Pension schemes that need to address section 37 issues arising from the Virgin Media v NTL legal case do not need to wait for the Pension Schemes Bill to receive Royal Assent before beginning remediation work, the Pensions Regulator (TPR) has said.
TPR has issued guidance on section 37 remediation, confirming that schemes can instruct their actuaries to begin analysis, rather than waiting for the bill to become law. It also said schemes did not need to report remediation efforts to the regulator.
A 2024 ruling on the case – involving Virgin Media and the NTL Pension Plan – could have required pension schemes that were contracted out of the state second pension to ensure they had written actuarial confirmation of any changes to benefits, as required under section 37 of the Pension Schemes Act 1993. Failure to locate confirmations could have cost schemes millions in retrospective payments and administration work.
Trade bodies, including the representative groups for actuaries and pension lawyers, have successfully lobbied the Department for Work and Pensions in relation to the issue. The Pension Schemes Bill now contains provisions that allow actuaries to assess retrospectively whether scheme amendments are valid.
In its guidance for trustees, TPR said boards should “consider the circumstances impartially and take account of all the relevant facts” when assessing whether remediation action is needed. Actuaries are free to begin this work when instructed by trustees. The remediation powers within the bill will come into force as soon as the Pension Schemes Bill receives Royal Assent.
TPR also told trustees: “You do not need to report your remediation actions on this matter to us. We have no statutory functions in relation to the section 37 remediation. If and to the extent it is established that there had been a failure to obtain a section 37 confirmation, but the matter can now be resolved through an actuarial confirmation, any historic breach is very unlikely to be materially significant to us now in carrying out any of our functions.”
However, it also urged trustees to take legal advice on the remediation process.
‘Pragmatic’ approach welcomed
Mark Tinsley, principal at Barnett Waddingham, said the guidance – as well as that issued to actuaries by the Financial Reporting Council – “can now be used to progress matters where schemes have been in a state of limbo” since the Virgin Media case rulings.
“The regulator is absolutely right to highlight the importance of legal advice, and we support their recommendation for clear audit trails – that will hopefully save schemes from having to revisit these rule changes in another 20 years,” Tinsley added.
Sonya Fraser, partner at Arc Pensions Law, said the ability to start work on remediation immediately was particularly useful for pension schemes going through bulk annuity transactions, as these may have been paused to await clarification of benefit rules.
Fraser added: “The guidance builds on the pragmatic stance that has been taken on this issue by the industry to date… For example, it states that the regulator does not expect trustees to ‘carry out exhaustive searches before your actuary undertakes the remediation work’.”
The Pension Schemes Bill has completed its journey through the House of Lords following its third reading today (26 March). MPs in the House of Commons will consider amendments to the bill on 15 April.
