The Financial Reporting Council (FRC) has published guidance designed to support pension scheme actuaries dealing with historic amendments to pension rules, ahead of forthcoming legislation prompted by the Virgin Media Ltd v NTL Pension Trustees case.

Last year, the government announced plans to introduce legislation allowing for the retrospective confirmation of scheme amendments following the court judgment, leading to uncertainty around the validity of historic changes made to schemes without formal actuarial confirmation.

The case centred on whether amendments made without a valid actuarial certificate were legally effective, with new legislation to be introduced allowing scheme actuaries to confirm that historic benefit changes met the necessary statutory standards.

The FRC’s guidance aims to give a practical framework to support the application of the ruling and improve confidence that historic changes to schemes have complied with legal requirements.

It noted the judgment had emphasised that some schemes may not be able to demonstrate that past amendments to their rules were valid, potentially leaving them with higher liabilities that expected.

The Technical Actuarial Guidance looks to provide actuaries with non-prescriptive guidance that includes examples of how to apply a proportionate approach to collecting information and forming judgements when historic records are inaccurate.

It was developed in partnership with the industry, including “extensive input” from the Institute and Faculty of Actuaries and the Association of Consulting Actuaries.

The FRC noted that the guidance had been published ahead of the Pension Schemes Bill receiving royal assent and may be updated as the bill progresses through parliament.

"The Virgin Media legal case has caused considerable concern across the pensions industry,” commented FRC executive director of regulatory standards, Mark Babington.

“Our guidance provides actuaries with clear, practical help on how to work proportionately when reviewing historic scheme changes. This will support sound judgement and strengthen confidence that pension schemes have complied with their legal obligations.

“In turn, this will provide pension holders with greater certainty that the investment decisions underpinning their retirement have been appropriately assessed, and the scheme will deliver the expected benefits for its members.”

The Pensions Regulator director of policy, Joey Patel, added: “This guidance will be valuable in supporting actuaries to help affected scheme members without disproportionate cost to schemes.

“We will also issue guidance on this issue in spring to support trustees to navigate this issue while ensuring that schemes are continuously in compliance with legal requirements.”

Association of Consulting Actuaries chair, Stewart Hastie, welcomed the guidance, stating: “Alongside the Institute and Faculty, we have made strong representations on the shape the guidance should take having identified the legal uncertainties and difficulties schemes were facing following the Virgin Media v NTL Pension Trustees judgement and raising this with DWP, alongside the SPP and APL.

"We will of course closely scrutinise the guidance to make sure it is complete – it’s a great sign of how the industry can work with the government and regulators to iron out practical bumps in the road that can undermine good pension scheme governance and administration.”

---