The Pensions Regulator in legal challenge with administrators

The administrators for Nortel Networks and Lehman Brothers have launched a legal case to challenge the Pensions Regulator’s ability to impose an order that requires them to provide financial support for underfunded pension schemes.

The regulator has issued a Financial Support Direction (FSD) against the two companies on the grounds their pension schemes are insufficiently resourced. However, the administrators have argued such a measure should not be used for insolvent companies.

Meanwhile the regulator and the pension scheme trustees have argued that the liabilities should be treated as an expense in the administration.

Peter Murphy, head of the regulatory unit at law firm Sackers, said: “The positions taken by both the administrators and the Pensions Regulator seem rather extreme. The court may well try to find a more moderate route somehow – although it is not clear whether such a route exists.”

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