Welcome to your weekly update from the A&O Shearman Pensions team, covering all the latest legal and regulatory developments in the world of workplace pensions.
Amendments to Pension Schemes Bill include Virgin Media remediation
The government has published amendments and new clauses to be considered during the committee stage of the Pension Schemes Bill. Among the new clauses is a process to deal with issues created by the Court of Appeal’s decision in the Virgin Media case (that certain amendments made by schemes that were contracted-out on a section 9(2B) basis between 1997 and 2016 are void unless a necessary actuarial confirmation was provided). The drafting does not override missing confirmations but provides a reasonably straightforward process with no time constraints and some flexibility.
In brief, the format is that if an alteration would have required a confirmation at the time it was made, but has been treated as valid by the trustees, it is potentially remediable unless either of the following applies:
- "Positive action" has been taken by the trustees to say that they consider the alteration to be void for noncompliance—this means that the trustees have notified the members of that view and will administer the scheme on that basis; or that they have taken any other step in relation to the administration of the scheme in consequence of that view, which has or will have the effect of altering payments to or in respect of members.
- Any question of validity in relation to compliance with regulation 42 (which set out the requirements for actuarial certification) has been determined by a court in legal proceedings to which the trustees were a party, or legal proceedings were on foot on or before June 5, 2025 and the question is still in issue or has been settled—these alterations are excluded from remediation.
For potentially remediable alterations, the alteration is to be treated for all purposes as having met the requirements of regulation 42 (and as having always been a valid alteration so far as those requirements are concerned) if:
- the trustees have made a request in writing to the scheme actuary to consider whether or not the alteration would have prevented the scheme from continuing to satisfy the statutory standard
- the scheme actuary has confirmed that, in their opinion, it is reasonable to conclude that the alteration would not have done so.
It remains the case that, to obtain certainty via this legislative route, the scheme actuary will have to provide an opinion about the effect of the alteration, but in giving this opinion the actuary has flexibility to take any professional approach that is open to them in the circumstances and may act on the basis of the information available to them, so long as they consider it sufficient to form an opinion on the relevant matter.
These provisions are scheduled to come into effect two months after the Bill receives Royal Assent—but the drafting makes clear that the request and confirmation may take place either before or after the legislation comes into force. For schemes with potentially remediable alterations which have already wound up by the time the section comes into force, the alterations will be treated as having met the requirements of regulation 42, so no questions arise about their validity on that basis.
Other proposed amendments and timing
There is a long list of other proposed amendments to the bill, including clarifications about the circumstances in which the new power to make payments out of surplus will apply, and that it cannot be used to introduce a power to pay surplus on winding up; and amendments to ensure that the Value for Money (VFM) framework applies to the DC element of hybrid schemes and for the application of VFM assessment with a VFM rating to DB schemes.
The bill is now in its committee stage, which will end on October 23, 2025.
Read the amendments to the Pension Schemes Bill.
High court rules on construction to bridging pension provision in scheme rules
The High Court has ruled on an appeal from a decision of the Pensions Ombudsman (TPO) about payment of a bridging pension by the Spirit (Legacy) Pension Scheme (the Scheme). TPO had ruled that the complainant member was entitled to be paid a bridging pension until age 66, but the Scheme trustee appealed, arguing that under the rules it was payable only to age 65: Spirit (Legacy) Pension Trustee Limited v Alexis.
The core issue was whether the definition of "State pension age" in the Scheme’s 2001 Rules, which applied when the member left service, was static or dynamic—did amendments to the Pensions Act 1995 which had the effect of increasing state pension age generally also flow through to the rules? TPO had held that the proper interpretation was dynamic, having regard to the text and to the fact that the member’s pension came into payment in 2018 when her state pension age was 66; there was nothing in the rules requiring the reader to check what it had been in 2001. He considered the dynamic interpretation to be a workable (and the preferable) construction of the rules.
Mr Justice Richard Smith reached the opposite conclusion, noting that the rule included a description of the relevant part of the Pensions Act 1995 as "rules for equalisation of pensionable ages for men and women", which he considered indicated that the reference was not intended to encompass wider changes in relation to more general increases in state pension age. A dynamic interpretation fitted better, in the court’s view, with the statutory context and avoided writing what the trustee had referred to as a "blank cheque".
In particular, while the long-term nature of pension schemes means there is some expectation that laws will change, he did not consider that it was evident in 2001 that there would be future increases to state pension age. He also noted that the bridging pension (referred to in the rules as a "supplement") was not in fact a match for the state pension and the fact that this mismatch would be compounded by a gap between the last payment of the supplement and actual receipt of the state pension did not, in his view, necessitate a dynamic reading.
The difference between the analysis and conclusions of TPO and the High Court illustrates what a finely-balanced exercise the interpretation of scheme rules can be. Richard Smith J noted that the legal arguments put to him were different from the arguments relied on before the Ombudsman and came to a "clear view", as a matter of the proper construction of the relevant rule, that the supplement was only payable until the member reached 65.
Read the decision.
TPO signposts new approach on transfers complaints
The Pensions Ombudsman has published a "lead determination" which is expected to inform its approach in cases concerning statutory transfer requests from occupational pension schemes in the period from February 2013 to November 30, 2021 (when the new red/amber flag framework was introduced).
The specific complaint concerned a statutory transfer from the British Steel Pension Scheme to a small self administered scheme in 2014. The member complained that the BSPS trustee failed to carry out sufficient due diligence to check for scam warning signs and to communicate these to him.
TPO found that as the member was exercising a statutory transfer right in relation to an occupational pension scheme, there was no legislative or regulatory obligation on the trustee to undertake due diligence beyond that required to meet the criteria for a transfer, either generally or as set out in the Pensions Regulator’s Action Pack or Scorpion leaflet. There was no general, common law or equitable duty of care that required trustees to conduct additional due diligence and the BSPS Trustee had not voluntarily assumed a responsibility to investigate the receiving scheme or made any promise or implied representation that it was conducting due diligence on which the member might then have relied.
The decision does not resolve all issues which might arise in relation to a transfer complaint (for example, issues around maladministration or failure to meet service standards) but, if followed in future cases, it should significantly reduce the scope of issues around pension liberation due diligence in the relevant period. Further determinations setting out TPO’s analysis of the position in relation to transfers from personal pension schemes and discretionary/non-statutory transfers are expected to follow.
Read TPO's press release and the determination.
Dashboards: state pensions now connected
The Pensions Dashboards Programme has published a blog post announcing that the state pension has now completed connection to the pensions dashboards ecosystem, meaning that eventually, users will be able to see their personal, workplace and state pension information together in one place. The post explains what state pension information will be provided on the dashboard and the types of information that can still be obtained only via the "Check your State Pension forecast" tool on the government website.
Read the blog post.
TPR: latest DB scheme funding analysis
The Pensions Regulator has published its latest annual overview of funding levels and recovery plans in UK occupational DB and hybrid pension schemes. The survey notes some changes in methodology which may affect direct comparisons with previous years, but notes that 62% of schemes in this reporting tranche (tranche 18) reported a surplus, compared to 27% for the parallel cohort three years ago.
Read the report.
[View source.]
