The Court of Appeal last week heard appeals by the sponsoring employers in two important pension cases. In both cases the employers had wished to amend (or to explore amending) the scheme rules to reduce the cost of future pension accrual.
The sponsoring employers are hoping to overturn decisions from the High Court last year. As is usual, judgments will be given some time after the actual hearings.
Virgin Media Limited v NTL Pension Trustees II and others: amendments to contracted-out rights
In a judgment with potentially widespread implications, the High Court held that certain amendments to members’ “section 9(2B) rights” (defined benefit contracted-out rights accrued between 6 April 1997 and 5 April 2016) were void. This increased the value of accrued benefits under the scheme by £10m.
The problem arose because the contracting-out legislation in force at the time provided that amendments to section 9(2B) rights can only be made if the scheme actuary gives written confirmation that the contracting-out reference scheme test would continue to be met. It was common ground that no written confirmation from the actuary could be found.
The judge interpreted the legislation literally, holding that the amendments were void in respect of both past and future service. It made no difference that the purported amendments would not have any adverse effect on section 9(2B) rights.
The employer’s appeal was heard on 26-27 June.
BBC v BBC Pension Trust Limited: restrictions in amendment power
The amendment power in the BBC scheme rules includes restrictions on how it may be used. In particular, an amendment which affects the “interests” of an active member can only take effect if certain conditions are met (broadly, if the members pass a resolution approving the amendments or the actuary gives a certificate regarding certain safeguards).
The High Court held that an active member’s “interests” included not only past service rights (which was common ground between the parties) but also the member’s interests in:
- retaining a final salary link; and
- accruing future service benefits on the same terms.
Alterations which impacted the final salary link or future service accrual were therefore prohibited by the restrictions in the amendment power unless the further conditions were met.
The employer’s appeal was heard on 25-27 June
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