Virgin Media Case – Court of Appeal’s Decision: Far earlier than expected, on 25 July 2024, the Court of Appeal upheld the High Court’s ruling in Virgin Media v NTL Pension Trustees. The decision reaffirms that any amendments to contracted-out salary-related (COSR) pension schemes made after 6 April 1997 are void if the trustees failed to obtain written confirmation—known as a “section 37 confirmation”—from the scheme’s actuary before implementing the changes. This applies to both future benefit changes and those affecting benefits already accrued.
Trustees and sponsors of COSR schemes active between 6 April 1997 and 5 April 2016 should review any amendments made during this period to ensure compliance. The Court of Appeal noted that a Section 37 confirmation did not need to be a formal certificate, all that was required was written confirmation from the actuary. The government may consider regulatory action to address issues arising from this judgment, but no decisions have been confirmed. A working group made up of representatives of the Association of Consulting Actuaries, Association of Pension Lawyers and Society of Pension Professionals has engaged with the DWP to propose that the Secretary of State should make regulations to validate, retrospectively, any amendment that is held to be void because a written actuarial confirmation was not received before the amendment was made, or where such a confirmation cannot be found.
New DB Funding Code: The final draft of the Defined Benefit (DB) funding code (the “Code”) has been laid before Parliament. The new Code, effective for valuations dated on or after 22 September 2024, must be before Parliament for 40 days before it takes effect. Schemes with valuation dates after 22 September 2024 must comply with the new code.
The Code clarifies that trustees’ investment strategies are not constrained by notional investment allocations set out in the scheme’s Funding and Investment (F&I) Strategy, except where TPR expects alignment. The definition of “low dependency investment allocation” (LDIA) focuses on resilience to short-term adverse market conditions, and TPR has removed prescriptive testing requirements, allowing trustees flexibility in demonstrating low dependency.
Significant maturity is now defined as ten years for DB schemes and eight years for schemes with cash balance benefits. The formulaic approach to assessing employer covenant risk has been replaced by a principle-based approach, offering trustees flexibility in their assessments. Further guidance will be issued by TPR in due course.
TPR Twin-track regulatory approach: At the same time as the New Funding Code was put before Parliament, TPR also published responses to its consultations on a twin-track approach for assessing Defined Benefit (DB) scheme valuations. The Fast Track option serves as a filter; valuations meeting its parameters, such as low dependency funding basis and recovery plans, are less likely to be scrutinised or trigger further engagement with trustees.
In contrast, the Bespoke route allows trustees greater flexibility to select funding solutions tailored to their schemes, provided they meet legislative requirements and the principles of the final Code. This approach is suitable for schemes taking more risk, unable to meet Fast Track parameters or facing unique employer circumstances. TPR estimates that 62% of schemes currently meet all Fast Track parameters, with another 19% potentially doing so with adjustments. TPRs latest updates on the new Funding Code and the twin-track approach can be found here: Draft defined benefit (DB) funding code of practice and regulatory approach consultation | The Pensions Regulator. More guidance is expected
This year’s budget will take place on 30th October.
