THE CONSUMER'S VIEW OF THE IBM UK PENSIONS AFFAIR

For your convenience, this is an amalgamation and summary of allegations contained in complaints that are now being officially investigated. There is more detailed information about each complaint elsewhere on this website.

Pensions are not charity. Occupational pensions are the outcome of a bargain where the employees contributed work in return for a retirement income. The bargain develops during employment and is complete at retirement.

For decades IBM attracted very high quality staff by, until recent years, providing comprehensively good benefits. The good benefits included a pensions-in-payment(PIP) policy of aiming to compete favourably with leading UK companies.

It cannot be seriously doubted that the provision of a good PIP policy was a selling point in IBM's plans for recruiting staff when it wanted them, and for fostering early retirements when it suited IBM.

IBM's PIP practice has proved to be the worst amongst all comparable companies in the 1990's. This is not due to affordability. It is due to a mechanical rule of degrading the value of pensions by 30% of the RPI change. The Trust collaborated in the application of the rule - there were not two sets of numbers about pension erosion, one for what the Trust proposed and one for what was agreed to.

The Trust has exhibited a policy of doing what IBM wanted, a policy it should not have had. (That is called misdirection) One example is the radical restructuring of IBM pensions in 1996 to make them cheaper for IBM. That was illegal in its introduction of "sections". It was unfair in thwarting Parliament's intention that companies should not take profit from pension fund reserves if they were not preserving the value of the pensions. It put fund reserves, derived from money that was contributed on the basis that it would fund a final salary scheme, to a wrong use.

IBM and the Trust are culpable in not using their discretionary powers for the purpose of the powers - to honour the retirement bargains. IBM and the Trust were culpable of misleading, by withholding from members information important to the members' decisions, for example decisions on AVC's, early retirement and commutation.

The operation of the Trust demonstrated a failure (intentional or otherwise) to successfully manage the conflicts of interest inherent in a situation where IBM US, through its IBM UK subsidiary, hires and fires the majority of the directors. Parliament's intention that members should have a good influence on the running of their scheme is thwarted by the treatment of member elected directors.