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Virgin Media case could have implications for defined benefit pension schemes

28th July 2023

Virgin Media’s legal case against NTL Pension Trustees II Limited has raised concerns for defined benefit schemes, and it could have significant financial consequences. Here, Rowleys Head of Pensions, Matt Hutchinson, explains more about the case and the possible implications.

The background

Virgin Media asked the High Court to clarify an old pension law related to the National Transcommunications Limited Pension Plan, which was the pension scheme before Virgin Media between 1997 and 2023.

The case is about changes made to how the scheme calculates members’ benefits. These changes were introduced in 1999 but affected benefits from 1997 onward.

However, there is a regulation that requires schemes to get confirmation from actuaries that these changes still provide members with a minimum amount of benefits, and this confirmation comes in the form of a section 37 certificate.

The outcome and implications for defined benefit schemes

The High Court ruled that because the scheme didn’t have this section 37 certificate, the changes they made are not valid. This ruling could cost Virgin Media around £10 million.

This decision has broader implications for other defined benefit pension schemes. If a scheme can’t produce a section 37 certificate for changes they made in the past, they might have to undo those changes.

The uncertainty surrounding this area of law had left many trustees and employers unsure whether changes without a section 37 certificate were valid. Now, the court’s judgment clarifies this.

It remains uncertain whether Virgin Media will appeal the case. It might be challenging to appeal further, so they might instead seek new regulations from the government to address the issue.

The ruling could also affect other pension schemes that have made amendments to the scheme between April 1997 and April 2016 and the scheme was contracted out on a salary-related basis. This could therefore affect those currently going through buy-ins and buyouts, potentially leading to additional costs for sponsors and unexpected benefits for some members.

As the pensions industry analyses this ruling, it’s likely that further guidance from the government and the Pensions Regulator will come. Pension schemes should closely follow the case’s developments to understand its full impact.

The Rowleys pensions team are pension audit experts. We work with a large number of pension schemes, taking a balanced, risk-based approach to audit.  If you’d like to discuss your pension scheme accounts and audit requirements, then please get in touch.

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