A law firm has warned collapsed firms with large pension deficits will face an “uphill struggle” to reassess the debt after it has been certified by auditors at the point of insolvency after a High Court ruling this week.
In 2008, a £2m fund was transferred by Kaupthing Singer & Friedlander, a UK subsidiary of failed Icelandic bank Kaupthing, to the Bank of England in a ringfenced pot.
When the bank became insolvent there was confusion as to how the money was to be distributed between potential beneficiaries, including its pension scheme. A subsequent judgment of the court of appeal held that the scheme was the beneficiary.
In a fresh ruling on the case earlier this week, the High Court ruled against the administrators of the bank, and found the £2m deposit held on trust for the pension scheme could not be deducted from the administrators’ debt to the scheme.
High Court chancellor Sir Terence Etherton ruled that it would be “unprincipled” to “go behind” the actuary’s section 75 certificate, which establishes the level of statutory debt as a “single, indivisible debt”.
Pinsent Masons’ pensions partner Alastair Meeks says: “By freezing the calculations of assets and liabilities at the point at which the insolvency event occurs, the calculation of the debt does not need to be endlessly revisited in the light of changing circumstances.
“This ruling means any firm wanting to do so would really face an uphill struggle.”
However, the chancellor’s ruling says it could be possible to reasses the debt in exceptional circumstances, for example in cases where there is evidence of fraud.