On 5 June 2025, the prayers of many in the pensions industry were answered when the DWP announced that the Government will introduce legislation to address issues arising from the Virgin Media v NTL Pension Trustees judgment.
Background
The DWP acknowledged the industry uncertainty emanating from the July 2024 Court of Appeal judgment, which upheld a High Court ruling that a failure to obtain a section 37 written, actuarial confirmation (Confirmation) in relation to an amendment to a salary-related, contracted-out scheme invalidated that amendment in relation to both past and future service rights. As a result, where DB schemes have made amendments between April 1997 and April 2016 affecting salary-related contracted-out rights, and there is no evidence of a Confirmation having been provided, those amendments will be void for past and future service. The ruling was a landmark decision of industry-wide significance.
A cross-industry group including members of the Association of Pension Lawyers, the Association of Consulting Actuaries and the Society of Pension Professionals has been working with the DWP for some time in the hope that it would intervene in the form of overriding regulations. Hopes were raised in February this year when Torsten Bell, Pensions Minister, indicated he was aware of the issue and that the DWP was actively considering it.
The announcement
The announcement states that the DWP will introduce legislation to give affected pension schemes the ability to obtain retrospectively written actuarial confirmation that historic benefit changes met the necessary standards, thereby validating historic amendments.
It remains to be seen when the legislation will be passed (we understand this may be in the Autumn) and what form it will take when it is.
What next?
In the meantime, how should you and your scheme respond to this latest announcement? In our view, the answer to that depends on how your scheme has responded to the Virgin Media ruling thus far…
If your scheme has already carried out a thorough review of historic scheme documents, you are one step ahead; you will already know whether you have amendments where it has not been possible to trace a Confirmation. In this case, you will be ready to act once the DWP’s new regulations are in force. Consideration could also be given to liaising with the scheme actuary in relation to whether they would be able to provide a retrospective Confirmation in relation to these amendments. However, it will be necessary to see the form of the legislation before detailed actuarial and legal consideration is given to dealing with the amendments retrospectively.
If your scheme has adopted a ‘wait and see’ approach and you have not carried out a review of scheme documents, this remains a valid position for you to take i.e. our view that trustees are not under a legal obligation to search for defective scheme documents remains unchanged in light of the announcement. However, the fact that we know there will be a mechanism to address any section 37 issues removes some of the risk from undertaking such a review (but not all – the review may still reveal issues that cannot be resolved by retrospective actuarial confirmation), and you may find that pressure from company and scheme auditors and other stakeholders to conduct a review increases now that the Government has intervened. Therefore, you may now wish to consider a review in order to identify which, if any, amendments will need to be retrospectively validated so that you are ready to act swiftly once the regulations have been passed.
Schemes that are currently close to completing wind-up face a dilemma – should they pause the wind-up until the legislation is passed so that they can address any Virgin Media issues, ensure that the correct benefits are insured and minimise residual risk? If you are in this position, we suggest discussing how to proceed with your usual legal adviser.
Notwithstanding the proposed legislation, uncertainties arising from Virgin Media will inevitably remain – trustees still need to understand which amendments they need a Confirmation for (whether contemporaneous or retrospective) and what they can do in relation to amendments where the actuary is unable to retrospectively validate the amendment.
Help in relation to some of these issues may also be on its way in the form of a significant High Court judgment, fortuitously expected at around the same time as the draft regulations this autumn. The Pensions Trust litigation lasted an epic six weeks back in February and March and covered some of the key issues emanating from the decision in Virgin Media, such as which specific amendments require a Confirmation, including whether closure to accrual requires a Confirmation (note that it may not be possible to retrospectively provide a Confirmation in relation to closure, unless this is specifically addressed in the regulations), and how severance of defective aspects of deeds of amendment operates in this context, as well as other questions of significance to the industry.
Will the TPT judgment and the new legislation be the knights in shining armour trustees have been hoping for? We will have to wait until the autumn to find out – watch this space.
Please speak to your usual contact in the DLA Piper pensions team to discuss any questions you may have.
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