Court of Appeal gives Trustees more work to do: Virgin Media Appeal dismissed

Background

You might remember our article from last summer after the High Court ruling in Virgin Media v NTL Pension Trustees. The High Court decided that amendments made to a contracted-out pension scheme from April 1997 to April 2016 would be invalid without written confirmation from an actuary (often referred to as a "Section 37 Certificate"), confirming that the scheme would still meet the necessary "Reference Scheme Test" post-amendment.

This case was about interpreting legislation that applied to pension schemes contracted out on the "Reference Scheme Test" basis, with potential repercussions for all such schemes. We are aware of a number of amendments that lack the actuary's written confirmation. Post-high court decision, some clients requested us to carry out an audit to investigate whether they could have a potential problem, particularly those nearing significant decisions like securing benefits with an insurance company. Other clients waited for the appeal result, hoping that a successful appeal could cancel the need to carry out an audit.

Court of Appeal decision

On 25 July, the Court of Appeal dismissed the appeal. Although there is a possibility of appeal to the Supreme Court, this window ends in September and there is no expectation that an appeal will be lodged.

Implications

Unless there is a successful appeal or intervention by the government (see below), the Court of Appeal's verdict could mean that your scheme is paying (and funding for) incorrect benefits if your scheme was amended between 1997 and 2016 without an actuary's written confirmation as mandated by law. The fact that such approval could have been easily obtained back then did not influence the Court, which emphasised that the procedural requirements set by legislation cannot be relaxed merely because it may be convenient to do so.

Possible Government intervention

Before the Court of Appeal decision, the Association of Pension Lawyers (APL), the Association of Consulting Actuaries (ACA), and the Society of Pension Professionals (APP) sought government action if the appeal failed. The joint statement is available here. 

Up to now, the government has not indicated if it will introduce any solution to address the repercussions of the Court of Appeal decision. While predicting government action is speculative, any legislative fixes will likely include safeguards, necessitating an audit to determine whether you have a potential issue and if so whether these safeguards can be met.

Next steps

Assuming no Supreme Court appeal is lodged and the decision stands, trustees who have not carried out an audit may wish to do so to identify any amendments made from April 1997 to April 2016 that lack the required actuarial written confirmation (a section 37 certificate). This information will be vital regardless of any government-initiated solutions.

We will keep you updated on any responses to lobbying efforts by the ACA, APL, and SPP.

For any questions about the topics discussed in this article, please reach out to your regular contact in our Pensions team or get in touch with Suzanne Duff.