Lehman administrators in Supreme Court over pension payments

Lehman administrators in Supreme Court over pension payments

PwC administrators are in Court to decide on the future of how pension liabilities should be paid in an administration

PWC ADMINISTRATORS for Lehman Brothers are in the Supreme Court today to decide the future on how the collapsed bank’s defined benefit pension scheme liabilities should be paid.

In a case which will dramatically change the insolvency landscape, PwC administrators are in court arguing that pension payments should no longer enjoy the luxury of receiving priority treatment over other creditors in the event of a collapse.

Currently, defined benefit pension payments are paid ahead of unsecured creditors such as HM Revenue & Customers and suppliers because they are considered an “expense of an administration”.

The three day hearing is due to determine where these types of claims, known as Financial Support Directions (FSDs), will rank in terms of payment if a company collapses. To date the High Court and the Court of Appeal has ruled that they are an expense of an administration.

The Supreme Court could overturn the previous rulings and find that FSDs should be paid as an unsecured creditor, in many cases receiving just a fraction of what they are owed, or after them, where they are likely to receive nothing. If this were to be the case the UK could see pension schemes end up with a large shortfall and take actions to protect themselves.

PwC administrators to Lehman Brothers and Ernst & Young administrators, for collapsed communications company Nortel Network, have joined forces to try and overturn the previous court decisions.

However, Nortel Networks UK Pension Trust, which was advised by PwC partner Jonathon Land, and other schemes are trying to ensure pensions remain a preferential creditor. 

Land said: “The ranking of FSDs has remained a key area of contention over the past few years. The final ruling could have a significant impact on the ways in which pension schemes look to safeguard themselves against insolvency situations.

“The knock on impact could be far reaching, affecting insolvency practitioners and the restructuring world more widely.”

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource