When the Lehman Brothers group imploded in September 2008, the impact of events on the Lehman Brothers U.K. pension scheme was not seen as a key concern for anyone other than the members themselves. Yet as time progressed, the scheme featured heavily in resolving the administration of many U.K. Lehman Brothers group entities and in the process, important legal principles relating to defined benefit pension schemes were decided. Many ancillary points were decided during the litigation (some of which are discussed below), but the most important issue, that of the priority of debts on a winding up, is of great significance.

Defined benefit schemes are a type of occupational pension scheme set up by employers for the benefit of their employees. There are generally two types of occupational pension scheme:

• defined benefit schemes (where a defined level of benefit, usually calculated by reference to a member’s final salary, is promised on retirement); and

 

• defined contribution schemes (where benefits payable on retirement are calculated by reference to contributions paid and returns on investment).

This article focuses on the operation of anti-avoidance pension legislation in relation to U.K. defined benefit pension schemes. In particular, we discuss the litigation over the imposition of pension liabilities on certain Lehman group companies and attempts of those companies to clarify the nature and extent of their obligations.  Read More.