BACKGROUND
The cost of funding the BBC Pension Scheme has increased significantly in recent years and like many other employers, the BBC is interested in limiting its ongoing pension costs. In May 2022, the BBC was paying a contribution rate of 42.3% of Pensionable Salaries of Active Members to fund their future service pension costs. This was almost three times the contribution rate in 2010. By comparison the BBC is contributing an average 7% or 8% rate for employees who are in the defined contribution schemes. The defined contribution employees represent over 60% of the workforce but receive less than 20% of the BBC’s current pension spend on pension provision. BBC Pension Scheme employees are less than 40% of the workforce but account for over 80% of the spending on pensions. So, in May 2022 the BBC announced that it would be carrying out a review of its future pension provision for its serving employees.
At the same time, it wanted to see if it could reduce its pension costs by reducing future service pension accrual rate under the BBC Pension Scheme, including the possibility of closing the Scheme altogether to future service pension accrual. However, to do this they had to go to the High Court to clarify whether the Rules of the BBC Pension Scheme would allow changes to be made to future service benefits. The BBC confirmed to the High Court that the options they were considering did not involve reducing benefits already earned (which by law they would not be allowed to do).
HIGH COURT HEARING
The High Court hearing took place over three days in May 2023. The parties to the hearing were the BBC, The Trustee of the BBC Pension Scheme, and a Representative Beneficiary (representing active members). Each party was represented by its own legal team.
The BBC’s lawyers argued that Rule 19 (Alterations of Trust Deed and Rules) of the Scheme’s Trust Deed and Rules could be used to change future service benefits and/or member contributions for Active Members, provided both the Trustee and the BBC agreed to the change. The Representative Beneficiary’s lawyers argued against this interpretation. They argued that Rule 19 could only be used to change future service benefits in limited circumstances – which are not just that both the Trustee and the BBC agree the change, but that, in addition, at least one of the following three conditions set out in the Rule is also satisfied:
- the Scheme Actuary (who is appointed by the Trustee) has confirmed that Active Members will not be substantially worse off as a result of the proposed changes; or
- if Active Members will be substantially worse off, the Scheme Actuary has confirmed that Active Members will be provided with suitable alternative benefits (which must be substantially equivalent to existing benefits); or
- the Active Members as a group have agreed to the proposed changes at a duly convened meeting of Active Members.
THE DECISION
On 28 July 2023 the High Court issued its decision. It accepted the Representative Beneficiary’s interpretation and ruled that the BBC could not cut future service benefits for members of the BBC Pension Scheme or increase members’ contribution rates. The full Court decision can be found at:
BBC’S RESPONSE
The BBC subsequently told its employees “We are considering the judgement very carefully and the options available to us. This will include whether we have reasonable grounds to appeal the decision, which is not unusual in cases of this nature.” The BBC will have to until 15 September to decide whether to appeal”. If the BBC does decide to appeal the decision, then we will update our members in due course.
