ITV has fully closed its defined benefit pension scheme as the UK broadcaster moves to plug a £367m hole in the retirement fund and battles with a decline in advertising revenues.
The FTSE 100 company shut the pension scheme at the beginning of March after informing staff of its plans to close the retirement fund to future accruals in July last year. At the time the move was met with condemnation from trade union groups. However, it was not enough to prevent the closure.
A spokesperson for ITV Pensions said: “It was inevitable. Lots of other companies are doing the same.”
Under the change, those benefits built up within the current scheme will remain in place. But future proceeds will be put into a new defined contribution scheme, with pay-outs linked to investment returns rather than wages.
In its full year results published in March, ITV reported that its defined benefit deficit rose from £176m in December 2015 to £328m in December 2016. The increase was attributed to a rise in pension liabilities following a fall in corporate bond yields and an increase in market expectations of long-term inflation.
Gerry Carr, supervisory official at BECTU, the broadcast union, said: “The company’s proposals were released to staff and unions in July last year, just days ahead of confirmation that company profits had risen by 9% to £425m in the first half of 2016.”
The closure comes at a time when many UK companies are facing a pension funding crisis, as low interest rates and other economic stimuli force up deficits. Royal Mail said in April that it would close its “unaffordable” pension scheme in 2018, while RBS announced in October last year that employees would have to contribute 2% more of their salaries to get the same pension payout.
According to an extensive report from LCP, the consultancy, the UK’s 100 biggest companies have paid £150bn into their retirement schemes over the last 10 years and yet still have a combined funding deficit of £17bn.
Bob Scott, a senior partner at LCP, told Financial News: “The fall in bond yields over the last 10 years has led to a sustained rise in liability values, more than 85% since 2007, meaning companies have effectively paid £150bn to go backwards.”
ITV reported a 3% decline in revenues to £1.46bn in the six months to the end of June. Profit before tax fell to £259m from £309m with earnings per share dropping by 9 per cent year-on-year.