The government has added amendments to its upcoming Pension Schemes Bill, which aim to address concerns raised by the Virgin Media v NTL Pension Trustees ruling.

In July 2024 the Court of Appeal upheld a June 2023 High Court ruling on the validity of certain historic amendments to contracted-out defined benefit schemes. It stated that they were void unless the scheme actuary confirmed in writing, when the amendment was made, that the pension scheme would continue to satisfy the statutory standard for contracted-out schemes. 

The ruling had created significant uncertainty regarding the validity of certain past amendments made to pension schemes where trustees were unable to demonstrate that the required confirmations had been obtained. 

The new measures – expected to come into effect in Q2 or Q3 of 2026 – will allow scheme actuaries to provide retrospective confirmation of past amendments, which should come as a relief to trustees and other stakeholders of potentially affected schemes. 

In practice, this means that schemes will be able to fix any amendments that were considered at risk of being invalid, avoiding the need to make alterations to benefits or to revisit funding and administration decisions made over many years. 

However, the proposed remedy does come with some conditions and exceptions that stakeholders should be aware of.

Solution only for potentially remediable alterations

The proposed solution will only apply to scheme amendments that are considered to be ‘potentially remediable’. The legislation defines this as an amendment where: 

• actuarial confirmation would have been required at the time that the amendment was made under the relevant statutory requirements;
• it was treated as a valid alteration by the trustees or managers of the scheme after it was made;
• no positive action has been taken by the trustees or managers of the scheme on the basis that they consider the amendment to be void – and therefore without legal effect – due to non-compliance with the relevant statutory requirements; and
• it is not or has not been involved in legal proceedings relating to the relevant statutory requirements.

What is ‘positive action’?

To address potential debate about what might constitute ‘positive action’, especially where trustees might have initiated information-gathering exercises to establish the extent to which their schemes might have been affected by the original ruling, the draft amendments also provide a definition.

‘Positive action’ is deemed to have been taken where trustees or managers have notified scheme members in writing that they consider the alteration to be void and that the scheme will be administered on this basis.

Alternatively, taking any other step in relation to the administration of the scheme with the effect of altering payments as a result of having concluded that the amendment is void will also be classified as ‘positive action’.

Happily, this definition excludes any preliminary or investigative steps that might have been taken and will only apply to scheme amendments where trustees or managers have already concluded (presumably validly) that an amendment is void.

Many trustees will have been advised to take a ‘wait-and-see’ approach to the ruling thus far and are therefore very unlikely to have reached such a conclusion about any scheme amendments.

The remediation process

The process for retrospectively validating scheme alterations that the government has outlined will need to be led by trustees or scheme managers. Trustees do not need to wait until the legislation comes into force to start obtaining retrospective confirmations – and steps already taken to investigate or resolve issues can form part of the remediation process under the proposals.

Trustees will need to identify specific amendments and request that the scheme actuary evaluate each one individually. Sponsor employers will not be directly involved but may wish to remain in close contact with trustees to stay informed about progress.

Trustees should make a request in writing to the scheme actuary asking them to consider whether, on the assumption that the amendment was validly made, the amendment would have prevented the scheme from continuing to satisfy the statutory standard. Actuaries will then need to provide written confirmation that this is the case.

The legislation confirms that a scheme actuary may take “any professional approach” that is open to them and may act based on the information available, as long as they consider it sufficient for the purpose of forming an opinion.

The FRC plans to publish technical guidance to support scheme actuaries tasked with confirming historic pension scheme amendments.

Other considerations

The amendments also address situations in which a scheme has been wound up (or joined the Pension Protection Fund or Financial Assistance Scheme) before the bill comes into effect.

For these schemes, any potentially remediable alteration will be treated as if it has always been valid. No process will therefore be required to be undertaken in respect of alterations to these schemes.