Nortel Network pension scheme agrees £2.4bn buyout with L&G

Nortel Network Pension Plan has agreed a £2.4bn buyout with Legal and General Assurance Society, covering around 22,700 members.

The scheme, which has 15,500 pensioner members and 7,200 deferred members, entered a Pension Protection Fund (PPF) assessment period after its sponsor entered administration in 2009.

However, after a significant litigation process the scheme has now received “substantial additional funding”, allowing it to strike a deal with Legal and General, securing “benefits in excess of PPF levels”.

Nortel Networks UK Pension Trust chair, David Davies, said: “This ends a near decade long process for the plan and provides security for all our members, whether they are already receiving their pension or planning for their future retirement.

“Extensive and ultimately successful litigation enabled us to secure significant recoveries. As a result the buyout has meant that we can provide most members with the flexibility to decide between different pension options that give them greater control over their future pension income.”

According to Legal and General, the scheme trustee was able to offer flexibility to many members of the plan, meaning they could reshape their benefits or receive a transfer value.

Legal and General Retirement Institutional CEO, Laura Mason, said: “We are pleased to have been able to deliver this significant transaction which provides flexibility and greater financial security to the members of the Nortel Networks UK Pension Plan.

“This transaction continues to demonstrate our solutions driven proposition, while providing wider benefits for the pension environment and the UK economy as we deliver further direct investments.”

KPMG acted as the insurance broker to the trustee, while Willis Towers Watson acted as the scheme actuary and Mercer as the trustee’s investment adviser.

It is the second large bulk annuity deal completed by Legal and General in the last month, after it agreed on a £4.4bn buy-in with British Airways for its Airways Pension Scheme, the largest bulk annuity transaction ever completed in the UK market.

The deal will cover around 60 per cent of all the scheme’s pensioner liabilities. The transaction accounts for existing longevity reinsurance contracts of circa £1.7bn that APS entered into via a captive insurer with Canada Life Reinsurance and PartnerRe, which were incorporated into the buy-in arrangement.

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