Panel Says Nortel Underfunded U.K. Subsidiary’s Pension Fund

A June 25 determination by a panel of the U.K. Pensions Regulator states that 25 companies in the Nortel group must provide up to £2.1 billion (US$3.3 billion) to a U.K. subsidiary’s pension fund, saying the group’s improper transfer pricing regime was designed to create a shortfall in the fund. [U.K. Pension Regulator's Financial Support Direction Notice re: Nortel Networks U.K. pension plan, TM6409, determination notice issued 6/25/10]

The panel concluded that the control exercised by Nortel’s Canadian parent entities over their U.K. subsidiary included whether and in what amounts funds would be contributed to the U.K. firm’s pension plan. The panel said the evidence showed that the Nortel group benefitted by making little or no contributions to the U.K. pension plan and failed to adequately make up for the deficit through its transfer pricing regime. Under the regime, the group benefitted two ways, the panel found: by undercompensating its U.K. subsidiary for research and development and sales and marketing activities and from an interest-free loan that was drawn against the U.K. subsidiary. Enjoying this article? To continue reading you need to take out a FREE trial to the Transfer Pricing Library.




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