Virgin Media v NTL: reference scheme test and “Section 37”

In June 2023 a landmark judgement was handed down in the High Court in the case of Virgin Media vs NTL Pension Trustees II Limited that could have significant implications for defined benefit (DB) pension schemes going forward.

The aim of this High Court case was to ascertain whether an amendment to a scheme’s rules was invalid in the absence of a confirmation from the Scheme Actuary under Section 37 of the Pension Schemes Act 1993. The Judge ruled that it was.

Other DB pension schemes that were “contracted out” between April 1997 and April 2016 – when contracting-out was abolished – could be impacted by this judgement. If changes were made to scheme rules but a valid “Section 37” confirmation was not obtained from the Scheme Actuary, then in such cases these changes to scheme rules could be deemed invalid. This could have implications for benefits payable to members and the funding position of these schemes.

It may take some time for the industry to understand the impact of this ruling, and for the next stages of the legal process to become clear. It is anticipated that the ruling will be appealed and, given its significance, could also be the subject of government intervention. In the meantime, trustees and sponsors to DB schemes should consider seeking legal advice as to what steps to take.

Owing to Virgin Media’s massive footprint in many UK markets – through it’s subsiduaries such as internet provider Virgin Broadband, airline Virgin Atlantic and former phone network Virgin Mobile – the case with NTL has garnered a lot of attention. And whilst there has already been a lot of discussion on the legal details of the case, it is also helpful to understand some of the background, including:

  • What is contracting-out?
  • What is the Reference Scheme Test?
  • What a “Section 37” confirmation was?
  • Can actuaries give Section 37 confirmations now?

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