The Pensions Regulator (TPR) has published guidance on section 37 issues arising from the Virgin Media Ltd v NTL Pension Trustees case.

The guidance focuses on potential remediation for past alterations to salary-related contracted-out pension schemes.

Regulations made under section 37 of the Pension Schemes Act 1993 restricted certain alterations to the rules of relevant schemes.

In July 2024, the Court of Appeal upheld the High Court’s ruling that a lack of actuarial confirmation would render relevant amendments to affected contracted-out defined benefit schemes’ rules invalid and void.

To address uncertainty caused by the ruling, the government has included remediation measures in the Pension Schemes Bill that will allow the trustees, scheme managers, and responsible authorities (governing bodies) of affected schemes to validate rule alterations that are potential remediable.

TPR has therefore published guidance for governing bodies of affected schemes, seeking to remind them of their statutory duties and set out its expectations of the standards needed to achieve compliance.

Those choosing to use the potential remediation under the bill will need to provide a formal written instruction to their actuaries to undertake the work.

This should specify the alterations the actuary should consider and, where multiple rule changes occurred at the same time, whether the actuary can consider the overall effect of them together, consider them individually, or use a combination of approaches.

While the bill does not give a deadline for using potential remediation, governing bodies were urged to agree a “practical and realistic” timescale for the work.

To decide whether to use the potential remediation available, TPR told relevant governing bodies to consider which alterations required a section 37 confirmation, and weigh up the cost/benefit of devoting resource to tracking down evidence of past certification or just moving directly to remediation if not easily found.

“You should make all the decisions relating to this issue in line with the decision-making procedures in your scheme’s governing documents and record the factors that influenced your decisions,” TPR said.

“You should maintain a clear audit trail for all the decisions, actions and the results of this exercise.”

Commenting on the guidance, Arc Pensions Law partner, Sonya Fraser, said: "The regulator’s guidance is a useful reminder to trustees of their duties in relation to assessing the impact of the Virgin Media judgment on their own scheme, taking the necessary advice, making informed decisions and ensuring that there is a clear audit trail.

"The guidance points out that while the remediation will not be available until Royal Assent is given, trustees can instruct their actuaries to start the work now. That is consistent with what we are seeing, particularly for schemes that are preparing for buy-in or buyout.

"The guidance builds on the pragmatic stance that has been taken on this issue by the industry to date - including the recent FRC actuarial guidance. For example, it states that the regulator does not expect trustees to 'carry out exhaustive searches before your actuary undertakes the remediation work'.

“The regulator also does not expect to receive reports from trustees regarding the actions that they have taken in respect of remediation."

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