Trustees of the pension scheme of collapsed Nortel has signed a £2.4bn buy-out deal with Legal & General (L&G).
The Nortel Networks UK Pension Plan left the Pension Protection Fund (PPF), after nine years in assessment at the pensions lifeboat.
In March, it was announced that the trustees of the defined benefit (DB) scheme, which had more than 40,000 members and a buy-out deficit over £2bn in 2009, where able to recover sufficient funds from Nortel’s global insolvency to exit the PPF.
Nortel Networks collapsed into insolvency in January 2009, with its European, US and Canadian entities making simultaneous insolvency filings in London, Delaware and Toronto.
The buyout deal now signed with L&G covers around 15,500 pensioner members and around 7,200 deferred members.
In these type of transactions, an insurance policy is issued to each pension scheme member individually that enables the pension scheme to wind-up, or to significantly decrease its liabilities, if the transaction doesn’t cover all members.
After receiving more funds from the insolvency, Nortel trustees were able to offer additional flexibility to the plan members, either through member option exercises or a transfer value, it said.
Since the scheme expects to receive more recoveries, a further transaction is likely to follow in future, it added.
According to David Davies, chairman of the Nortel Networks UK Pension Trust, the buyout “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”.
He said: “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.”
Laura Mason, Legal & General retirement institutional chief executive, added: “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.”
In September, L&G announced a £4.4bn deal with the Airways Pension Scheme, one of the DB schemes of British Airways, which was the largest-ever single deal of its kind.
maria.espadinha@ft.com
