The pensions of nearly 2,500 former UK staff of Lehman Brothers, the collapsed US investment bank, have been safeguarded following the settlement of a six-year legal wrangle.
An agreement, announced on Tuesday, will see companies within the Lehman Brothers group make a £184m payment to cover staff pension promises. These pensions had been left in doubt by the US group’s insolvency in 2008.
The deal, struck between the joint administrators of Lehman Brothers International Europe and the pension scheme’s trustees, brings to an end a protracted regulatory and legal dispute triggered by the collapse of the investment bank.
“This is a pleasing and appropriate settlement for the 2,466 members in the Lehman Brothers pension scheme and shows we will not hesitate to pursue regulatory action to protect members’ benefits and Pension Protection Fund levy payers, where we believe it is appropriate,” the Pensions Regulator said.
“[This payment] will be the largest sum paid to a scheme as a result of our actions so far.”
In 2010, the regulator initiated action to force LBIE and six other Lehman group companies to fund the scheme, which was in deficit at the time of the bank’s collapse.
However, the interventions were fiercely contested in a series of legal and regulatory actions that concluded with the signing of the settlement last week.
Had the regulator and the trustees failed in their action against Lehman, members’ benefits would continue to be paid by the Pension Protection Fund, but at a reduced level.
“This negotiated outcome is a good result,” said Peter Gamester, chairman of trustees of the Lehman Brothers Pension Scheme.
“The trustees would like to thank members for their patience, but at least this patience has been rewarded by the commitment to provide funding to secure pension entitlements in full.”
The joint administrator of LBIE said the settlement was “another milestone” on the path to resolving the administration of LBIE. Under the terms of the deal, members’ pension benefits will be transferred to an insurance company, in a deal known as a “buy out”.
Pension experts said it was unusual for scheme members to secure their full benefits in an insolvency situation but cautioned that conclusions should not be drawn from this case.
John Ralfe, an independent pensions consultant, said: “I would be cautious about saying a precedent had been set for pension scheme members being pushed to the front of the creditors’ queue because the Lehman case was so complex.”
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