Bradbury case: Ombudsman determines on employer duty issues in the employer’s imposition of a cap on pensionable pay

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Pensions Pieces — February 2014: the Pensions Ombudsman determines on employer duty issues in the employer’s imposition of a cap on pensionable pay - .PDF file.

The Pensions Ombudsman has ruled that the BBC did not breach its implied duty of trust and confidence and/or the implied term of good faith as an employer when imposing a cap on pensionable pay for the purposes of its pension scheme.

In 2011, Mr Bradbury, a member of the BBC Pension Scheme unsuccessfully brought a case before the Ombudsman relating to a cap that his employer (the BBC) had introduced on his pensionable pay for the purposes of calculating his pension benefits. This cap was part of a package of measures in the context of pay increases that were offered to scheme members such as Mr Bradbury at a time when the scheme was in significant deficit. Members were offered the option of either remaining in membership on their current basis but with any future pay awards being subject to a cap on their pensionable salary, joining a new section of the scheme where the benefits were calculated on a career average basis and pensionable salary would not be subject to a cap or joining a new defined-contribution pension scheme provided by the BBC. The BBC had argued that the scheme rules gave it flexibility to impose the cap on pensionable pay under the first option (and so not only was there no need to change the scheme rules to accommodate that cap, but there was also no need to consult the scheme trustees in that regard).

Mr Bradbury’s complaint was rejected first by an investigator at the Ombudsman’s office and later by the Ombudsman himself, particularly being based on the decision in Trustees of the NUS Superannuation Fund v Pensions Ombudsman [2001] All ER (D) 439, where an employer had offered an increase in salary on the condition that the increase would not count as pensionable earnings. In that case, it was held that it was not open to the member to accept one element of the employer’s offer but not the other. Further, the Ombudsman said that Mr Bradbury’s case was not sustainable because in accepting a pay increase he would know exactly what was being declared for pension purposes and that it was open to the BBC to make such a declaration if the member/employee agreed to it…

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