19 Aug 2014: TPR announces Lehman Brothers settlement
TPR announced today that a £184m settlement agreement has been reached meaning full benefits will be paid to members and PPF entry will be avoided.  The settlement has taken 6 years to reach following an investigation that began in 2008.
The investment bank filed for Chapter 11 protection in the US on 15 September 2008, following billions of dollars of losses from its holdings of sub-prime mortgage-backed securities.  The filing triggered the insolvency of the majority of the group including the Scheme sponsor and other UK operating entities, leaving the UK pension scheme without ongoing support.
In September 2010, the Determinations Panel determined that six companies in the Lehman Brothers Group should receive Financial Support Directions.  Following an appeal to the Upper Tribunal, several legal challenges and an appeal to the Supreme Court in July 2013, the parties have now agreed that certain companies would pay the cost of buying out benefits with an insurer.

Argyll Financial comment:  This is a welcome decision for pension scheme members.  The court processes in this case have also clarified some key points regarding FSDs:
  • FSDs are effective against insolvent targets and liabilities under them rank as provable debts, equally with other unsecured creditors
  • FSDs can be issued to multiple companies which amount in aggregate to more than the buyout debt even though the overall recovery will be limited to that debt
One issue that remains unresolved however is the extent to which TPR can enforce overseas.

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