We have previously noted both the legal uncertainty for many defined benefit (DB) occupational pension schemes from the Virgin Media court cases, and the UK Government’s intention to address this in legislation.
As explained in this blog, the Pension Schemes Bill has been adjusted to give effect to this commitment, but care will still be needed to ensure that the schemes that need this help can actually access it. Also, while the new statutory procedure could be a valuable addition to the toolbox for – by far – the majority of schemes, for a small number the conditions and exclusions could be quite problematic.
Very positively, this part of the Bill is now expected to enter force just two months after Royal Assent – hopefully next Spring – which can only be good news if it saves having to wait until late 2026 or even April 2027. Helpfully, too, and unusually, a carefully drafted version of this legislation has been included from the outset for Northern Ireland.
The Background
In July 2024, the Court of Appeal’s decision in the case concerning one of the Virgin Media pension schemes confirmed the industry’s worst fears about a technical flaw in the way in which many contracted-out DB pension schemes made alterations to their scheme rules between 6 April 1997 and 5 April 2016.
Regulations under the Pension Schemes Act 1993 have long required written actuarial confirmation to be obtained that after any change was made, the scheme would continue to meet the minimum statutory standard for contracting-out – but a wide range of views was previously taken by relevant professionals as to the necessary timing of the confirmation, what amendments needed it, and the consequences of not obtaining it.
We have been concerned about this issue for some years, but most recently our spring update revisited the unfortunate consequences of the unexpectedly strict Virgin Media decisions for many schemes, while our Pension Schemes Bill blog went on to note the Government’s intention, announced on 5 June 2025, to introduce the legislation explored in this blog.
The Retrospective Remedy
The amendments, generally well received across the pensions industry, have now been considered by the Public Bill Committee of the House of Commons, and incorporated in the latest print of the Pension Schemes Bill. In summary, the legislation works but (as was only to be expected) does impose some conditions.
The new legislative solution will be available only to “potentially remediable alterations” i.e. amendments that:
- required a statutory actuarial confirmation when they were made;
- have been treated as valid by the trustees; and
- have not been the subject of “positive action” by the trustees to declare or treat them as invalid.
We will return to the third of these requirements later, but it should be noted immediately that this is unlikely to be a concern at all in the vast majority of cases where trustees or employers have at most investigated previous amendments, noted a contingent risk, or raised concerns that one or more amendments might not be effective or fully effective.
Potentially remediable alterations can then be declared free of any concern under the contracting-out legislation if:
- the trustees formally ask the current scheme actuary to consider whether the alteration would (at the time) have prevented the scheme from continuing to satisfy the statutory standard; and
- the scheme actuary confirms in writing and as a matter of opinion that it is reasonable to conclude that the alteration would not have prevented the scheme from continuing to satisfy the statutory standard.
Clearly, any scheme actuary who is placed in this position will need some reassurances. An important one in most cases will be the fact that every contracted-out scheme needed to be re-certified every three years anyway, as still meeting the statutory test.
So there will often, typically in fact, be reasonable evidence that a near-contemporaneous certification was issued by the scheme actuary of the time. In some cases, this may not be available, but in a majority of cases we can only hope that when the matter comes to be investigated the position remains clear enough.
Exemptions
In three specific situations where it would not now be possible to obtain a scheme actuary’s confirmation, any affected alteration that lacks an actuarial confirmation is nevertheless deemed not to be invalid on that ground. These three circumstances are that the scheme has been wound up or entered the Pension Protection Fund (PPF) before the legislation enters force, or are benefited by the Financial Assistance Scheme.
Exclusions
However, not all alterations qualify for such relief, and in particular the following are excluded from retrospective validation:
- alterations already subject to legal proceedings started on or before 5 June 2025; and
- schemes where trustees have taken “positive action” to treat an alteration as void, such as notifying members or changing scheme administration in a way that affects payments.
Reviewing the history of its use both in pensions and in general legislation, the expression “legal proceedings” has historically always been given a wide and inclusive interpretation. So while it is hopefully unlikely in practice, it cannot be much doubted that an individual member complaint to the Pensions Ombudsman that happened to raise this matter even in passing might have the effect of excluding the use of this legislation altogether. If the issue were spotted in time, perhaps the Pensions Ombudsman could defer or refuse the acceptance of such an application.
It may also be a concern for the trustees of the relevant Virgin Media Scheme and for Verity Trustees, who have also brought an important test case, that this exclusion for “legal proceedings” is in place at all. Excluding cases that are already before the courts is by no means unheard of when new legislation is made, but in a technical area such as this, it is difficult to see precisely what member entitlements and expectations might be defeated by allowing trustees and employers to take a step back from the action, and agree a sensible solution.
And finally – we are not aware of any trustees that have specifically declared an existing amendment to be invalid on the grounds of a concern with the contracting-out legislation, but if there are any who have, they have surely done so as a last resort. It is difficult to see why they should not be allowed the chance to reconsider matters with the benefit of the legislation, if they consider it to be in the members’ best interests to do so.
Conclusions
As before, the more cautious approach for most clients must be not to take any substantive steps on the assumption that the amendments will become law at all, or in any particular format. It is also important to remember that in some cases there may be missing data or other difficulties in demonstrating the historical position.
So the new legislation is undoubtedly a useful addition to the toolbox, and in many cases we can expect it to provide the most pragmatic and certain solution. However, it will be important not to forget any other tools and strategies that may be available in individual cases.
Overall, the legislation is to be welcomed, and we support its implementation. We will continue to provide updates as the Bill progresses throughout Parliament and will stand ready to support clients in due course.
If you would like to discuss any of the issues raised in this blog, please contact a member of the pensions team or your usual Brodies contact.
