The High Court has ruled the pension claims of trustees at failed Kaupthing Singer & Friedlander Bank should be valued using annuity rates on the date of its insolvency.
The UK division of Icelandic bank Kaupthing fell into administration in October 2008 after the Financial Services Authority deemed it would struggle to meet its depositor obligations.
Today’s ruling by Mr Justice Sales will reduce the bank’s pension debt by £66m.
International law firm Freshfields Bruckhaus Deringer had been advising the bank’s Ernst & Young administrators about its pension situation.
Freshfields pensions partner David Pollard explained: “This is a sensible decision.
“As pointed out by the judge, it would cause many problems and not be very consistent if the date for estimating the annuity rates differed from the date the value of the scheme’s assets are fixed (the date of insolvency) and the date the level of benefits being provided are fixed (frozen as of the insolvency date).
“It would not be comparing like with like.”
“Had the judge taken the opposing view, this would have added substantial uncertainty to the insolvency process.”
Due to the changes in insurance company annuity rates since October 2008 KSF’s estimated pension debt was set to increase from some £74m to about £140m.