Partner Sonya Fraser comments in Pensions Age on planned legislation aimed at tackling section 37 issues
More than two years on from the Virgin Media v NTL ruling, the pensions industry is still grappling with its consequences. The decision left trustees and sponsors facing great uncertainty around the validity of past amendments to contracted-out DB schemes.
However, following an announcement in the summer that the government would legislate to “fix” the issue, amendments have recently been made to the draft Pension Schemes Bill, designed to create a statutory route for schemes to obtain retrospective actuarial confirmation.
Commenting in Pensions Age, partner Sonya Fraser noted:
“We are pleased to see that the government has understood the need to position the retrospective test carefully. The actuary has to confirm it’s reasonable to conclude that the alteration(s) would not have prevented the scheme from contracting out. This is subtly different from confirming that the scheme met the reference scheme test at the time, because that may depend on data, which doesn’t now exist. We anticipate that this will enable a lot of schemes to solve any Virgin Media problem.”
She added that while the new provisions represent a pragmatic step forward, actuarial professional guidance will be important and that may take a while to be issued. There are also some relevant questions that the Verity Trustees Ltd v Wood High Court case may be answering in the coming weeks, such as whether a scheme’s closure to future accrual required an actuarial confirmation under section 37, or not.
“But it seems safe to expect that [the legislative “fix”] will cover most PRAs, if not all,” she continued. “If any scheme was about to act on corrections for section 37 issues, it’s important to pause and reconsider as corrective action could take them out of the scope of PRAs.”
Sonya also highlighted that schemes working to tighter timelines might be able to progress with the actuarial process ahead of the legislation coming into force.
“Schemes considering this route should take advice on how much risk this would entail, and the scheme actuary may have their own views. Wound-up schemes will apparently have blanket approval. This is helpful for those that have completed winding up, and may present a window of opportunity for those that are close to it.”
Read the full article in Pensions Age here, on pages 66 – 67.
Sonya recently wrote a briefing newsletter for trustees and sponsors on this topic. This can be found here.
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