On the go: The UK pension scheme of failed telecoms giant Nortel has been bought out with Legal & General in a £2.4bn transaction, bringing nine years of uncertainty for members to an end.
The Nortel Networks UK Pension Plan has been in the Pension Protection Fund assessment period since 2009, when Canadian multinational Nortel declared international bankruptcy.
A lengthy process of “scorched earth litigation” ensued in which various claimants established their share of $7bn (£5.4bn) in residual assets, which were held by US and Candian courts in a “lockbox” until May 2017. The case has been a key test of the Pensions Regulator’s and PPF’s ability to recover money from overseas companies.
The opening of that escrow account and a transfer of more than £1bn in assets paved the way for a bulk annuity transaction securing benefits above the PPF’s guaranteed level.
The buyout also brings total bulk annuity volumes past £15bn for 2018, and the Nortel scheme’s lead investment adviser Mercer said it is likely that more than £20bn will be written by the end of this year. Legal & General alone has completed more than £8.4bn in derisking business in 2018 and boasted of £25bn in active pricing discussions.
“The Nortel transaction illustrates the diverse range of situations to which buy-ins and buyouts can provide solutions to enhance outcomes for members, scheme sponsors and in this case, the PPF,” said Legal & General chief executive Nigel Wilson.
