The Virgin Media judgment will be handed down by the Court of Appeal on 25 July 2024. Eagerly awaited by schemes affected, we will be back in touch with the implications once we have them.

The BBC appeal was dismissed. This case was about the meaning of the word “interests” in the power of amendment and if it prevented prejudicial changes to the future accrual of benefits. In the case of the BBC it does, but this will not apply to all schemes.

The Court of Appeal’s recent ruling in BBC v Christina Burns, upholding last year’s High Court decision, could therefore cast doubt on the validity of some pension schemes’ historical rule amendments, and might prevent other schemes from making changes to future service benefits. It shows how archaic or nebulous language in old pension scheme deeds can hamper employers who wish to adopt modern-day remuneration strategies for their workforce.

The BBC wanted to reduce the level of benefits earned in future by members of its (expensive) DB pension scheme. The scheme’s amendment power prevents alterations that substantially prejudice the “interests” of scheme members, without setting down any express temporal limitation (e.g. it is only interests stemming from membership prior to the rule change which can’t be impacted). The Court said that such “interests” include not only pensions already earned, but also pensions that scheme members could earn in the future if they remain employed by the BBC. Reductions to future service benefits were therefore prohibited by the scheme’s own rules and could not be implemented.

Every pension scheme is different and there can be subtle differences between the precise wording of different schemes’ rules. Theoretically, at least, the recent ruling applies to the BBC scheme only. It is possible, however, that other schemes with a similar restriction (or ‘fetter’) in their amendment power exist; and that some of them may, in the past, have made changes to the level of benefits that their members earn. They may even have closed to future accrual entirely, perhaps on the back of legal advice that “interests” could only properly mean benefits that members had already earned.

Trustees of such schemes may wish to consider whether there is any risk of changes not having been validly made. Similarly, employers planning to make ‘future service’ changes should always consider the precise terms of their scheme’s amendment power very carefully. Older schemes in particular may contain language that doesn’t really have a clear modern-day meaning. Along with other fetters such as “secured” and “accrued”, which are already known to be problematic, restrictions on prejudicing “interests” are now a red flag that proposed benefit changes may not in fact be lawful.

Key takeaway

Trustees and employers alike may want to consider if they are affected by this judgment. The word “interests” is another red flag to be considered when looking at the validity of benefit changes.