The government has today published amendments to the Pension Schemes Bill to allow the retrospective validation of amendments which may have otherwise been invalid, following the Court of Appeal's decision in the Virgin Media case.
In Virgin Media, the High Court (upheld by the Court of Appeal) ruled that failure to obtain actuarial confirmation before amending certain contracted-out rights (as required by reg 42 of the Contracting-out Regulations 1996/1172) meant that such amendments were invalid. For a more detailed reminder of the issues arising from Virgin Media, please click here.
Details of the new provisions are given below.
Retrospective validation of potentially remediable alterations (PRAs)
The new provisions will apply to “potentially remediable alterations” (PRAs) (please see below).
A PRA will be treated as always having been valid (and as having always met the requirements of reg 42) if:
- The trustees or managers make a written request to the scheme actuary to consider whether the alteration, if assumed to be valid, would have meant that the scheme no longer satisfied the contracting-out reference scheme standard; and
- The actuary has confirmed in writing that, in the actuary’s opinion, it is reasonable to conclude that the alteration would not have prevented the scheme from meeting the reference scheme standard.
When deciding whether to give this confirmation, the actuary may:
- Act on the basis of the information available, provided that that s/he considers it is sufficient to form an opinion; and
- Take any professional approach in all the circumstances of the case (including making assumptions or relying on presumptions).
Helpfully, a request to the actuary and the actuary’s written confirmation may be given before the legislation comes into force – meaning that trustees do not need to wait until the completion of the Parliamentary process before asking the actuary to consider the alterations concerned, if it becomes clear that the provisions are agreed by both Houses of Parliament and are expected to be passed in the same form.
We expect that trustees will welcome the new route for validating amendments which had previously been agreed, though it would be helpful for sponsoring employers to be able to initiate the validation process as well.
What is a “potentially remediable alteration”?
A previous rule amendment (or purported amendment) will be a “potentially remediable alteration” (PRA) if:
- The alteration could not have been made unless the requirements of reg 42 were complied with;
- The trustees or managers of the scheme treated the alteration as being valid after it was made;
- The trustees or managers have not taken any “positive action” (please see below) on the basis that they considered the alteration to be void for non-compliance with reg 42; and
- On 5 June 2025 (when the government announced it would take steps to resolve the issues arising from the Virgin Media decision), the trustees or managers were not party to legal proceedings questioning the alteration’s validity on grounds of non-compliance with reg 42.
Amendments made to the Virgin Media scheme considered by the High Court and Court of Appeal (and to any other scheme already subject to a Court decision on similar grounds) are excluded from being PRAs. The new legislation also includes power for regulations to exclude prescribed alterations (or schemes) from the remediation provisions.
What is “positive action”?
The trustees or managers will have taken “positive action” in relation to a purported alteration (with the effect that the alteration cannot be a PRA) if they have either:
- Notified members in writing that they think the alteration was void for non-compliance with reg 42 and that they will administer the scheme on this basis; or
- Taken steps in relation to scheme administration which alter (or will alter) payments to or in respect of members.
What about schemes in an assessment period?
Where a scheme is in a Pension Protection Fund (PPF) assessment period (or has come out of an assessment period and is being run as a closed scheme), the PPF Board may direct the trustees to request the scheme actuary for written confirmation about any PRAs and to take any action needed to facilitate this.
And schemes in the PPF, or which have wound up?
The good news extends to PRAs in schemes which have already wound up, transferred to the PPF, or come within the Financial Assistance Scheme (FAS) before the new legislation is in force. In these cases, any PRAs will be treated as always having been valid, without the requirement to seek actuarial confirmation.
This exemption is particularly helpful, as it means that schemes with PRAs can proceed to wind-up even if there is delay between the legislation being agreed and it coming into force.
[View source.]
