From the Message Board - 20 to 23 September
Posted by terry critchley on 21 September 2000 at 14:36:38:
I sent a letter about the IBM Pensions Scam and received the
following from Paul Rodgers, IBM UK HR. My reply to him
(unanswered) follows. IBM Confidential Dear Mr. Critchley, I have been asked to respond to your email to Mr. Gerstner on the
subject of the IBM UK Pension Fund. The C Plan is a defined benefit plan and was introduced in 1983.
In a defined benefit plan the Company carries the investment risk
and at no stage are the accrued rights of members affected by
negative fluctuations in the financial markets.
In the past, the Company has had to make significant
contributions due to market underperformance and such actions
clearly demonstrate the Company?s integrity in discharging its
duty towards employees. The funding of the Company's contribution to the Defined
Contribution Scheme (M Plan) out of the surplus of the old
Defined Benefit Schemes was agreed by the Trustee at the end of
December 1996. The Trustee is a separate legal entity, bound by
legally prescribed duties to both manage and safeguard the
operation of the IBM UK Pensions Plans. The Trustee took
independent, formal legal advice prior to agreeing to this form
of funding to ensure that existing members' accrued rights were
not impacted. This has subsequently been reconfirmed, and the
Trustee will continue to monitor this situation in the light
of any new relevant legal developments. As regards increases to pensions in payment under the C Plan,
such increases are discretionary for service pre-April 1997.
The introduction of a partial guarantee of pensions indexation
for
service post-April 1997 (known as LPI - Limited Price Indexation) was
introduced in 1997 as part of the 1995 Pensions Act. The cost
of this benefit enhancement could, legitimately, have been borne
by employees - either through an increase in the employee
contribution rate, or by a reduction in benefit. The Company
agreed to underwrite the funding of this significant benefit
improvement without recourse to employees. Unlike C Plan members, members of the M Plan are legally obliged
to purchase indexation at 5% or RPI whichever is the lower.
At retirement age M Plan members use their fund of money to
purchase an annuity which will provide their pension in
retirement including indexation. As a result the retirement
pension at the outset will be lower than a pension benefit which
is defined and which attracts discretionary increases. I trust that my comments above will serve to reassure you that
your current level of pension is protected and is not impacted
by the transfer of funds from the C to the M Plan.
Although I cannot make a commitment as to what the level of any
future increases may be, I can say that all relevant factors will
be taken into account when future pension increases are being
considered. Thank you for this opportunity to put the Company's position to
you. Yours sincerely, Paul Rodgers,
Director of Human Resources, UK & Ireland
A3, IBM North Harbour.
My reply:
Thank you Mr. Rodgers for your reply. I am sure what you say may
the letter of the 'law' but is not in the spirit of it. Since the
last pensions act, schemes now abide by the 5%/RPI increase
clauses.
Since the C-Plan is in surplus, I can see no reason why these
increases, albeit 'discretionary', should not be applied
to C-Plan pensions. Can you see any reason why not? One further question. For whose benefit is the C-Plan being
managed? Terry Critchley
Posted by Roger Burtenshaw on 22 September 2000 at 20:23:59:
Paul Rogers reply ignores the fact that a fund, that we all contributed 4% to for all our IBM years, has been robbed to provide benefits to totally different population. Although the company can claim to bear the final investment risk, in a normal year employee contributions are about 40% of all new contributions. Whilst for the last few years employee contributions have been 100% of all new contributions. The current company contribution holiday is not the first holiday, I don't ever remember an employee contribution holiday.
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