Virgin Media Ltd v NTL Pension Trustees II Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Bacon |
| Judgment Date | 16 June 2023 |
| Neutral Citation | [2023] EWHC 1441 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PE-2022-000010 |
[2023] EWHC 1441 (Ch)
Mrs Justice Bacon
Case No: PE-2022-000010
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
Rolls Building
Fetter Lane
London, EC4A 1NL
Nicolas Stallworthy KC and Philip Stear (instructed by Gowling WLG (UK) LLP) for the Claimant
Jennifer Seaman (instructed by Eversheds Sutherland (International) LLP) for the First and Second Defendants
Andrew Short KC and Patrick Tomison (instructed by Squire Patton Boggs (UK) LLP) for the Third Defendant
Hearing dates: 2–3 May 2023
Approved Judgment
This judgment was handed down remotely at 10 a.m. on 16 June 2023 by circulation to the parties or their representatives by email and by release to the National Archives.
Introduction
In this claim under CPR Part 64, the claimant Virgin Media Limited asks the Court to determine the correct interpretation of historic provisions relating to contracting-out from the State Earnings Related Pension Scheme ( SERPS), as applicable between 6 April 1997 and 6 April 2013, in relation to the National Transcommunications Limited Pension Plan (the Plan).
The questions raised concern the interpretation of s. 37 of the Pension Schemes Act 1993 (the 1993 Act) as amended by the Pensions Act 1995 (the 1995 Act), and Regulation 42 of the Occupational Pension Schemes (Contracting-out) Regulations 1996 (SI 1996/1172) (the Regulations). The questions seek to determine how s. 37 and Regulation 42 affect the Plan's Second Definitive Trust Deed and Rules dated 8 March 1999 (the 1999 Deed & Rules), which sought to amend the Plan's revaluation provisions with effect from 6 April 1997.
The questions in this case proceed on the assumption that the 1999 Deed & Rules were not the subject of actuarial confirmation (as required by Regulation 42) that the pension scheme would continue to satisfy the relevant statutory standard following the amendments. On that basis, the essential question is whether the effect of s. 37 is to render the amendments void, and if so to what extent. These questions have been the subject of considerable uncertainty in the pensions industry for some time, but have not yet been determined in proceedings concerning other schemes.
The claimant is the principal employer under the Plan, and was represented by Mr Stallworthy KC and Mr Stear. It says that s. 37 did not render the amendments void. Alternatively, it contends that the Regulation 42 requirements only applied to past service benefits, and not to benefits arising from service after the date of the amendment; and that any sanction of voidness should only apply to adverse alterations.
The first and second defendants are the trustees of the Plan and are neutral in these proceedings. They were represented by Ms Seaman.
The third defendant has been appointed to represent those beneficiaries of the Plan in whose interests it would be to argue for the invalidity of the 1999 Deed & Rules and to the greatest extent. He was represented by Mr Short KC and Mr Tomison. The third defendant's position is that the failure to obtain the necessary actuarial confirmation means that the amendments made by the 1999 Deed & Rules are of no effect; that the Regulation 42 requirements apply to both past and future service benefits; and that voidness under s. 37 applies to all relevant alterations and not only adverse alterations.
Factual and procedural background
The Plan is an occupational pension scheme which provides “defined benefit” pensions (i.e. pensions based on the member's salary and how many years of service the member has accrued) and lump sum benefits on the retirement and death of members of the Plan, and those claiming through its members. It was established with effect from 1 January 1991 for employees of National Transcommunications Limited ( NTL) and associated companies, by the Trust Deed and Rules dated 6 December 1990 (the 1990 Deed & Rules).
From the outset, the Plan was contracted out of SERPS and was therefore what was referred to as a “contracted-out salary-related” scheme. The effect of contracting-out of SERPS was that the employer could pay national insurance contributions at a reduced rate on behalf of both employer and employee. The corollary was that the employee would not accrue the additional earnings-related component of the state pension under SERPS.
Before 6 April 1997, a contracted-out salary-related scheme was required to provide each member with a Guaranteed Minimum Pension ( GMP), broadly equivalent to the SERPS pension that it replaced. The scheme had to be the subject of a contracting-out certificate issued by the Occupational Pensions Board ( OPB), which would only be provided if the OPB was satisfied that various prescribed conditions were met by the scheme.
The amendments to the 1993 Act introduced by the 1995 Act made extensive changes to that regime, with the detail of the new regime set out in the Regulations. In particular, with effect from 6 April 1997, further accrual of GMP ended and instead contracted-out schemes had to satisfy a more general test of overall quality, which became known as the “reference scheme test”. Whether that test was met had to be assessed and certified by the scheme actuary. The OPB was abolished, and responsibility for issuing, varying and cancelling contracting-out certificates was passed to the Secretary of State, who delegated those functions to the Contributions Agency.
The 1999 Deed & Rules were executed on 8 March 1999. They sought to amend the Plan's revaluation provisions, by (in broad terms) reducing the rate of revaluation of deferred pensions under the Plan. The claimant and the trustees are agreed that the 1999 Deed & Rules did not adversely affect any benefits which had already been earned by 8 March 1999, because of a fetter in the amendment power (in clause 31(2) of the 1990 Deed & Rules) under which the 1999 Deed & Rules were executed. The reduction in the rate of revaluation therefore only affects future accrual of benefits after 8 March 1999.
It is common ground that the parties have not located any confirmation from the Plan actuary that the alterations to revaluation made in the 1999 Deed & Rules would continue to satisfy the reference scheme test. In that context the claimant issued these proceedings on 10 October 2022, to determine the impact of that (if any) on the validity of the 1999 Deed & Rules as concerns the accrual of benefits after 8 March 1999. It should be emphasised that there has been no determination of whether an actuarial confirmation was in fact issued at the relevant time. The court is, however, asked to proceed on the assumed basis that no such confirmation was issued.
Under the Third Definitive Trust Deed and Rules dated 21 June 2010 (the 2010 Deed & Rules) the Plan closed to new members. For existing members, the revaluation of deferred benefits continued on the same basis as under the 1999 Deed & Rules. The 2010 Deed & Rules appended the required actuarial certification. In the present case, therefore, the question of validity of the 1999 Deed & Rules affects Plan members with pensionable service between 8 March 1999 and 21 June 2010 (believed to be around 430 to 450 members). If it is held that the changes to revaluation set out in the 1999 Deed & Rules are void and ineffective, that will improve the benefits accrued by those members during that period of time, at a cost to the Plan which has been estimated at around £10 million.
The relevant legislation was later amended, and contracting-out of SERPS was eventually abolished with effect from 6 April 2016. For present purposes, the question is the interpretation of the legislation in the version applicable between 8 March 1999 and 21 June 2010.
Legislative framework
Requirements for a contracted-out scheme
Section 9 of the 1993 Act set out the requirements that any scheme had to satisfy if it was to be approved as a contracted-out scheme. As originally enacted, those requirements included conditions in relation to GMP accrual. As amended by the 1995 Act, with effect from 6 April 1997, the GMP conditions remained for benefits relating to the employee's service before that date: s. 9(2A). For benefits relating to the employee's service from 6 April 1997, however, the requirements for a contracted-out scheme were as set out in s. 9(2B). That section required the Secretary of State to be satisfied that the scheme complied with s. 12A of the 1993 Act as amended, as well as various other conditions.
Section 12A(1) of the 1993 Act, as amended by the 1995 Act, required the scheme to satisfy the “statutory standard”, defined in s. 12A(2)–(4) as being met if the pensions under the scheme were collectively broadly equivalent to, or better than, the pensions that would be provided under a reference scheme as specified in regulations made under s. 12(A)(4). Section 12A(5) then provided that regulations made under s. 12(A)(4) may provide for the determination (of whether the scheme met the reference scheme test) to be made in accordance with guidance approved by the Secretary of State.
Crucially, for present purposes, s. 12A(6) provided that:
“The pensions to be provided for such persons under a scheme are to be treated as broadly equivalent to or better than the pensions which would be provided for such persons under a reference scheme if and only if an actuary (who, except in prescribed circumstances, must be the actuary appointed for the scheme in pursuance of section 47 of the Pensions Act 1995) so certifies.”
The Regulations were made pursuant to various provisions of the 1993 Act, including s. 12A(4). They set out the detail of the requirements for contracted-out schemes and the way...
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