Law firm Stephenson Harwood and the Society of Pension Professionals (SPP) have successfully lobbied for a change to the Pension Schemes Bill aimed at clarifying the government’s planned fix for the section 37 issue.
The issue – also known as the Virgin Media case – posed problems for many defined benefit (DB) pension schemes, as trustee boards could have been forced to unwind historic changes to scheme rules if they could not prove the changes had been approved by an actuary.
Last year, the government amended the Pension Schemes Bill in an effort to mitigate this issue, which affected schemes contracted out of the second state pension.
However, the SPP and Stephenson Harwood pointed out that clause 102 of the Pension Schemes Bill, which related to schemes that have been wound up, only mentioned those that had been wound up in full, and not those that had wound up one section.
In a press release, Stephenson Harwood explained: “In a market where many DB arrangements are sectionalised – notably multi‑employer schemes and master trusts routinely wind up or buy out one section years before others – that omission would have produced arbitrary outcomes and unnecessary friction, driven by scheme architecture rather than substance.”
“It has been satisfying to see industry and government working collaboratively on this issue.”
Hamish Kadirkamanathan, Stephenson Harwood
The law firm, backed by the SPP, put forward an amendment to clause 102 that has now been adopted in the latest version of the Pension Schemes Bill. The bill is currently going through the House of Lords and received its second reading in mid-December.
Stephen Richards, head of Stephenson Harwood’s pensions team, said: “Many of our clients are trustees of segregated schemes. Without the amendment, it could have forced trustees and administrators into costly, time-consuming reviews of section-specific amendment records, which are often incomplete where sponsors have exited. This would have led to complicated pricing and execution of buy-ins and buyouts for sections and increased the likelihood of member disputes turning on paperwork rather than entitlement.”
Hamish Kadirkamanathan, an associate at the law firm who drafted the proposal, added: “It has been satisfying to see industry and government working collaboratively on this issue. The amendment removes that asymmetry, supports de‑risking and consolidation, and provides a clearer route to regularise benefits where section 37 evidence is missing.”
