Defined benefit (DB) pension scheme sponsors have been encouraged to consider including some narrative disclosures around the status of any risks, following the Virgin Media judgment.
In June 2023, the High Court ruled that a lack of evidence of actuarial confirmation would render relevant amendments to affected contracted-out DB pension schemes’ rules invalid and void.
This ruling was also upheld by the Court of Appeal in July 2024, with industry experts warning at the time that this could have far-reaching implications for many DB schemes.
And with year-end pensions accounting exercises approaching, LCP suggested that auditors will likely be asking sponsors to make meaningful investigations into the implications of this precedent for their schemes.
However, it acknowledged that the best course of action will depend on many issues, including the materiality of pensions in the context of the sponsor’s accounts, the outcome of any investigations or legal advice already sough, as well as the quality, completeness and complexity of the historical records.
Industry experts have argued that the Department for Work and Pensions (DWP) should provide "urgent" clarity on issues arising from the Virgin Media and NTL case, with some schemes now receiving member inquiries on the ruling.
LCP acknowledged that there is potential for government intervention to resolve some or all of the issues, and some pension schemes would want to wait for that.
However, it argued that it is unlikely to be in time for sponsors reporting at the 2024 year-end, who under the relevant accounting standards usually need to consider legal risks based on the position at the time.
As a result it suggested that most sponsors need to consider including some narrative disclosures around the status of any risks.
Given the potential for material liabilities, it also stressed the need for sponsors to address this with appropriate advice.
"The Virgin Media judgment has potential to have material accounting implications. Sponsors should proactively engage on this," LCP partner, Helen Draper, said.
Recent Stories