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Many pension scheme trustees and employers will welcome the news that the Government has introduced draft legislation aimed at addressing the issues arising from the Virgin Media case. This case called into question the validity of amendments made to schemes contracted-out on a salary-related basis between 6 April 1997 and 5 April 2016.
In a nutshell, the case confirmed that where such schemes amended their rules, but failed to obtain an actuarial confirmation where required by Section 37 of the Pension Schemes Act 1993 and Regulation 42 of the Occupational Pension Schemes (Contracting-out) Regulations 1996, the amendment was invalid and void. You can read more about the case in our earlier client alert.
Since the case, many schemes have been waiting for news on whether the Government would act to regularise the position. On 5 June 2025, the Government confirmed that it would introduce legislation to allow affected schemes retrospectively to obtain written actuarial confirmation that historic benefit changes met the necessary standards. This legislation has now been introduced by a series of amendments to the Pension Schemes Bill.
We outline below the key features of the draft legislation, which we expect to be brought into force shortly after the Bill receives Royal Assent, currently slated for early 2026.
There are three key features of the proposed new legislative regime:
Potentially remediable alterations: the regime will apply to “potentially remediable alterations” – these are past amendments that required actuarial confirmation at the time, were treated as valid by the trustees, and where trustees did not take any “positive action” (such as notifying members that the amendment was void or altering benefit payments) as a result of the missing actuarial confirmation. Some amendments, such as those which have already been the subject of a determination by the courts in relation to this issue (or were the subject of legal proceedings on or before 5 June 2025), are out of scope.
Remediation process: to validate the amendment, trustees will need to obtain retrospective written confirmation from the scheme actuary that, in the actuary’s opinion, it is reasonable to conclude that the amendment would not have prevented the scheme from meeting the statutory standard (as it applied at the time of the amendment). Notably, the actuary does not have to conclude that the scheme would have satisfied the statutory standard, but that it is reasonable to conclude that it would have. Arguably this imposes a lower test, presumably to address difficulties with, for example, data availability. The actuary will be able to reach their decision using any appropriate professional approach (including making assumptions or relying on presumptions), on the basis of the information available to them.
Special cases: for schemes already wound up, transferred to the Pension Protection Fund or qualifying for the Financial Assistance Scheme (in each case before the effective date of the legislation), amendments will be validated automatically provided the alteration is “potentially remediable”.
It is of course possible that this draft legislation may be amended. The Public Bill Committee is considering this between now and 23 October 2025, and there are further opportunities for amendments to be made before the Bill is finalised.
As noted above, the legislation is unlikely to come into force before next year. We will provide further updates as the Bill progresses through Parliament.
In the meantime, we recommend trustees and employers take advice before taking any action.
For more information on this development, please speak to your usual Linklaters contact.
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