Members’ “interests” held to include benefits for future service (British Broadcasting Corporation v BBC Pension Trust Limited and Christina Burns)

The High Court has held that a proviso to the power of amendment in the BBC Pension Scheme applies to benefits for future pensionable service as well as past service rights.

The court was not asked to consider any specific proposal to amend the scheme.

The court also decided that it would be proper for the trustee to amend the benefit provisions of the scheme with the consent of the BBC subject to compliance with the provisos to the amendment power. The judge found there was no parallel with the British Airways plc v Airways Pension Scheme Trustee Ltd (2018) case where the trustee had a unilateral power of amendment and was held to have used it improperly to alter the balance of power between trustee and employer in relation to pension increases.

Implications

The BBC will not be able to use the amendment power to reduce benefits accruing under the scheme for future service unless:

• the scheme actuary certifies that the interests of active members will not be substantially prejudiced; or
• equivalent benefits are provided to offset the reduction; or
• the change is agreed by the affected members.

The BBC has in fact made changes to the scheme previously which were the subject of litigation. Mr Bradbury objected to changes introduced in 2010 when members were given an option to join a new section of the scheme providing career average benefits. Members could choose to stay in the existing section but were told that only 1% of any future pay increase would be pensionable. The BBC claimed it could do that because the scheme’s definition of pensionable salary allowed the BBC to determine what wages or salary were pensionable. The definition of pensionable salary had been amended in 2000 to add the words “determined by the BBC”.On the face of it that was an amendment which was potentially detrimental to active members’ interests, but the actuary had certified that the change would not substantially prejudice their interests. Mr Bradbury did not directly challenge the validity of the 2000 amendment, but it was argued on his behalf that the court was faced with a stark choice: either the amended definition did not give the BBC the power they contended to determine salary was non-pensionable or the actuary’s certification could not be correct. The Court of Appeal did not agree that was the choice they were faced with. They noted that employees do not have a right to pay increases and therefore it was always open to the BBC to say that an increase would be given on condition that part of it would not be pensionable. In that way the court was able to square the circle. Although it had not been asked to rule on the validity of the 2000 amendment to the definition of pensionable salary it was at least possible for the actuary to have certified that it did not substantially prejudice active members’ interests (the BBC having accepted it could not use the power to reduce pensionable salary).

Restrictions in amendment powers will not necessarily stop employers achieving their aims. If they cannot rely on the scheme’s amendment power, employees may be persuaded to agree to the change. It seems that Mr Bradbury had agreed to join the new benefit section but felt he had been “strong-armed” into it by unlawful means; he claimed his employer had breached its duty of good faith in relation to the changes. Ultimately, he was unsuccessful in that claim but the fact that it went to the Court of Appeal may sound a note of caution for employers.

The decision is a reminder on the importance of carefully considering any restrictions on a scheme’s amendment power. Trustees of schemes with similar provisos in their amendment power may wish to get advice on the validity of past amendments particularly in relation to benefit changes or closure to accrual.

Restrictions vary from scheme to scheme and the courts have found they give differing levels of protection. Some examples include:

• “Decreasing the pecuniary benefits secured to or in respect of such members…..” held to apply to past and future service benefits (Lloyds Bank Pension Trust Corporation Limited v Lloyds Bank PLC (1996))
• “Active Members whose interests are certified by the Actuary to be affected thereby…..” past and future service benefits (British Broadcasting Corporation v BBC Pension Trust Limited (2023))
• “Benefits already secured by past contributions…..” past service benefits with a salary link for future service (Re Courage Group Pension Scheme (1987))
• “Prejudice or impair the benefits accrued in respect of membership up to that time…..” past service benefits with a salary link for future service (Re Gleeds Retirement Scheme (2014))
• “Prejudice or adversely affect ….. the rights of any Member” past service benefits with a salary link (Wedgewood Plan Trustees v Salt (2018)).

An interesting aspect of the BBC case was the courts examination of the scheme’s archaeology. The judge started with the current rules and was able to construe the fetter on the amendment power by giving the words used their natural meaning (recognising the weight to be given to textual analysis when construing pension scheme rules). The amendment power had not changed substantially however during the life of the scheme and the judge agreed it would be a useful check to consider the words used in the context of the scheme’s first trust deed which had been executed in 1949.

At that time members got a pension if they retired from service at normal retirement age. There were no pension rights for members who left the BBC’s service before they reached that age. The judge commented that in that context, active members would have “a keen interest in the terms on which benefits would accrue into the future remaining the same”.