Watchdog orders Nortel to pay £2bn pension bill
The UK's Pensions Regulator is to formally demand that defunct telecoms firm Nortel pay up £2.1bn to meet the bill for its underfunded British pension scheme.
The pensions watchdog's Determinations Panel said it would issue a Financial Support Direction against 25 companies in the Nortel group in Canada, the US, Europe and Africa after Nortel's UK pension plan was found to be "insufficiently resourced".
The UK ruling comes after US and Canadian courts in February rejected claims made by the firm's pension trustees to secure their position in the queue of creditors in both jurisdictions.
Nortel, which at one time employed over 1,000 at its Northern Ireland operations, went into administration in January 2009, leaving a massive pension deficit.
The regulator said yesterday that Nortel UK had ceased to operate as an independent unit and was "effectively controlled" by its Canadian parent company, which had opted to make "little or no contribution" to the pension scheme between 1990 and 2002.
It also found that the Nortel group had benefited from research, sales and marketing activities for which the UK business was not compensated.
June Mulroy, from the Pensions Regulator, said the panel's decision "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 Unite union's regional organiser Sean Smyth, who represented many of Nortel's local employees, said it was no surprise the pensions regulator had ruled in favour of the workforce.
"Nortel ran away from its responsibility when it went into administration and left the workers' stranded with regards to redundancy and safeguarding pension rights," he said.
Mr Smyth also criticised local MPs for failing to adequately raise the plight of Nortel workers at Westminster.
"When it comes to dealing with the bosses' irresponsible actions, the politicians in Northern Ireland who have been wined and dined by these corporate clowns have withered on the vine when it comes to the protection of workers' and their families. It just shows whose side they are on," he added.
The case could have serious implications for the solvency of the UK's pension-fund-rescue scheme.
The £3bn Pension Protection Fund, which bails out funds whose parent companies collapse, already has an estimated shortfall of £1.2bn and Nortel would more than double its deficit.
Ms Mulroy added: "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."
The Regulator's action is expected to add weight to ongoing legal actions by the trustees of the Nortel Networks UK pension fund, which in conjunction with the PPF have lodged appeals to the rulings against their case in the US and Canada.