UK -Trustees of the Lehman Brothers Pension Scheme have taken the first steps to find out whether the UK defined benefit pension fund should fall under the management of the UK's pensions lifeboat fund.
A spokeswoman for the PPF confirmed officials behind the pension fund filed a Section 120 notice on Friday (19 September) to begin the process of getting the scheme recognised as being under the PPF.
The last available data on the Lehman Brothers Pension Scheme showed it had assets under management of £180m (€235m) - understood to be managed by Legal & General Investment Management, Scottish Widows Investment Partnership and UBS Global Asset Management - but there is thought to be a deficit which other pension funds may now have to pay the bill on.
PPF officials say they are unaware of the true status of the pension scheme at this state but information is now being sought from the Lehman scheme trustees "to enable us to assess whether it should enter the PPF".
Dave Robertson, partner of the financial strategy group at consulting firm Mercer, said it will be unclear for some time whether the Lehman scheme is entitled to fall under the PPF as officials will now have to analyse the assets it now holds.
Terms of the PPF cover a substantial sum of defunct company's pension fund assets but there are some limits to the payouts beneficiary may receive, according to Robertson.
"The PPF covers a subset of the scheme benefits and the maximum pension for someone under 65 is £27,770 per annum in benefits, so given it has been closed it is possible people within it will have a significant amount of service," said Robertson.
Robertson explained the entire process could take 18-24 months to complete if the scheme is accepted into the PP but that is only if the scheme is accepted.
Dealing with the initial paperwork of seeking PPF status officially takes 28 days but normally takes a few months to find out whether the scheme should be accepted by the PPF and then takes a further 12 months to assess the scheme's financial status before determining how much further funding may be required to plug any gaps and what entitlements members should have.
"Ironically, it could mean the banking sector puts more strain on the pensions sector," said Robertson.
A key question officials will be looking at is whether it has enough funding to be kept out of the PPF, and this can only be determined by looking at the age and status of its members. Those aged under 65 are entitled under PPF rules to up to 90% of their acquired benefits and then face a cap of £27,770 per annum.
Those over the age of 65 are entitled to all of their pension benefits, so officials must ascertain whether there is sufficient within the existing assets to cover those liabilities.
"The ordinary man in the street would expect to get up to £27,770 a year but for high earners such as some of those seen at Lehman the cap could substantially affect their benefits. Someone on £150,000 a year and having done 30 years' service could find they are only entitled to £27,770 rather than their full pension. The people exposed are those under 65," added Robertson.
This latest action just preceded the filing of court papers late yesterday (Sunday 21 September) by Lehman's administrator PricewaterhouseCoopers asking for the return of $8bn (€6bn) in assets to Lehman Bros International Europe (LBIE) which had been transferred from its account to Lehman Brothers Holdings just before its collapse.
While it is understood there was nothing untoward about the transfer - this was a regular transfer from London to New York every Friday and would see assets sent back each Monday - PwC is seeking to establish the status of these assets as, technically, it contains clients assets and monies handled through the LBIE division and needs to know when they might be access and return as clients monies to their owners.
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