The High Court has ruled, in a case involving Virgin Media and the NTL Pension Plan, that changes to certain rules of contracted-out schemes are invalid – and so void – if the amendment does not include the required actuarial confirmation (“section 37 confirmation”).
The requirement for certification stems from regulations made under section 37 of the Pension Schemes Act 1993, which restricts the ability of contracted-out (or formerly contracted-out) schemes to change their rules in a way that would affect benefits accrued by members between 6 April 1997 and 5 April 2016 (when contracting out ended). The regulations require that:
- the trustees have “informed the actuary in writing of the proposed alteration” and
- the actuary has “considered the proposed alteration and has confirmed to the trustees in writing” that he or she is satisfied that the scheme would continue to satisfy the relevant statutory standard if the alteration were made (“a Section 37 Confirmation”).
This judgment makes it clear that, where the required written confirmation was not provided, any amendment to 1997-2016 benefits envisaged by the rule change is invalid and void. In the Virgin Media case, the financial impact is estimated at £10 million.
As a result of this ruling, trustees will need to be sure that any relevant amendments to their scheme were accompanied by the section 37 confirmation. This will be particularly urgent for schemes that are in the process of securing their benefits with an insurer. A “Consequentials” hearing is expected, to answer outstanding questions, and leave may be given for Virgin Media to appeal.