The Lehman Brothers pension scheme is set to pay full retirement benefits to its members to avoid entry into the Pension Protection Fund (PPF), following a settlement agreement worth £184m.

The settlement comes after nearly six years of investigations and legal proceedings, when Lehman Brothers Holdings Inc filed for bankruptcy in September 2008, which then triggered insolvency for the majority of the group.

Lehman Brothers Limited (LBL) is the sponsoring employer of the Lehman Brothers pension scheme, and the scheme was supported up to this point with a viable recovery plan, under the scheme-specific funding regime.

However, the insolvency of the main UK Lehman Brothers entities left LBL without the means of providing on-going support for the scheme.

Consequently in September 2010, The Pension Regulator's (TPR) determination panel ordered the companies within the Lehman Brothers group through a financial support direction (FSD) to provide financial support to the Lehman Brothers pension scheme.

The regulator and scheme trustees then defended a number of legal challenges arising from the FSD proceedings including in the Supreme Court, which confirmed in July 2013 that FSDs were effective against insolvent targets.

This was also in addition to the case of Storm Funding, which was heard in the High Court in October 2013, which ruled that the regulator was not limited to the s75 debt when requiring multiple targets of regulatory action to provide support to a scheme.

Stephen Soper, TPR interim chief executive, said: "The estimated £184m settlement payment will be the largest sum paid to a scheme as a result of our actions so far.

"This is a pleasing and appropriate settlement for the 2,466 members in the Lehman Brothers pension scheme, and shows we will not hesitate to pursue regulatory action to protect members' benefits and PPF levy payers where we believe it is appropriate.

"The regulator has increasingly been required to engage its anti-avoidance powers to secure the retirement benefits of members and protect the PPF. This case demonstrates that the regulator's anti-avoidance powers can be used effectively, even in highly complex international insolvency situations."

First published 21.08.2014

monique_simpson@wilmington.co.uk