Fear and loathing in White City: trustees and pension reform

Negotiations over benefit reform at the BBC scheme have been the most fractious and high profile of the year. Set amid the backdrop of bleak public sector cuts, the corporation's attempts to reduce member benefits are seen as a litmus test for further public service scheme reforms.

And yet, somehow, the trustee was the nowhere man in the pensions battle of the year. How did this happen?

An email circulated around BBC staff in December, which set out the final deal agreed with the unions, was instantly leaked to the press.

The joint wording agreed between the BBC and its unions relating to its new career average scheme – CAB 2011 – said the corporation would guarantee to increase pension blocks by the lower of the consumer prices index (CPI) or 4% until April 1, 2016.

This agreement followed high profile breakaway strikes held by the National Union of Journalists (NUJ) in November that replaced Radio Four's Today show with a nature programme.

Missing link?

But where were the trustees in the heavyweight fight of the year? At an extraordinary meeting in September – details of which were leaked to schemeXpert.com – they apologised to unions over their inaction, and blamed the broadcaster for skipping them out .

The trustee chairman Jeremy Peat said the corporation had "effectively bypassed the trustees", with no "formal discussion between the BBC and the trustees on the pension proposals".

Had the trustees been asked, they would have refused to make the changes, he said.

"I understand you feel let down and that you feel we should have taken up cudgels," he told the 150 members present.

Had they been formally consulted, the trustees would have been in a difficult position.

"Generally speaking, trustees will conclude that future benefits are really more a matter for the employee, the employer and the unions, than for the trustees," says Jane Samsworth, head of pensions at Hogan Lovells.

"You wouldn't expect trustees to take a position in relation to a pay freeze on a pay increase so why would you expect them to do so in relation to a change in pensionable salary?"

At the union-trustee showdown, scheme actuary Alison Blay insisted there was no "requirement" to make changes to the scheme before the next valuation, even if she understood BBC's intention in doing so.

The debate so far has centred around the calculation of the scheme's deficit, forcing it further into the trustee's realm.

"The trustees are the people who really should understand what it is because they are the people who commission the triennial valuations," says Samsworth.

But these figures can be "shifty", she admits. And promises are subject to the conditions under which they are made.

"The BBC will meet with the unions again in the event that the deficit (prior to reforms being taken in to account) is less than £1.5bn," reads the agreement.

Arguments will rumble on, and trustees may yet have a chance to make up for their slow start.

From 2017, two economic triggers would allow the employer to seek a lower increase: two years of negative inflation (CPI), or a 12.5% cut in the licence fee or equivalent.

"In these circumstances the BBC may approach the scheme trustees to jointly consider a lower increase than that outlined above," says the joint wording.

Which would, inevitably, bring them further forward in this polarised picture.