Virgin Media decision: ICAEW sets out considerations for trustees, sponsors and auditors

The Institute of Chartered Accountants in England and Wales has published an information note on the Court of Appeal's decision in Virgin Media Ltd v NTL Pension Trustees II Ltd, which may be of interest to trustees as well as sponsoring employers and their auditors, at whom it is primarily aimed.

The Court upheld the earlier High Court decision, confirming that "section 9(2B) rights" included both past service and future service rights. At first instance, the High Court also decided that the effect of the relevant regulations was to render void an amendment to the rules of a contracted-out scheme which related to such contracted-out rights in so far as the amendment was introduced without actuarial confirmation.

The Institute’s information note does not make any recommendation of the appropriate course of action but sets out the various approaches that the parties might take following the ruling and the considerations for each approach. It suggests the following possible approaches for trustees:

• A wait-and-see approach – be aware of the amendments that have been made to the scheme and whether actuarial confirmation was required. This could give an idea of the potential likelihood of the scheme incurring additional obligations.
• An information-gathering approach – this could help trustees make an informed decision on what to do next and consider whether an in-depth investigation or analysis is needed.
• A detailed analysis – where trustees conclude that a more detailed investigation is required to ensure the correct benefits are being paid, although it may not be a cost-effective use of scheme resources while so many uncertainties remain.

As regards accounting considerations, the note says that corporate sponsors of a pension scheme which could be affected by the ruling will wish to consider how to reference the potential impact in their financial statements. If the scheme is immaterial to the sponsor, it may be appropriate to say nothing, as it would be unlikely that any possible additional liabilities are material. However, where any change in the assessment of DB liabilities could be impactful, sponsors will need to decide how best to present the potential change in their financial statements. The note examines various approaches which may be considered.

In turn, auditors of financial statements will need to make judgements on the approach to be taken in the specific circumstances of the scheme. Early communication with the sponsor will be important to determine the agreed approach.

For more detail on the Virgin Media case, see our related briefing.