Scheme amendments made to contracted-out DB scheme without section 37 actuarial confirmation void
In Virgin Media Limited v NTL Pension Trustees Limited , Mrs Justice Bacon ruled that amendments made in March 1999 to the revaluation provisions of a contracted-out defined benefit (DB) scheme, if made without written actuarial confirmation under section 37 of the Pension Schemes Act 1993, were void and ineffective. The voidness extended to both past and future service pension benefits and applied to all alterations not just to those that were or might be adverse.
Section 37 and associated regulations at the time of the alterations provided that the rules of a salary-related contracted-out scheme relating to ‘any section 9(2B) rights’ could not be altered unless the scheme actuary confirmed in writing that, after the alterations, the scheme would continue to satisfy the statutory contracting-out ‘reference’ scheme test (that applied between 6 April 1997 and 5 April 2016 when contracting-out was abolished). Section 9(2B) rights are broadly rights (and accrued rights) to pensions relating to contracted-out service.
The section 37 regime was changed from 6 April 2013 to restrict the requirement to provide written actuarial confirmation to future service benefits, with different requirements in respect of past service being introduced.
The judgment has potentially wide-reaching consequences for schemes which have been amended without the required actuarial confirmation. There may be a further Court hearing which could consider further issues such as whether it would be possible for the scheme actuary to provide section 37 confirmation retrospectively. The case may also be appealed. Aside from this, the Government could legislate under an existing statutory power to introduce regulations retrospectively validating amendments that would otherwise be void because section 37 confirmation was not provided.