Connected Research

Union policy research in the 21st century

Pensions Regulator goes after Nortel assets

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The UK Pensions Regulator has filed a major submission to a court in Ontario seeking a £2.1bn share of the estate assets of Nortel Networks, the Canadian telecoms services company that went bankrupt in January last year. Nortel is in the final stages of selling its assets in a programme that has raised comparatively scant proceeds ($3bn) so far – unsurprisingly, given the economic timing – although all except the most recent sale has had more than one bidder [registration required; limited viewing time]. It has still to decide what to do with its portfolio of intellectual property and next generation wireless patents, which may turn out to be lucrative.

The bankruptcy left 43,000 employees in the UK, Prospect members among them, relying on the Pensions Protection Fund, which pays a limited pension in such situations. Given that the PPF is  in deficit, according to its most recent annual accounts, the Regulator is thus more or less obliged to pursue whatever avenues it can to maximise the PPF’s asset base since it is this that will be used to pay the pensions of those drawing on the Fund.

The comments on the newspaper article show that the move has aroused opposition in Canada, not least amongst pensioner groups as Canada seems to have no law proving employees in bankrupt groups with a fall-back pension, leaving them essentially relying, along with other creditors, on the distribution of sold assets for the payment of their pensions. And pensioner groups see any successful legal claim by the Pensions Regulator as reducing the amount available to them.

The Pensions Regulator has perhaps little choice but to pursue such a claim in court – though it may of course not be successful: no-one yet knows whether the Pensions Regulator has the ability to lodge a claim in this way, while hackles have also been raised locally over the late timing of the intervention (though that’s not the fault of the Regulator, given the uncertainty over its powers in this area). A higher asset base for the PPF is itself welcome since this will facilitate the payment of pensions to those under its protection, and it will also lower the pressures on the levy as regards other UK schemes. From the perspective of UK workers, both ex-Nortel and more generally, both these would be welcome developments. Nevertheless, it is sad to see that the impact of this is essentially to set worker against worker.

The court case is due to start next Monday.

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Written by Calvin

24/02/2010 at 5:05 pm

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