Out-Law News 1 min. read
Rare High Court ruling limits BBC pension scheme’s amendment powers
10 Aug 2023, 9:39 am
The High Court in London has blocked the BBC’s efforts to limit the costs of its future defined benefit (DB) pension obligations, in a rare decision of its kind.
The BBC had sought to limit the ongoing costs of running its pension scheme by clarifying the scope of a restriction on the scheme’s amendment power that limited the changes that could be made to the interests of its active members.
The BBC argued that this restriction only applied to the past service rights of the scheme’s active members. But the High Court rejected the BBC’s case (29 pages / 361KB PDF) and held that it was wrong to create a “fault line” between “benefits already earned by past service” and “those which are yet to be earned”.
The court added that the correct interpretation of the wording of the restriction, which was first introduced in a 1949 deed, protected the future service benefits of its active members. The ruling places a significant limit on the BBC’s ability to alter the pension scheme’s benefits accrual in future.
Pensions expert Liam Fitzgerald of Pinsent Masons said: “This is a tough decision, and one that does not take into account the economic context that pension schemes operate in. Presumably, the BBC will now look at other ways to resolve this issue.”
“This decision is only the second time that a UK court has ruled that a fetter like this one protects future service benefits, after the landmark Lloyds Bank pensions scheme case in 1996,” he added.
The High Court heard that the BBC was currently paying an employer contribution rate of 42.3% of DB members’ salaries – three times what the rate had been in 2010. At the same time, however, members of the broadcaster’s defined contribution (DC) scheme, who joined after 2010, were receiving employer contributions of between 7% and 8%.
Overall, the court heard, DB employees accounted for less than 40% of the BBC’s workforce but received around 80% of its pension scheme’s spending. Fitzgerald said many other employers and schemes were in a similar position and faced challenges over how to reduce the cost of DB pension contributions in order to provide more for DC members.
“Wherever possible, schemes should take care to ensure that their rules are clear and unambiguous to prevent the scope of their amendment powers being left open to interpretation,” he added.
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