Court of Appeal finds in favour of BBC pension caps

Out-Law News | 31 Jul 2017 | 1:24 pm | 1 min. read

The BBC acted lawfully in implementing a 1% cap on increases to pensionable salaries, the Court of Appeal (CoA) has ruled in a long-running dispute which pensions experts said would bring clarity in other cases. 

In the case brought by BBC Philharmonic Orchestra member John Bradbury, the CoA said the BBC had acted lawfully.

The BBC's pensions scheme previously had three sections with different benefit structures. Bradbury was a member of the section known as the New Benefits Scheme, which provided a pension calculated as a proportion of the member's pensionable salary earned in the last year of active membership.

In 2010 the BBC decided that the deficit and future burdens of the pension scheme would be unsustainable, so it established a new career average section called CAB 2011. At the time it wrote to employees to tell them that if they chose to remain in their current pension scheme section only 1% of any future pay increases would count as basic salary.

Bradbury submitted a complaint to the Pensions Ombudsman arguing that the cap would breach his right to a future pension linked to his final pay. He also complained that by seeking to agree the cap with individual employees, instead of amending scheme rules, the BBC had marginalised the pensions trustees and trade unions.

The ombudsman dismissed Bradbury’s complaints and the High Court agreed with the body, in turn dismissing his appeal against the decision. 

The CoA upheld the High Court judgment, ruling that the scheme rules allowed the BBC to decide what constituted pensionable pay as far as pay rises were concerned, and the way the BBC had implemented the pay cap was permissible under the rules.

The CoA also said the cap did not breach section 91 of the 1995 Pensions Act, which bans surrender and forfeiture, because employees had no current entitlement to future pay rises.

Pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said it had taken a long time to reach a decision that most pension lawyers would have expected.

“It has always appeared logical that an employer should be able to offer pay rises on condition that they aren’t pensionable – since it is rare for an employee to have a right to any future pay rise,” said Tyler.

Pensions litigation expert Charlotte Scholes of Pinsent Masons added: “It is also interesting to note that other complaints to the Pensions Ombudsman about the same conduct by the BBC have been stayed pending the outcome of this appeal. Some of those complaints involve employees in a slightly different position from that of the appellant but presumably they will be dealt with by the ombudsman in pretty short order following the outcome of this appeal.”