The High Court has issued a judgment in the case of British Broadcasting Corporation v BBC Pensions Trust Limited, addressing concerns related to future service benefits within the BBC Pension Scheme.
Justice Adam Johnson ruled that the BBC cannot modify its £19.8 billion pension to cut future benefits for members of the plan, but can make other changes without needing employees’ consent.
The BBC argued that the restriction in the pension trust deed, prohibiting changes that have a negative impact on its members’ “interests,” only applies to benefits they have already accrued. The judge rejected this claim and in support of the pension plan ruled that “interests” must include anything that would leave members worse off.
Employees of the BBC who began employment before 1 December 2010, are eligible for defined benefit retirement benefits under the scheme. It has four DB structures and they include career average benefit categories, which offer average salary benefits, old benefits and new benefits categories, which offer typical 1/60th final pay benefits.
The BBC initiated the proceedings to manage the rising costs of funding the scheme. By May 2022, the BBC’s contribution to active members’ pensionable salaries had reached 42.3%, nearly triple the rate in 2010.
Arc Pensions Law legal director Kris Weber said: “This is a good result for the lucky few current employees who are active members of the BBC’s final salary pension scheme. They will continue earning those pensions.
“Wording in the scheme limits the employer’s ability to stop paying a 42% contribution rate, compared to the 7 or 8 per cent the BBC pays for more recent hires. The rules can’t be amended if it would substantially prejudice the interests of members. The High Court said that ending future accrual would breach that protection.
“The scheme dates back to 1949 and it has a very restrictive amendment power, which wasn’t uncommon in schemes of that era. Other schemes with similar wording will have to give careful thought to the implications. Some might have already made amendments in the past that are now called into question.
“Modern pension schemes set up since the 1990s give much more scope for trustees to agree to stop future accruals – restrictions on benefit changes based on nebulous concepts such as ‘interests’ is much less common than in older schemes. In most private sector schemes closure to accrual happened years ago.
“The BBC will now have to decide whether to appeal. In the last round of litigation about how the BBC can limit its future pension costs, a visit to the Court of Appeal about capping pensionable salaries did pay off because the High Court’s judgment in favour of a Mr Bradbury was overruled.
“So it’s a good result for a lucky few members, but not-so-good news perhaps for other employees, freelancers, programme-makers and others wanting a share of the BBC’s limited resources, let alone licence-payers.”