Lack of actuarial certification could invalidate scheme changes
Contracting-out ended in 2016 but it still has the potential to cause trouble.
For benefits accruing on and after 6 April 1997, a contracted-out salary-related scheme (COSR) had to provide benefits which were broadly equivalent to, or better than, a reference scheme specified in the legislation. When the rules of a COSR were changed it was necessary to get written confirmation from the actuary that the scheme would continue to satisfy the statutory standard.
The requirement was changed with effect from 6 April 2013 to make it clear that the actuary’s assessment of the change was forward looking, so it was concerned with the benefits members would earn for pensionable service after the date of the change.
Unfortunately, there remained some doubt as to what the legislation meant prior to that change, i.e. for scheme amendments made between 6 April 1997 and 5 April 2013.
- Was the actuary’s confirmation concerned only with past service rights?
- If the actuary’s confirmation wasn’t obtained, was the amendment void (invalid)?
- Were amendments which improved benefits also affected?
The recent judgment in Virgin Media Limited v NTL Pension Trustees II Limited and others has provided answers to these questions, though not necessarily the ones practitioners had hoped for.
Trustees need to know what benefits they should be paying so doubts about the validity of scheme amendments need to be resolved but there are likely to be questions about how much digging trustees should do.
It is possible however that the case may be appealed, and the judgment could be overturned.
If you have any queries you would like to discuss regarding the actuarial certification, please contact Kim Jones.
Read the other topical articles from our Pension Law Update:
- Pensions Ombudsman decides who gets death benefit
- Department for Education guarantee applies to academies outsourcing who wish to outsource services
- Remedies for late payment of pension contributions
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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