The Virgin Media Case - Keep calm and carry on

The mention of Virgin Media, for most people who are not involved with pension schemes, conjures up images of excellent TV shows and fast broadband.

For pensions lawyers it conjures up images of pension scheme documents and the frantic search for actuarial certificates. Riveting stuff. So how did it come to this? 

Last year, in the latest in a line of judicial decisions in pensions cases that can at best be described as “unhelpful”, the High Court in England (subsequently backed up by the Court of Appeal) decided that where amendments were made to a contracted-out pension scheme that impacted those contracted-out benefits, a failure to obtain appropriate actuarial confirmation would render the amendments invalid. Fair enough. Legislation required actuarial confirmation. If there was none, there are consequences that flow from that.   

There have been multiple pensions cases over the years that have decided that a failure to properly meet the formalities required to execute pension scheme documentation could lead to amendments made in good faith being declared invalid. So why is this decision causing particular consternation?  

Bluntly speaking, because of the way in which auditors have decided to approach it. Particularly company auditors. Unlike with those previous decisions, auditors have taken the approach of asking companies what the trustees of their formerly contracted-out pension schemes are doing about the Virgin Media decision. And while the answer ought in many (if not most) cases to be “nothing at this point in time” given the uncertainty around how this issue might be addressed in other upcoming cases and / or by government intervention, that has (for some auditors at least) not been an acceptable response.

Such has been the outcry, that the Institute of Chartered Accountants in England and Wales (ICAEW) has issued guidance to auditors confirming that while they should consider the impact of the Virgin Media decision, there are three possible approaches to take, one of which is, essentially, to do nothing. 

The Virgin Media case concerned a scheme governed by English law. And although the same contracting-out requirements apply in Scotland, there are differences under Scots and English law as to how evidence (or a lack of evidence) is treated.  In a nutshell, the approach under Scots law means that there has not been such a panicked reaction to the Virgin Media decision. Is that why the Institute of Chartered Accountants of Scotland (ICAS) has not felt the need to issue guidance? Or is it just a matter of time? 

If you have any questions about how the Virgin Media decision might impact your pension scheme and what steps, if any, you should be taking to deal with it, please get in touch with your usual Burness Paull contact. 

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