The High Court has quashed an attempt by the BBC to limit the costs of its future DB obligations, we look at what the ruling means.
What happened?
The High Court has quashed an attempt by the BBC to limit the costs of its future defined benefit (DB) obligations.
The BBC was seeking to clarify the rules around curtailing or removing the future service benefits it has committed to active members of its DB scheme.
In evidence given to the High Court, Leigh Tavaziva, chief operating officer of the BBC, explained that the broadcaster was paying a contribution rate of 42.3 per cent of the pensionable salaries of active members, which is almost three times what the contribution rate was in 2010.
By contrast, members of the BBC’s defined contribution (DC) scheme who joined after 2010 are receiving an employer contribution of seven to eight percent.
DB employees accounted for less than 40 per cent of the workforce, but accounted for over 80 per cent of the pensions spending, according to the judgement.
The judge concluded that the interests of DB scheme members would be affected if their future benefits were cut, and that this would contravene the scheme’s rules.
What does it mean?
Much of whether companies will be successful in challenging their DB commitments will depend on the circumstances of the individual case – which is why there has been a number of cases of late which either seek to clarify or challenge scheme rules.
The BBC is far from the only employer which has considered cutting the costs of providing DB pensions to employees in order to save costs and give a bigger slice of the pie to DC scheme members.
In this case, the BBC sought to clarify the boundaries of historic scheme rules – its own rules date back to 1949.
In more recent times, schemes have learnt from situations like this. Their rules tend to avoid sweeping language relating to members’ “interests”, which could be considered open to interpretation.
This should help employers to avoid the expensive – and expansive – commitments which those with longer-standing pension schemes must meet.
What’s next?
The BBC is considering whether to appeal the ruling. The ruling does not forbid the broadcaster from making other changes; it is continuing a wider review of its pension arrangements.
Meanwhile, the rare few employers with open DB schemes are likely to continue to keep these under review. More legal challenges can be expected.
BBC pension history
In May 2022 the BBC pension scheme, which has around 500,000 members, was reported as seeking clarification from the High Court on whether it might be possible to change future service benefits and or active member contributions.
A source said of this week's ruling: "It was very clear that the rules are very restrictive and do not really provide a practical route for the BBC to reduce future accruals or close the scheme."
