme would continued to build up benefits, but future salary increases for calculating pension benefits would be limited to 1 percent per year.

The new coalition government plans a fundamental review of public-sector pensions, whose deficit is officially 770 billion pounds but which experts believe could be as high as 1.2 trillion pounds.

(Reporting by Georgina Prodhan; editing by Simon Jessop)