The Government has published new provisions to the Pension Schemes Bill designed to address the section 37 issue arising out of the Virgin Media court case. The amendments create a pragmatic statutory process for trustees to obtain actuarial confirmation of past scheme alterations made while the scheme was contracted-out. Where confirmed, those amendments will be treated as retrospectively valid for section 37 purposes. This provides long-awaited certainty for schemes potentially exposed to claims that historic amendments are void.

Background

Between 1997 and 2016, contracted-out defined benefit schemes could only be validly amended if the scheme actuary confirmed, before the amendment was made, that the scheme would still meet the statutory reference scheme test after the amendment.

The Virgin Media case confirmed that the absence of such confirmation would render an amendment void. As many schemes cannot now locate actuarial confirmations for all applicable deeds from the period, this has created significant uncertainty across the pensions industry since the High Court decision in June 2023.

The Government announced on 5 June 2025 that it would introduce legislation to fix the section 37 problem that had been plaguing the industry. However, provisions were not included in the first draft of the Pension Schemes Bill and so it was not clear when exactly the issue would be resolved or in what manner.

What “fix” has the Government now proposed?

The amendments to the Pension Schemes Bill published on 3 September 2025 introduce a framework for “potentially remediable alterations” (“PRAs”) to be retrospectively treated as valid. A PRA is defined as –

• a purported amendment made to a salary-related contracted-out scheme that required an actuarial confirmation at the time of the amendment;
• that was treated by the trustees as valid;
• where no “positive action” (see below) has been taken by the trustees on the basis that they consider the alteration to be void by reason of non-compliance with the legislation requiring an actuarial confirmation; and
• it is not excluded from scope (see below).

A “positive action” is defined as either:

• written notification to members to the effect that the trustees consider the alteration to be void by reason of non-compliance with the requirements for an actuarial confirmation and that the scheme will be administered on the basis that the amendment has no legal effect; or
• taking “any other step” in relation to the administration of the scheme in consequence of the trustees considering the amendment to be void which has (or will have) the effect of altering payments to or in respect of scheme members.

It is unlikely that scheme trustees will have taken so-called “positive action” as most have, to date, done no more than carry out a fact-find exercise to understand the scope of their potentially problematic deeds. However, legal advice should be taken in relation to individual scheme circumstances where there is any uncertainty.

Excluded alterations are essentially those that, in relation to issues of section 37 validity, have already been determined by a court or legal proceedings were in issue on or before 5 June 2025. Again, if there is any doubt as to whether these exclusions apply, legal advice should be taken.

What process must be followed?

If the following two conditions are met in relation to a PRA, it is to be treated for all purposes as having met the requirements of section 37 before it was purportedly made and having always been a valid alteration.

The first condition is that the trustees make a written request to the scheme actuary for the actuary to consider whether or not, on the assumption that the alteration was validly made, it would have prevented the scheme from continuing to satisfy the contracting-out test.

The second condition is that the scheme actuary confirms to the trustees in writing that in their opinion it is reasonable to conclude that, on the assumption it was validly made, the alteration would not have prevented the scheme from continuing to satisfy the contracting-out test.

Helpfully, a scheme actuary is able to take “any professional approach (including making assumptions or relying on presumptions) that is open to the actuary in all circumstances of the case” and may act on the basis of information actually available “as long as the actuary considers it sufficient for the purpose of forming an opinion”.

This is drafted very widely and allows for a large dose of pragmatism. However, we will have to wait and see what actuarial guidance develops in relation to considering and providing this confirmation. We expect that it will be straightforward for most scheme amendments but, depending on the nature of the specific alteration and the data/information available, some PRAs could be trickier for the actuary.

When can this be done?

Interestingly, the draft legislation allows for the two abovementioned steps to take place before the Pension Schemes Bill comes into force. Whilst this may be helpful for trustees who are under time pressure to resolve their section 37 issues, we recommend legal advice is taken as to whether this is an appropriate course of action. The scheme actuary’s views will be relevant too; professional guidance may take a while to be issued, and the provision about making assumptions and relying on information available may not be technically in force until the Act is in force.

The new provisions are drafted to come into force two months following the enactment of the Pension Schemes Bill (which is currently expected in Q1 2026).

What about schemes that have wound-up or in the PPF?

For schemes that have, before the legislation comes into force, wound-up or entered the PPF or Financial Assistance Scheme, any PRAs are to be treated for all purposes as being valid so far as the section 37 requirements are concerned.

This is good news for schemes that may have been concerned about residual section 37 risk post buy-out and scheme wind-up. It may also present a window of opportunity for some schemes to complete wind-up ahead of the legislation coming into force where appropriate in the circumstances.

Next steps for trustees and sponsors

Now that the direction of travel is clear, it would be sensible for trustees and sponsors to take steps to establish what PRAs they have so that they can take action at the appropriate time to request actuarial confirmation under the new framework.

For schemes that are under greater time pressure (due to, for example, buy-ins and buy-outs), trustees could begin discussions with their scheme actuary now in relation to the known problematic amendments to explore whether they can use the new confirmation framework as soon as possible.

Legal advice should be taken before taking any steps that could amount to “positive action” under the draft legislation, or if legal proceedings are already underway.