The Pensions Regulator has confirmed in a report that it has ceased its anti-avoidance case against Nortel, following a settlement for its pension scheme members.
Published today, the report, gives background detail on the case, TPR's regulatory action, and the outcome, detailing a timeline of events.
The regulator has welcomed the start of payments to the UK plan following a settlement reached in October 2016 between global creditors on the allocation of over US$7bn raised from the sale of Nortel’s assets. The settlement agreement, which became legally effective in May, ended several years of litigation in North America about how the funds should be allocated following the Nortel group’s insolvency in 2009.
The agreement ends a period of uncertainty for UK members and minimises the cost to the Pension Protection Fund (PPF).
In 2010, TPR’s Determinations Panel held that Financial Support Directions (FSDs) should be issued to several Nortel group companies to provide support to the pension plan. In conjunction with the plan’s trustee and the PPF, we pursued the case for financial support right through to the settlement being reached in October 2016.
Following the settlement agreement becoming effective, we have concluded, together with the trustee and the PPF that it would not be reasonable to use our powers, and accordingly we have agreed to cease our anti-avoidance case.
Payments totalling over £1bn are expected to be paid into the UK plan over the forthcoming months, and the plan’s trustee expects the proceeds to be sufficient to allow benefits to be secured outside the PPF. The plan provides benefits for almost 31,000 UK pensioners and deferred pensioners who worked for the communications giant.
Commenting on the case, TPR director of case management Mike Birch said: “We welcome the start of payments following the settlement reached last year, which we believe gives the UK pension scheme a fair and proportionate share of the proceeds from the disposals of the Nortel group’s worldwide assets. We believe this is the best outcome in difficult circumstances, and brings to an end a period of uncertainty for the plan’s members.
“As well as highlighting the impact of Nortel’s insolvency on the members of the UK pension scheme, this case also resulted in an important precedent from the UK Supreme Court that FSDs are effective when issued against insolvent companies.”