Government should address current insolvency laws to stop pension schemes becoming “super-creditors” following the Nortel and Lehman Brothers ruling, the Confederation of British Industry says.
The employer group said the ruling - which upheld The Pensions Regulator's financial support direction against the insolvent companies - muddles the creditor status of schemes and could make it harder for small employers sponsoring defined benefit schemes.
It also warned the ruling could make it harder for smaller defined benefit sponsors to raise finance from banks.
It urged the Department for Work and Pensions to legislate on the issue and address it in the upcoming Pensions Bill due this year.
CBI head of pensions Neil Carberry said: "You cannot have a situation where pension schemes are moved from the position they have always held to a different position in the creditor line. Effectively, by making an FSD an expense of the insolvency it means if a regulator issues an FSD then the pension scheme becomes a super creditor."
He added: "I think it would be wise for all parties to be thinking about what the appropriate way of dealing with this is so that firms can continue to operate, to continue to support covenants and continue to invest in their businesses."
The CBI said it fears the directive will push financiers further down the list of creditors to repay if a firm goes bust, pushing up the cost of finance.
The DWP said it was considering the implications of the judgment with the Insolvency Service.
A DWP spokesman said: "The government's intention is that members of defined benefit pension schemes and the Pension Protection Fund should be treated fairly during insolvency procedures.
"The Pensions Regulator has made clear that it is required by the Pensions Act 2004 to act reasonably in using its financial support direction power, and to have regard to the interests of those directly affected by them - this includes the impact that the use of the power could have on a target company and other creditors."
The administrators for Nortel and Lehman Brothers have been given permission to appeal.
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