Lehman pensions case: a much needed reality check
Lehman pensions case: a much needed reality check The bankrupt groups Lehman Brothers and Nortel Networks (a Canadian telecoms organisation) won a landmark case in the Supreme Court yesterday over The Pensions Regulator’s (TPR) assertion that pension members should be given priority over the firms’ other creditors. Lehman Brothers and Nortel Networks left pension deficits of £130 million and £2.1 billion, respectively. This is a case where the term ‘landmark’ is certainly not wheeled out flippantly, as the ruling is likely to set a precedent for the other companies which fail and subsequently leave behind pension deficits. If nothing else, this judgement finally provides clarity to pension members that their pensions take no special priority within the company and any handout of assets in the event of liquidation. There is growing realisation among pension members that their once-considered ‘bullet proof’ final salary schemes are not so secure after all – and should their sponsoring company go into liquidation then they may find themselves waiting patiently in line with the rest of the company’s unsecured creditors. With economic concerns still prevailing, coupled with huge advances in technology (making it likely that some corporate giants of today might not even exist in decades to come) , it would be almost impossible to say that, in the vast majority of cases, company pension schemes are these days ‘guaranteed’. Indeed, as I recently pointed out, these schemes are, by their very nature, reliant on the financial stability of the members’ firm. The question someone, especially a younger worker, should ask themselves is ‘will my company still exist and be financially sound in three or four decades’ time when I come to draw my pension?’ The news underscores once again what deVere has been saying for years – that financial security is increasingly becoming a personal responsibility for each and every one of us – we can no longer hold on to assumptions that greater agencies (such as companies, the State) will be able to provide for us in the way they have done for previous generations. The world has changed. With this in mind, we need to ensure we have a sound, efficient and achievable financial plan in order to reach – and hopefully exceed – our objectives, which include for most people is financial freedom in our mature years.