Note: The comments are 'first impressions' only (as at 28th Nov) and they should only be taken as such!

Comments on the Barclay's Case

In the High Court on 21st November, Barclays won their appeal against the Ombudsman. The Judge agreed with the concept that a Defined Benefit and a Money Purchase Scheme could exist in parallel under a single Trust, provided the legal documentation was couched in appropriate terms, which it was in the Barclays case.

The major differences between the Barclay and IBM cases are:

1. The Barclays Scheme was non-contributory and the pensions have been and are fully protected against RPI. In this case it may not be unreasonable to conclude that there is no justification for benefit improvements or a "catch up" pension increase and that pension fund members do not have any right to the surplus.

   The IBM scheme is a contributory Scheme and the benefits are 'ex-gratia' payments which have typically been 70%RPI. In this scheme there is no future guarantee of any annual increase.

   In the IBM scheme one might argue that IBM should only make use of the surplus once it was satisfied that adequate provision had been made for pension fund members. Consider the case when the surplus has been exhausted and there is growing inflation. The IBM pensioner could well have a 0% increase, whilst the Barclays pensioner would still receive RPI.

   Mike Cawley's complaint to the Ombudsman centres on the fact that the Trustees had failed to ask IBM for any special action to improve pensions before they used the surplus for other purposes.

2. Barclays did inform the Union in advance that they intended to use the surplus to help finance the Money Purchase Scheme. Barclays have always kept their members fully informed as to the progress of the dispute.

   IBM did NOT tell employees about their intentions in the 1997 announcement and IBM has still not, to our knowledge, formally told members. Instead IBM assures us "that IBM acts and will continue to act with complete integrity when dealing with pensions matters".

   In the IBM case there are a number of additional complaints regarding why members were not informed about the use of the surplus to fund the M-Plan section. In some cases it can be argued that plan members have been misled or misinformed.

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