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Retirees of Nortel Networks Corp. have vowed to continue their fight to find a new model for managing their pension fund assets, saying the Ontario government needs an alternative to forced liquidation and the unpalatable requirement to buy annuities with the money.

Ontario Finance Minister Dwight Duncan notified Nortel's pension committee late Tuesday that his government will not allow a request to have the company's $2.5-billion pension plan transferred to a private-sector financial company for management, saying it puts plan members at risk.

"I am not willing - particularly after the financial events of 2008 - to risk making an already difficult situation worse by subjecting $2.5-billion in retirement savings to an untested capital markets model," Mr. Duncan told the pension committee.

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Retirees had urged the government to let the plan avoid mandatory wind-up by the end of September following the liquidation of Nortel under court protection. They instead tabled a novel solution for Canada, proposing that the pension money be transferred to a new independent investment fund managed by a major financial company, avoiding the need to crystallize the plan's deep shortfall at this time.

The pension fund is estimated to have assets equal to about 65 per cent of its liabilities, which means plan members could lose about one-third of their pension entitlements.

Don Sproule, national chairman of the Nortel retirees committee, said Wednesday the plan members are disappointed by Mr. Duncan's decision, but intend to keep fighting to change his mind.

Mr. Sproule said his committee believes Mr. Duncan's letter of rejection contained errors - including an assertion that similar efforts to convert pension plans to private management in Britain have been controversial - and that Mr. Duncan does not have all the facts yet.

For example, Mr. Duncan's letter says the retirees have not provided a detailed offer to take over the management of the funds, including a term sheet from a financial institution willing to sponsor the fund and provide retirement security for pensioners.

Mr. Sproule said institutions interested in bidding on the job have been preparing offers, and they are due by Sept. 27, so the retirees could soon give Mr. Duncan the information he is seeking.

"We certainly haven't given up," Mr. Sproule said. "We're in it for the long haul."

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He said retirees would also be willing to consider alternatives to private-sector management of the money if they could help avoid the need to buy annuities with the pension money.

Retirees argue the current low-interest-rate environment is a terrible time to purchase annuities with the money in the plan, which is the normal route when pension plans are liquidated. Annuities are investments that provide a steady stream of income to retirees for the rest of their lives.

"Fundamentally what we're looking for is a competitive option to rote wind-up by annuity," Mr. Sproule said. "What we're trying to do is push the government to consider alternatives."

While the pension fund is facing a wind-up date of Sept. 30, Mr. Sproule said the reality is that little action will take place for at least a year, so his committee still has ample time to keep proposing better solutions.

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