Virgin Media judgment/Section 37 and public service pension schemes – momentum for further analysis is finally gathering steam following our call to action last year….

Recap of the possible issue 

The ramifications of the Virgin Media Court of Appeal judgment from last July rumble on (full details of the judgment and what it means can be found here). Despite some recent updates from Government (confirming they are continuing to consider the issue), we are no clearer whether the Government will step in to resolve the issue by using its readymade statutory powers to retrospectively rectify any issues with a lack of evidence of required Section 37 confirmations. 

However, whilst much of the focus within the pensions industry has been on the impact of the judgment on private sector defined benefit schemes that were contracted out on a reference scheme test basis, we wrote an article last September about the possible impact on public service pension schemes as well.

Whilst there has been a mixed response within the pensions industry as to whether Section 37 issues are relevant to public service pension schemes, there has been an interesting development which suggests we are not the only ones who think Virgin Media could be a real cause for Government concern. 

Update on the position 

It was reported this week that the LGPS Scheme Advisory Board (SAB) had written to the Government, ostensibly to extend a warm welcome to the new Pensions Minister, but also taking the opportunity to raise a few interesting sidebars as well. One of which was the relevance of the Virgin Media judgment for public service pension schemes. 

The SAB letter describes what we had also understood to be the case, namely that the Government Actuary’s Department has been undertaking a process to check whether Section 37 certificates were ever drawn up for relevant amendments to public sector schemes, and that it has not been able to find them all. 

The letter also notes that HM Treasury believes that the Virgin Media judgment is not of relevance to public service pension scheme because of their different constitution (i.e. legislation based rather than trust-based like private sector schemes). But it also acknowledges that this view is not shared by all including auditors and lawyers.

The SAB letter then goes on to make a direct request of the Government as follows (SAB’s use of emboldened wording not ours):

“The Board would urge that the Government act to bring the clarity needed for the LGPS (and wider public sector schemes) around the impact of this judgment. We believe that DWP can and should use its statutory powers to settle the question retrospectively, in respect of public service pension schemes at least”.

Comment

It is important to see that this potentially significant issue for public service pension schemes is starting to receive the attention it rightly deserves, as it is one that needs resolution sooner rather than later – and that resolution is only likely to come from the Government. 

Since writing our own article on the possible issue last year, we have been perhaps surprised at the lack of attention it has so far received but also interested to note, when raised with contemporaries within the industry the strength of feeling it has elicited. Some are strongly of the view that it is not relevant at all because of the legislative nature of the public service pension schemes and because they operate differently as regards actuarial certifications when compared to private sector schemes (i.e. it is not the scheme actuary that would instruct/be instructed to prepare such certificates). Whilst we acknowledge that to be the case, nevertheless we believe there are grounds for thinking the issue is still applicable to public service pension schemes (please see our earlier article which set out those grounds in more detail).

In the meantime, we will await with interest further developments in relation to this and will of course keep you updated. 

Co-written by Michael Hayles and Mairi Carlin