The Pensions Ombudsman has published a determination which will be of interest to all employers, deciding that changes to a pension scheme were not breaches of the implied terms in the employees’ contracts.

In our stop press dated June 2012, we reported on the High Court’s decision in Bradbury v BBC [2012]. The High Court hearing related to Mr Bradbury’s appeal against a determination of the Pensions Ombudsman (PO). The BBC had altered pension benefits under the BBC Pension Scheme (the Scheme) without changing the Scheme rules. This was achieved by making a pay increase subject to employees accepting that only 1 per cent of it would be pensionable.   The Court held that if an active member of a scheme accepts a pay rise on the basis that only part of it is to be pensionable, this forms a binding agreement, subject to the breach of any implied duty of trust and confidence or good faith.

The Court was unwilling to consider what it termed the implied duties, as these issues could not be raised for the first time on appeal to the High Court. The judge invited the parties to reach agreement on these issues and to submit that to the Court for approval, or, alternatively, to make a subsequent claim.

The member’s complaint was remitted back to the PO following the High Court appeal. The complaint was again dismissed by the PO, and the PO ruled that the BBC’s conduct did not breach the implied duties. The PO determined that the employer’s conduct should be viewed in the context of the substantial deficit of the Scheme and its overall financial position. For the BBC’s conduct to amount to a breach of trust and confidence, its conduct had to have a “pretty good chance” of destroying the relationship between employer and employee. Offering the complainant a pay rise on terms he did not like was not sufficiently destructive conduct to amount to a breach.

Comment

The decision in this long-running litigation will be welcomed by employers. It is likely to bolster employers’ confidence that changes to a defined benefits scheme may legitimately be made without breaching implied contractual duties to their employees.