The Court of Appeal’s ruling in Virgin Media Limited v NTL Pension Trustees was handed down in July last year
The Government will introduce legislation to deal with issues arising from the Virgin Media v NTL Pension Trustees judgment, the Department for Work and Pensions says.
In a statement issued today (5 June) the government said it was aware that, following last year's Court of Appeal judgment in Virgin Media Limited v NTL Pension Trustees Limited, there is increased uncertainty in the pensions industry.
It said it recognised that schemes and sponsoring employers need clarity around scheme liabilities and member benefit levels in order to plan for the future.
The government said it would therefore introduce legislation to give affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic benefit changes met the necessary standards.
It added that scheme obligations will otherwise be unaffected.
The Court of Appeal's ruling in Virgin Media Limited v NTL Pension Trustees – handed down in July last year – had potentially adverse consequences for defined benefit schemes that were contracted out of the state pension scheme at any time between 1997 and 2016.
According to the ruling, any amendments to scheme benefits made during that period would now be void unless the scheme actuary had confirmed, when the amendment was made, that the pension scheme would continue to satisfy the statutory standard for contracted-out schemes.
Industry bodies – including the Association of Consulting Actuaries (ACA), the Association of Pension Lawyers (APL) and the Society of Pension Professionals (SPP) – have been engaging with the DWP on the issue.
In December last year, a joint working group from the three bodies called on the government to make regulations that would enable the validation retrospectively of any amendment that is held to be void solely because either a written actuarial confirmation was not received before the amendment was made, or where such a confirmation could not now be located.
Greater clarity
APL chair David Gallagher welcomed the proposal to legislate to address issues caused by the Virgin Media case.
Gallagher said: "Last year's judgement in the Virgin Media case has caused great uncertainty in the pensions industry. The APL welcomes the government's announcement that it will legislate to give trustees and employers greater clarity about scheme liabilities and members' rights. We will be more than happy to work with officials on the further details needed to deliver this important legislation."
SPP legislation committee member Faye Jarvis agreed: "We are naturally very pleased that by working in collaboration, industry and the government have been able to find a workable solution to an unexpected problem that was causing the pensions industry, and many savers, considerable difficulties both in the public and private sectors."
ACA chair Stewart Hastie said an "immense amount of effort" had been put in by both the members of the tripartite group and DWP to help sort out this problem.
He said: "The uncertainty and potential for unforeseen costs that might have fallen on pension schemes represented a huge challenge. For our part, we want to thank all those involved from organisations across the industry that have worked together on achieving today's decision. The hard work will now continue in fine tuning the necessary legislation and guidance."
Sighs of relief
Arc Pensions Law senior partner Anna Rogers agreed: "The industry will breathe a collective sigh of relief to hear that DB schemes with a section 37 problem will be allowed to fix it retrospectively. When it was obvious that the contracting-out test would be met, people didn't always focus on getting the actuarial confirmation or keeping it safe.
"The DWP has just announced that schemes will be able to get this confirmation retrospectively. We assume it will be done by using the existing power to make regulations about contracting-out glitches. It's been done before.
She added: "There will still have to be a process and we await the details. It may not be easy to establish on the facts whether the test was met at the time, which could be the best part of 30 years ago. But at least the door is now open to a sensible solution that means DB schemes can get on with doing what they are supposed to do namely providing the promised benefits to members."
LCP partner Sam Jenkins agreed there would be sighs of relief.
He said: "It's welcome news that the government - after much lobbying across the industry - will be introducing legislation to allow schemes to address the issues arising from the Virgin Media case.
"The uncertainty raised by last year's judgment has caused headaches for schemes in a variety of situations - from those considering insured buy-out to those considering run-on strategies - given the lack of clarity it gave to a scheme's legal obligations. If the legislation allows all schemes to address these issues - hopefully in a pragmatic way - there will be sighs of relief all round."
