Lehmans cut their losses in pensions dispute

Lehmans cut their losses in pensions dispute
Pensions analysis: Will the settlement of Lehmans’ financial support direction (FSD) dispute encourage other employers to settle? Lesley Harrold of Norton Rose Fulbright believes employers will undoubtedly be taking advice on how the outcome could affect their own cases.

Original news

Pensions Regulator announces settlement in Lehman Brothers financial support direction case, LNB News 19/08/2014 22

Action taken by The Pensions Regulator (TPR) and the scheme trustees during the Lehman Brothers FSD case has now resulted in companies within the Lehman Brothers group agreeing to buy out member benefits in full, which will avoid the scheme’s entry into the Pension Protection Fund (PPF). As at 30 June 2014 the estimated buy-out figure was £184m.

What is the significance of this settlement?

After six years of lengthy and sometimes complex litigation, this is a significant result for all concerned. Firstly, it demonstrates TPR’s doggedness in pursuing its objectives of both protecting members’ benefits and safe-guarding the PPF. Next, it is obviously an enormous relief for the members of the Lehman Brothers Pension Scheme that their benefits will be dealt with on the buy-out basis, which is the best they could have hoped for in the circumstances.

It is also significant for other schemes which currently have contribution notice or FSD cases progressing through the courts or before TPR. Lehmans’ agreement to the settlement on the buy-out basis may have been driven by the decision in Re Storm Funding Ltd (in Administration) [2013] EWHC 4019 (Ch), [2013] All ER (D) 217 (Dec) when the High Court ruled that TPR was not limited to the Pensions Act 1995, s 75 debt when seeking scheme support from multiple employer targets. No doubt other employers will be taking advice on how the Lehmans outcome could affect their own cases.

On a wider basis, it is significant to all schemes which pay PPF levie

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About the author:
Kathy specialises in restructuring and cross-border insolvency. She qualified as a solicitor in 1995 and has since worked for Weil Gotshal & Manges and Freshfields. Kathy has worked on some of the largest restructuring cases in the last decade, including Worldcom, Parmalat, Enron and Eurotunnel.