Pensions

Court of Appeal sides with BBC over cap on pensionable pay

The Court of Appeal disagreed the BBC had breached any implied duties

The BBC has won a landmark pensions case in the Court of Appeal, allowing the broadcaster to impose a cap on increases in pensionable pay.

The case, which was brought by BBC Philharmonic Orchestra clarinettist John Bradbury, relates to the BBC’s decision to introduce a 1% cap in increases in pensionable salary in a bid to stem its defined benefit (DB) deficit.

The cap affected active members in the scheme’s three sections – Old Benefits, New Benefits, and CAB 2006 – including Bradbury, who complained to The Pensions Ombudsman (TPO).

Without reform, it was estimated that the BBC would need to increase contributions to the scheme from around the equivalent of 3.5% of money raised from the TV Licence fee to 10%.

The change required member approval to take effect and would see members moved into a new CAB 2011 section, but employees who did not consent would no longer receive pay increases.

Bradbury argued to the ombudsman that he had contributed to the scheme in good faith with a belief his pensionable salary was his basic salary, but the ombudsman dismissed the argument and said it was the BBC’s right to decide what was pensionable.

Bradbury then appealed to the High Court in 2012, with additional arguments relating to the relationship of trust and confidence and employee. Mr Justice Warren held TPO’s judgment, but said that, as the ombudsman had not been asked to consider the new arguments, the case should be referred back.

In 2013, TPO then rebuked Bradbury’s new arguments, stating the BBC did not breach its implied duties, leading to a new High Court appeal.

This was heard in 2015, but Warren again disagreed with Bradbury’s argument, and said that there was no reasonable expectations from which one could derive a reach of the implied duties. It also said the cap could be properly implemented if consent was reached from members.

Now, in a judgment published 28 July, the Court of Appeal has also backed the High Court’s ruling. The judges – Lady Justice Gloster, Lord Justice Lewison and Lord Justice Henderson – said “the judge’s analysis of the relevant facts, and his conclusion that there was no breach of the respondent’s duty of trust and confidence, cannot be faulted”.

It also rejected claims of “discrimination and improper motive”, noting “all employees were given the same choice – either to accept the cap or not – so there was no question of differential treatment”.

The court added the BBC’s primary motive was to address the scheme’s deficit, and that “the trustees, the unions and the respondent all agreed that something had to be done”. It said without doing so, the scheme would have been unaffordable and “would have damaged its ability to maintain the quality and range of its services to the licence fee payer”.

It therefore rejected all of Bradbury’s arguments.

Ashurst pensions lawyer John Gordon said the judgment provided “much-needed clarity” over the extent to which benefits are protected by legislation.

“Employers will no doubt welcome today’s sensible and pragmatic decision by the Court of Appeal, which provides that, in certain circumstances, employers have a level of discretion as to the extent to which future pay rises are pensionable in defined benefit pension schemes,” he said.

“Today’s judgment gives employers clarity over their obligations in respect of pay rises and the extent to which they are required to be included in the calculation of pensionable pay.”

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