Stefan Stoleriu from LCP explains what practical steps organisations participating in Verity defined benefit pension schemes should take in advance of the High Court's ruling later this year.
Around 2,500 charities and other not-for-profit organisations participate in defined benefit (DB) pension schemes in a master trust run by TPT Retirement Solutions. TPT run these schemes on behalf of the schemes’ trustee, Verity Trustees Limited.
Verity has taken a major legal case to the High Court and the outcome could have significant implications for employer pension costs across the not-for-profit sector, affecting charities, housing associations and independent schools in particular. With a ruling due later in the year, now is the right time for charities to understand the issues and prepare their leadership teams.
What is the Verity court case about?
Several years ago, Verity identified uncertainty in how some changes to schemes within the master trust had been implemented in the past. This can happen from time to time in pension schemes. Because these changes affect member benefits and employer liabilities, and the position was sufficiently unclear, Verity was advised to seek clarity through the High Court.
The hearing took place in February and March 2025, and whilst a judgment was originally expected later in 2025, we now understand that the ruling is expected during Q4 2026.
What does this mean for organisations who sponsor Verity’s pension schemes?
Although the case centres on technical pension rules, the potential implications for organisations participating in many Verity defined benefit pension schemes could be material:
- The Court’s decision could lead to changes in how benefits must be calculated for members
- If member benefits increase as a result of the case, this will need to be funded, and sponsoring employers may be required to pay additional contributions into their pension schemes.
In short, the ruling could increase the pension costs of many charities during the years to come, potentially materially.
How much could any additional liabilities be?
When the court case was first mooted in 2021, TPT estimated the impact of a range of outcomes, and notified employers of their potential additional liabilities, with estimates varying by scheme and by employer. Whilst financial conditions have improved since 2021, which we would expect to reduce the impact, the additional liabilities for individual employers in the charity sector could still be material if the outcome is unfavourable.
Ultimately, the actual impact will vary depending on a range of factors and the directions given by the court. The case involved a number of questions, the answers to which may affect different employers in different ways.
In practice, it will take time for Verity to analyse the ruling, to consider its response, and then, if necessary, calculate the impact on members and employers.
What will happen next?
Once the judgment is issued, organisations will need to:
- Understand how the ruling applies to their specific Verity scheme(s)
- Understand any impact on the organisation’s financial statements
- Look at the possible options for meeting or mitigating any additional liabilities
- Develop a response plan (including potential communications with stakeholders) if additional costs arise
- Review their future pension strategy – whether the judgment is favourable or not, organisations should have greater clarity on their liabilities, enabling clear planning.
What should organisations do now?
1. Ensure your Board is aware of the case. Your Board will need to understand:
- What the court case is about, at a high level
- Why the outcome could increase your organisation’s pension liabilities
- That cost increases - while by no means certain - are a realistic possibility.
Bringing this to the Board now avoids surprises when the judgment is released.
LCP’s webinar explaining the background to the case is available on demand at https://bit.ly/4htOR5x. LCP will issue a briefing note and hold a follow-up event once the ruling is released.
2. Consider how any impact can be managed or mitigated
Whilst we obviously hope for a positive outcome, it is worth taking time to consider the options in the event of a negative ruling. This could include:
Cash impacts: thinking about options for funding any additional liabilities – which will not necessarily solely rely on additional cash contributions.
Accounting impacts: having preliminary discussions with auditors about how any additional liabilities should be allowed for, particularly given that the ruling might emerge shortly before the signing date for your accounts.
3. Make sure you’re on the distribution list for future updates
If you or your finance team would like to stay informed on this issue, including receiving copies of the briefing note and invites to future events mentioned above, please email Stefan Stoleriu if you would like to be added to our distribution list.