Britain’s Pension Protection Fund may have a seat at the Lehman Brothers creditor’s table in the US when it comes to divide the proceeds of the liquidated group among lenders, according to the administrator of its UK pension fund.

The PPF said on Wednesday that the Lehman Brothers Pension Scheme had entered the stage where a full accounting of assets and liabilities takes place to determine whether there is enough money to ensure all guaranteed benefits are paid.

If there is a shortfall, that will be covered by the PPF which, in turn, will seek a share of proceeds of the liquidated group.

Jonathan Land, partner in the pension credit advisory business at PwC, said the trustees of the UK scheme had taken the precaution of securing a guarantee of benefits from the parent company some time before it became insolvent in September.

That makes it a creditor of the parent company rather than of the UK subsidiary and gives it a greater chance of recovering losses.

A recent legal decision in favour of the UK Pension Regulator in respect of US-based Sea Containers’ UK scheme has established the pension fund as a creditor entitled to share proceeds of companies in bankruptcy.

Mr Land said that there might not actually be a shortfall of funds available to pay PPF-level benefits.

The scheme is funded on an accounting basis typically 90 to 110 per cent of benefits guaranteed by the PPF.

The PPF pays 90 per cent of promised pension benefits up to a cap of about £28,000 and does not pay for inflation proofing in respect of benefits accrued before April 1997.

Lehman Brothers closed its defined benefit scheme to new and existing members in 1999.


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