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All eyes were on the Court of Appeal in Virgin Media Ltd v NTL Pension Trustees II Ltd, with the Pensions world holding its breath in the hopes that it could cross a tricky issue off its worry list. But it was not to be – and the industry must now grapple with the next steps.
Last summer, the High Court ruled that:
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amendments to contracted out rights in a contracted out salary-related scheme would be void if they had been made without written actuarial confirmation;
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"contracted out rights" as the law applied at the time of amendment in 1999 included both past and future service rights; and
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the requirement for actuarial confirmation applied to all changes, not just adverse changes to contracted out rights
The appeal in June this year considered only the second point. The Court of Appeal gave its conclusions at the end of July, upholding the High Court’s ‘impressive’ judgment.
Where are we now?
While we would expect most scheme amendments to have been made ‘correctly’, as the legislation has been interpreted so widely there are likely to be some instances where historic changes could be held to be invalid.
As it stands:
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a joint letter has already been sent to the DWP by key industry bodies, setting out the potentially ‘significant ramifications’ for schemes and the industry as a whole, and calling on the government to use the specific regulation-making power it has to clarify the issue (and retrospectively validating deeds that would otherwise be void). Any further discussion between parties however is unlikely before September, and even if granted the extent of any legislative solution is not certain and could take some time to implement
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a further appeal to the Supreme Court in the Virgin case is thought to be unlikely, although not impossible
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some discrete issues were reserved for further hearings, but it is not yet known whether any of these will be taken forward.
Action
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Any approach to work in this area should be proportionate and scheme specific.
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Schemes in a business-as-usual position need not rush to immediate action. They may however start to come under pressure from auditors or employers looking for certainty. Schemes could start an audit, considering what deeds might be affected, and beginning to assess the possible risk (and potential costs) to the scheme.
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Schemes that are currently in the process of or considering de-risking or other significant projects (including the purchasing of insurance) should speak to their advisers now, as the issue could have an impact on pricing and process. We are aware that some underwriters are starting to apply ‘Virgin Media’ exclusions.
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Not all amendments will be in scope – the timing of the deed, type of changes made, and some areas of uncertainty will require careful thought. Take advice.
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Speak to us for advice on what might evidence written actuarial confirmation having been given (a formal certificate appended to a deed is not specifically required).
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Where it seems that no confirmation was given, employers and trustees will need to consider what disclosures should be made. If there are potential claims to be issued, be aware of limitation issues.
Speak to the TLT Pensions team for further information on the judgment and guidance for your scheme.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.
Date published
12 August 2024
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