BBC v BBC Pension Trust Limited & Anor

An amendment power in a pension scheme must be construed precisely, even-handedly and in its documentary context. The word “interests” is not necessarily confined to accrued legal rights. Its content depends on the wording, the affected members and the proposed amendment.

Where a proviso protects Active Members whose interests are affected, it protects accrued benefits, the final-salary linkage of past-service benefits, and the ability to accrue future-service benefits on the scheme’s existing terms. The inquiry compares the position of the relevant class before and after the proposed amendment. If their position changes, the proviso is engaged; the amendment may proceed only through its specified protections, including actuarial certification, substantially equivalent benefits or member approval.

The BBC sought declaratory relief concerning rule 19.2(3) of its pension scheme, which permits amendments by the trustee with the BBC’s consent, subject to protections for affected Active Members. It wished to establish whether the proviso protected only benefits earned through past service, or also final-salary linkage and future benefit accrual.

Adam Johnson J held that the relevant division was not simply between accrued and future benefits. He held that the interests of Active Members included accrued rights, final-salary linkage and the ability to accrue future benefits under the existing scheme: [2023] EWHC 1965 (Ch). The BBC appealed with permission. The central issue was the meaning of “interests” in rule 19.2(3).

1. Appeal dismissed unanimously. The natural and contextual meaning of the proviso did not restrict the interests of Active Members to accrued legal rights earned through past pensionable service.

2. Pension-scheme interpretation has no special rules, but the characteristics of such schemes ordinarily make textual analysis important. The court must nevertheless avoid undue technicality, consider practical consequences and construe an amendment power precisely according to its terms. A perceived commercial need to reduce costs is not an autonomous or overriding interpretative principle.

3. The word “interests” is deliberately broad and open-textured. In rule 19.2(3) it includes matters of relevant concern to Active Members in relation to the proposed amendment. Its meaning cannot be fixed by the narrower uses of the word in other provisos, which concern winding-up interests or persons who are no longer Active Members.

4. The relevant inquiry is a comparison between the position of the relevant class, or an affected sub-group, under the scheme before the amendment and its position after it. The proviso therefore protects: accrued benefits; the link between past service and Final Pensionable Salary, subject to the BBC’s existing power identified in Bradbury to determine what future pay counts as Basic Salary; and both the ability to accrue future-service benefits on existing terms and the ability to accrue future benefits at all.

5. The actuary’s role is to assess the relevant class or sub-group, not each member individually. The proviso’s alternatives show that an amendment affecting interests may proceed if it does not substantially prejudice them, if substantially equivalent benefits are provided, or if the relevant Active Members approve it. The separate scheme-wide power to terminate future contributions did not determine the construction of an amendment power for an ongoing scheme.

6. Bradbury did not decide the scope of rule 19.2. It did, however, remain relevant to the qualification concerning the BBC’s determination of Basic Salary. The court endorsed the judge’s answers to all four questions and dismissed the appeal.

• Court of Appeal (Civil Division): appeal dismissed, affirming the construction adopted below: [2024] EWCA Civ 767 .
• High Court (Chancery Division): Adam Johnson J held that the interests protected by rule 19.2(3) extended beyond accrued past-service benefits: [2023] EWHC 1965 (Ch) .