Amendment powers after BBC

The recent Court of Appeal decision in BBC v BBC Pension Trust Limited is the first time the Court of Appeal has considered pension scheme amendment powers. It is also only the second scheme where the courts have decided that an amendment power prevented detrimental future service changes, with the first being in the Lloyds Bank decision back in 1996. On either account it would therefore be a significant decision, but even more so for the broad approach the Court of Appeal took in construing the word “interests” in the restriction in the amendment power.

What did the Court of Appeal decide?

The restriction in the BBC Scheme applied to active members, and prevented alterations affecting their “interests” unless:

  • the actuary could certify that either those interests would not be substantially prejudiced or that substantially equivalent benefits would be provided; or
  • the alteration was approved at a meeting of members.

The question for the Court of Appeal was whether the “interests” of active members in this context included future service rights. The Court found that this was indeed the case (upholding the High Court decision). This in and of itself is notable, but so too is the approach taken by the Court in reaching that decision.

In particular, the Court took a broad approach to the interpretation of “interests”, focusing on its natural meaning and the fact it was a “deliberately simple, broad and open-textured word”. Whilst the High Court decision had focused on a number of points specific to the BBC Scheme, this approach by the Court of Appeal may make it more difficult for other schemes to distinguish their own amendment power. For example where, like in the BBC Scheme, the word “interests” is not linked to any other form of temporal or other limitation.

How does this compare to previous decisions?

Starting with the decision in Courage back in 1987, there have been a number of High Court decisions considering the wording of restrictions in particular amendment powers. Most of these have decided that the restriction only related to past service rights (with a final salary link), including:

  • Re Courage Group’s Pension Scheme, which considered “benefits already secured by past contributions”;
  • Briggs v Gleeds, which considered “benefits accrued in respect of membership up to that time”; and
  • Wedgwood Pension Plan Trustee Ltd v Salt, which considered “rights”.

There are now two cases which have found that the restriction applied to future service changes, BBC (considering “interests” of active members) and Lloyds Bank (which considered “pecuniary benefits secured” in respect of members).

These decisions show the importance of taking care over amendment power restrictions, and considering very carefully the scope of the relevant restriction. The Court of Appeal was very clear in BBC that the context in which the words are used is important, so it will come down to the particular wording of the amendment power in any given case as to the scope of the restriction.

Linklaters acted for BBC in this case.

For further information on this case, as well as commentary on changes which may be made to the pensions landscape by the new government and a look at what’s on the horizon for trustees, please see our Trustee Agenda which is available here Trustee Agenda (linklaters.com).