Court of Appeal dismisses Virgin Media appeal
The Court of Appeal has upheld the High Court’s earlier ruling that actuarial confirmation is required in relation to any amendment to a scheme that was contracted out on a salary-related basis under section 9(2B) of the Pension Schemes Act 1993, if the amendment affects section 9(2B) rights in relation to either past or future service: Virgin Media Ltd v NTL Pension Trustees II Ltd.
Between 1997 and 2016 schemes could contract out of the earnings-related element of the state pension on the basis that the pensions provided were broadly equivalent to or better than those that would be provided under a so-called ‘reference scheme’ under section 9(2B). However, it was a requirement under section 37 of the Act that
the rules of a scheme that contracted out in this way could not be altered unless certain conditions were met, one of which (under regulation 42 of the Contracting-out Regulations) was that the scheme actuary had considered any amendment in relation to section 9(2B) rights and had confirmed in writing that the scheme would continue to satisfy the statutory basis if the alteration were made.
The question raised on appeal was whether the requirement for actuarial confirmation only applied if the alteration affected past service benefits, or if it was also required where the alteration related to future service benefits. In this case, a deed of amendment in 1999 purported to alter the rules of the scheme for future service (it also purported to have retrospective effect but it was accepted that the amendment could not detrimentally affect benefits attributable to service prior to the 1999 execution date). Unlike later deeds, the 1999 Deed did not mention any confirmation being obtained. It was not a requirement that the confirmation should be attached to the deed, and in this case no written confirmation has been found.
The High Court had ruled that the words ‘section 9(2B) rights’ used in regulation 42(2) at the relevant time included both past and future service rights and, having considered detailed arguments about the construction of the definition of ‘section 9(2B) rights’ for the purposes of regulation 42, the Court of Appeal agreed. Lord Justice Nugee held that ‘rights to the payment of pension and accrued rights to pensions’ described types of pension rights, not differences in periods of service: ‘The definition is not limited to pension rights that have already been earned by service to date at the date of the proposed alteration, but can naturally include rights to pension benefits that a member could continue to earn’. Without the required confirmation, an amendment would be void under section 37.
Nugee LJ noted that there was no suggestion that the confirmation could not have been given – the amendment made no difference to the ability of the scheme to satisfy the statutory standard. At first instance, the High Court held that the requirement for actuarial confirmation applied to all relevant amendments (not merely to those which would or might have an adverse effect). This issue was not appealed, so the High Court’s position on this stands: even amendments that could only have a neutral or beneficial effect on section 9(2B) rights required the regulation 42 confirmation.
There have been calls for the government to intervene and to announce that it will remove the unintended consequences of failure to comply with section 37, given the potential difficulty of locating historic confirmations and the implications for schemes of rectifying the position if no confirmation can be found. We will keep you updated on any developments.
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Government launches pensions review
The government has launched the wider pensions review promised in its pre-election manifesto, to be led by the joint Treasury and Department for Work and Pensions Minister, Emma Reynolds. The first phase of the review, which will take place ‘over the next few months’ will examine ‘actions to support greater productive investment and better retirement outcomes, including through further consolidation and encouraging at-scale schemes to increase returns through broader investment strategies’. This will include identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill. This could potentially pick up on the issues that were not included in the King’s Speech around changes to the rules on the use of DB surpluses and the introduction of a public sector consolidator.
A further phase starting later this year will consider the wider pensions landscape to strengthen security in retirement, including pension adequacy. A separate strand will look at issues specific to the Local Government Pension Scheme, including fees and asset pooling.
Read the announcement
DC scheme returns
The Pensions Regulator has published information about this year’s DC scheme returns, including changes from previous years to the information required.
This year DC schemes will be asked to provide:
- the number of members who have left the scheme in the 12 months up to the ‘as at’ date of the most recent membership information, split into categories depending on their choices after leaving, together with the asset values that have left the scheme;
- the name and email address for the scheme’s primary pensions dashboard contact, and confirmation of whether the contact is a professional or non-professional trustee;
- additional questions about performance reviews for investment consultancy providers; and
- updated questions about the number of members receiving certain types of benefit and the asset value received.
Scheme return notices will be sent out between August and December 2024 and must be returned within six weeks of receipt.
Read TPR’s scheme return information
Box Clever saga likely to end in settlement
The Pensions Regulator’s lengthy dispute with ITV about the Box Clever pension scheme has resulted in an ‘in principle’ agreement to settle the case, under which all members of the Box Clever scheme are expected to receive their pension benefits in full.
TPR’s anti-avoidance investigation began in 2011 following the collapse of Box Clever, which was a joint venture between Granada (now ITV) and Thorn (now Carmelite). ITV had extracted significant value from the joint venture and was issued with financial support directions followed by a contribution notice for the scheme’s full buy-out deficit.
Under the deal, all 2,800 members of the scheme will transfer to the ITV Pension Scheme and members who have been receiving benefits at PPF compensation levels since 2014 will receive full benefits and back payments.
However, ITV has termination rights and could refuse to proceed if liabilities are shown by a data cleansing exercise to have materially increased since the date of the settlement agreement. In that case, TPR would be free to recommence regulatory proceedings. TPR will publish a regulatory intervention report in due course.
Read the press release
