Mistakes, recalcitrance, bureaucracy E and pensioners
By David Gleason

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Mistakes, recalcitrance, bureaucracy E and pensioners

October 26 2000
David Gleason

This column is dedicated to the memory of Bennett Martins, who died on July 29.

I do not expect Martins' name to mean anything to you; indeed, it meant nothing to me until a member of the pension fund to which he belonged drew my attention to the circumstances in which he died.

On the night of his death, Martins was in Soweto, ill and cold. His home was in darkness because the electricity had been cut off, as had his telephone.

His medical aid allowance had been used up and he couldn't afford to buy medicines or visit his doctor. (I don't know why he didn't go to Chris Hani Baragwanath Hospital).

Bennett Martins was an IBM pensioner. He retired in 1986 after 26 years of service. The night before his death he used his last rand to call Ian Murdoch, another IBM pensioner, and a pension fund trustee, to plead for help from the company.

IBM's local pension fund has its own in-house investment managers. It was formed in 1970 and is a separate legal entity.

Even so, its members appear to enjoy little control. Such control is allegedly is exercised by IBM in the US, of which IBM South Africa is a wholly owned subsidiary.

The IBM Pension Fund's board comprises eight trustees, four representing the company and four the members. The chairman alternates and has no casting vote.

A rule of the fund prevents trustees from making any decision 'which may have an effect on IBM's financial obligations to the fund or any matter concerning the benefit or contribution structure of the fund'. This pretty well ensures an impasse whenever convenient to IBM.

The pension fund is small, with only about 450 members, and it has since been replaced with a provident fund for active employees. Nevertheless, the fund's assets have been well managed, and it stood at R493 million at the end of last year.

My information is that the surplus after reserve has reached R170 million.

The important statistic is that the annual investment returns alone are more than double the pensions paid. In other words, since 1995 the surplus grew by more than 20 percent a year.

However, increases in the pensions paid over the same period have averaged only 5,5 percent, resulting in pensioners' loss of purchasing power of about 20 percent.

In 1995, the fund's trustees, under the chairmanship of Jack Clark, then IBM South Africa's chief executive, authorised pension payment increases to catch up with inflation.

A problem with the administration of this programme meant the increase wasn't properly implemented for pensioners who had retired between 1986 and 1989.

The error was discovered in June 1998 and confirmed by the fund's actuary in August that year. The board ignored it.

In January 1999, the company appointed new trustees who were alerted to the problem. It remained unaddressed. A group of aggrieved pensioners finally threatened to take the matter on review before the adjudicator. But it wasn't until October last year, more than a year after the problem had been spotted, that the fund's actuary was formally asked to investigate it.

A month later, Bennett Martins asked for help. His pension payment was R800 a month, from which R200 was deducted for payments to the IBM medical aid scheme.

He was already ill, and the correction to the payments due to him would have resulted in a lump sum payment of more than R3 500, plus a small increase in his monthly pension to R900.

But the actuarial examination was again delayed. Members' representatives openly questioned IBM's motives. A posse of attorneys and advocates was hired to interpret what the 1995 decision really meant.

Meanwhile, Bennett Martins arrived at IBM in March, accompanied by his wife. His circumstances were so desperate that IBM staff whipped the hat around and collected R1 200.

I do not suggest - no one does - that IBM caused Bennett Martins' death. He might well have died on July 29 even if he had been paid the money due to him, and even if he had received medical care.

But he could have died in better circumstances, with warmth, light and dignity.

This is a story about mistakes, recalcitrance and senseless bureaucracy. It carries a terrible lesson for all pension fund trustees - that the welfare of fund members relies on their exercising the utmost diligence and care in the performance of their responsibilities.

As for IBM, its recently appointed general manager, Mark Harris, who was once himself a pension fund trustee, says 'the situation was resolved'.

I suppose that's one way of putting it. Meanwhile, perhaps the company should take time out to sit in judgment on itself.