PPF ready to face Nortel's £1bn deficit
UK - The Pension Protection Fund (PPF) today has said it would be able to handle a £1bn (€1.12bn) deficit, as the ailing UK pension scheme of defunct Canadian telecoms giant Nortel is poised to be placed in the UK lifeboat scheme.
A PPF spokesman told IPE today: "The way [the PPF is] designed is to make sure that we can survive both an upturn and downturn in the economy. We are built for it."
The PPF has received a Section 120 notice, the official notification of insolvency, from Nortel, whose UK pension fund is estimated to have a £1bn deficit.
The fund will now commence discussions with the trustees of the €2.5bn Nortel Networks UK Pension Plan trustees and the company's administrators to see if the scheme is eligible to enter our assessment period.
Once the fund is recognised as being under the lifeboat fund, it can take up to two years to assess the scheme's financial status, before determining how much further funding may be required to plug gaps and the entitlements members should have.
Pension experts today feared the move could put a huge strain on the PFF, as it has already amassed billions of pounds of pension liabilities in the four years since it was established.
The spokesman told IPE it is "too early to say" if more cash would need to be raised.
"Our levy is not just our only source of income, and the levy is capped, so we can only raise it to a certain limit, and that limit can only be changed by government," he added.
The limit has yet to change, and the PPF did promise in the 2006/2007 year it would keep its levy stable for three years, stressed the spokesman.
David Davies, chairman of the trustee board of Nortel's UK fund wrote to scheme members in September explaining the value of the plan's assets had fallen by £89m over the period from 6 April 2007 to 31 March 2008.
Following the plan's deterioration, the trustees intended to implement a liability-driven investment (LDI) programme in order to reduce risk to the plan by the end of last year.
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