The Pensions Regulator (TPR) has issued a Financial Support Direction against organisations in the Nortel group that will require them to provide support for the UK scheme, which had a shortfall of £2.1 billion.
The Pensions Regulator’s determinations panel found that it would be reasonable to impose the requirements of an FSD on the target companies after the employer of the Nortel Networks UK pension plan was found to be ‘insufficiently resourced’.
Nortel Networks UK entered administration in January 2009. The organisation was effectively controlled by the Canadian parent entities – Nortel Networks Corporation and Nortel Networks Limited.
The determinations panel found that the Canadian parent entities’ control over Nortel Networks UK’s financial position included whether, and in what sum, it contributed to the pension plan.
For some 12 years prior to 2002, the Nortel group benefited by paying little or no contributions to the scheme. The group also benefited from the controlling parent companies’ failure to adequately address the deficit from 2002 onwards.
The determinations panel agreed with the TPR’s evidence that Nortel group companies derived benefit from Nortel Networks UK’s research and development and sales and marketing activities, for which Nortel Networks UK was not adequately compensated.
The Nortel group further benefited from a growing interest-free loan drawn against Nortel Networks UK. At its peak in 2007 the amount of the loan reached £467 million.
June Mulroy, executive director for delivery at The Pensions Regulator, said: ”The panel’s decision is obviously welcome. It makes clear that companies within the Nortel group benefited from both the activities of Nortel Networks UK – and from the failure by the controlling Canadian companies to allow the UK company to repair the sizeable pension deficit.
“The FSD enables the scheme to have a voice in the insolvency proceedings of the target companies. The FSD is a UK regulatory process and is not an attempt to enforce outside of the Canadian or US insolvency processes. It provides certainty over the size of the pension debt for the courts and those supervising the Nortel insolvencies.
“We will continue to strive for the best result for the 42,000 members of the Nortel Networks UK pension plan and to limit calls on the Pension Protection Fund.”
Read more articles on pensions