The Government has recently published amendments to the Pension Schemes Bill, including new proposed provisions to remedy potential issues raised by the Court of Appeal decision in Virgin Media Ltd v NTL Pension Trustees II Ltd [2024] EWCA Civ 843 which may affect former contracted-out defined benefit pension schemes (a relevant scheme). 

The Pension Schemes Bill will come into force two months after receiving Royal Assent, so likely to be in Q2 or Q3 2026. 

While this legislative fix should solve the problems created by the Court’s decision for most schemes, it is not a panacea. In this article, we explore how the legislative fix is likely to work in practice and the issues and/or schemes it doesn’t solve for. 

Brief recap of the Virgin Media decision

In Virgin Media, the Court of Appeal held that, an amendment to post-April 1997 benefits would be invalid if it was made without the required actuarial confirmation (stating that the relevant scheme would continue to satisfy the statutory standard (known as the reference scheme test)). 

Following the decision, many schemes have seen questions raised about the validity of certain historic amendments because it is not clear from the face of the amending instrument that the necessary actuarial confirmation was obtained. In some cases, it may be difficult to determine whether the actuarial confirmation was provided at the time due to gaps in historic records and/or because schemes have changed their advisers. 

The legislative fix

An amendment will be capable of being remedied if the following conditions are met: 

• the amendment was within the scope of Regulation 42(2) of the Occupational Pension Schemes (Contracting-out) Regulations 1996 (SI 1996/1172) when it was made; 
• the amendment was subsequently treated as validly made by the trustees; and 
• the trustees have not taken any “positive action” on the basis that they thought the amendment was invalid. “Positive action” means either: (i) the trustees have notified members in writing that they believe the amendment was invalid and so will administer the scheme on that basis; or (ii) based on their view that the amendment was invalid, the trustees have taken other steps that have, or will have, the effect of altering payments to or in respect of members.

If the above conditions are met, the trustees can use the following process to validate the amendment: 

• they make a written request to the current scheme actuary to consider whether, on the assumption the amendment was validly made, it would have prevented the scheme from continuing to satisfy the statutory standard; and 
• the actuary confirms in writing that, in their opinion it is reasonable to conclude that, on the assumption the amendment was validly made, the amendment would not have prevented the scheme from continuing to satisfy the statutory standard. 

When giving their opinion, the scheme actuary may take any professional approach available to them in the circumstances (including making assumptions and relying on presumptions). They can also act on the information available to them, if they consider it sufficient for the purpose of forming an opinion on the subject-matter of the request.

Schemes that have already wound-up 

If a scheme has been wound up (or entered the Pension Protection Fund or the Financial Assistance Scheme) before the Pension Schemes Bill comes into force, any amendments that could have been fixed using the above process will be automatically deemed valid. 

This means no action needs to be taken in relation to schemes that have been wound-up. For schemes that are in the process of winding-up, there may be some incentive to complete the process before the Bill comes into force.

Circumstances in which the legislative “fix” is not available 

While the legislative fix should enable most schemes to solve any issues with amendments where the actuarial confirmation cannot be located (or was not given), there are some cases that it won’t solve for. These are as follows:

• if the validity of the amendment has been decided by a Court before the Bill comes into force; 
• if the validity of the amendment was in issue in legal proceedings begun on or before 5 June 2025 and it either remains in issue when the Bill comes into force or has been settled by agreement between the parties prior to that date; or
• the trustees have taken "positive action" and treated the amendment as invalid.

There is also currently a question mark hanging over amendments closing a scheme to future accrual. The question of whether actuarial confirmation was required for such an amendment is an issue in the case of Verity Trustees v Wood (the judgment in which is eagerly awaited). If the Court concludes actuarial confirmation was required, the only way an actuary could have given the confirmation was for the contracting-out certificate to be surrendered before the closure amendment. In practice, most schemes surrendered the certificate after the closure amendment rather than before. If the Court determines actuarial confirmation was required, the legislative fix could not be used for any schemes that surrendered their certificate after the amendment. 

What this means in practice

How much work will be required to “fix” an amendment will depend on the nature of the amendment itself. For some amendments, such as reducing the cap on pension increases or revaluation to reflect the change in legislation, it should be straightforward for an actuary to give an opinion. Other amendments, such as changes to accrual rates or the definition of pensionable salary may require a greater level of investigation by the actuary - although they will have the benefit of hindsight which, as they say, is a wonderful thing!

If you need further assistance, please contact Faye Jarvis in our pensions team.