Summary of Complaint

At the time of my retirement in 1997, I had the option to take 100% of my A-Plan contributions as a lump sum. Relying on previous information supplied to me by IBM and trusting that my contributions would be used solely for the benefit of Defined Benefit members of the C-Plan, I chose not to do so, but instead decided to use a proportion of my A-plan to augment my C-Plan pension.

1. Stage 1 Letter - dated 11th December 2000
2. Stage 1 Reply - dated 9th February 2001
3. Stage 2 Letter - dated 12th February 2001
4. Stage 1 Reply - dated 9th April 2001
5. The Next Stage - information from OPAS

Extract from Stage 1 Letter

Here is an extract from my initial letter - the quotes are taken from MILs.

11th December 2000 I wish to complain that my A-Plan funds are being used to provide benefits for quite a different category of member and that IBM have misinformed me regarding their intentions in this matter. I have been misled by IBM and I based decisions upon earlier statements from IBM which, for example, state: "The Deed stipulates that, once money has been put into the fund, it cannot subsequently be removed, other than for payment of benefits to members. In this case the context implies that "members" are members of the Defined Benefit Scheme. The creation of a new class of member who are benefiting from my AVC fund, but who enjoy a different benefit structure is immoral. ".. we aim to compete favourably with the practice of other leading companies." I gather that the IBM Pension Plan no longer compares favourably with other companies. If I had known about IBM's intentions earlier, then I would have made quite different decisions regarding the use of my AVC money by not investing it in an enhanced IBM pension. IBM should have informed me that they redefined the Trust Deeds leading to my detriment and that they no longer aimed to compete favourably with other leading companies.

The Reply to Stage 1

Here is the bulk of David Newman's reply (preamble and personnel details deleted):

9th February 2001 I believe that your complaint may be summarised as follows: "..that money from main plan assets are now being transferred to provide benefits to others.." And that your "...A plan funds are being used to provide benefits for quite a different category of member and that IBM have misinformed me regarding their intentions in this matter" The above actions have lead directly to your detriment. I have investigated your complaints and would reply as follows: No money has been transferred from Main Plan assets. The transfer of such monies is governed by Clause 1 (a) of Part 11 of the Definitive Trust Deed & Rules, dated April 24th 1997. This states that "Nothing in this Trust Deed or in the Rules shall authorise nor shall this Trust Deed or the Rules be altered or modified so as to authorise the transfer or payment of any part of the Fund in any circumstances to the beneficial ownership of any employer." This covers all (i.e.: both Defined Benefit and Defined Contribution) sections of the Main Plan. There is only one Main Plan, supported by one fund. The benefits relating to the different sections within the Main Plan are paid out from the one fund. As no money has been transferred, 1 do not believe it is correct to say that IBM has misinformed you. I am unable to see how you have suffered a loss or other detriment. Your entitlement to benefits remains unchanged. Your correct monthly pension has, and will continue to be, paid on a timely basis each month. The Trust Deed has not been redefined, but was amended in February 2000, on the advice of external legal advisers, to clarify, rather than redefine, an existing clause. Both the trustee's external legal adviser and Scheme Actuary have confirmed that this amendment has had no impact on members accrued benefits. Finally, I should point out that the Trustee can only act within the powers authorised in the Trust Deed & Rules or by external legislation. It has to act in the best interests of the members in the execution of its duties. As a general rule, the Trustee is not able to unilaterally to influence matters of pensions policy. For example, it therefore follows that I am unable to comment about the statement "we aim to compete favourable with the practice of other leading companies." As this is a matter for the Company, rather than the Trustee. In the light of the above, I do not uphold your complaint.

Extract from Stage 2 Letter

As I was not happy with this reply I decided to proceed to Stage 2.

12th February 2001 I wish to proceed to Stage 2 of the Internal Dispute Resolution Procedure as Mr Newman's summary of my complaint is incorrect. In my original letter, I complained that the word 'members' has been redefined to include a new class of member who benefit from the Defined Benefit section of the fund, but make no contribution to this fund. If I had known that this was to be the case when I retired I would have made a quite different decision regarding my AVC. As IBM did not inform me that they intended to define this new class of member, I believe that IBM misled me at the time I retired. Monies have been transferred out of the Defined Benefit section of the fund and, once removed, they cannot be used to support discretionary increases in the future. This will clearly impact the future health of the fund and will be detrimental to members, particularly in view of the fact that we have been offered no guarantees regarding future pension increases. I therefore wish to make a formal complaint under the Internal Disputes resolution Procedure Stage 2. A copy of my original letter to Mr Newman is enclosed together with a copy of his reply. I wish the Trustees to reconsider this complaint.

Reply to Stage 2

Again a brief reply with no mention of the fact that I believe that IBM and the Trustees misled me at the time I made my decision regarding my A-Plan options.

9th April 2001 The Trustee has considered the information you provided, the notice of decision given by Mr David Newman of 9th February 2001, the contents of your letter dated 12th February and all relevant information in the possession of the Trustee and has reached the conclusion that in this case the Trustee has acted properly. This decision confirms the decision given in the first stage of the internal dispute resolution procedure by Mr Newman. 1 have been authorised by the Trustee to respond to your complaint. In relation to the further points you make in your letter to me of 12th February 2001, the Trustee does not agree that the word "members" has been redefined to include a new class of member in the way that you suggest. The legal structure of the Plan is that it is established under a single trust which provides retirement benefits for employees and ex-employees of IBM. These benefits are calculated under a number of different "benefit structures" (viz N Plan, C Plan, M Plan etc). All of these benefit structures are supported by one "Fund" comprising the assets of the Plan as a whole. While benefits under N Plan and C Plan are calculated on a formula relating to length of service and salary, benefits for the M Plan members are calculated on a "money purchase" basis. This "money purchase" basis is simply another formula for calculating members' benefits, in this instance by reference to the return on a particular index or group of selected funds. Members of the M Plan have no right to any particular assets of the Fund and neither do members of C Plan or N Plan. The assets of the Plan are held generally for the purposes of the Plan and it is therefore not correct to say that monies have been transferred out of the defined benefit sections. In addition, the Plan's Actuary includes an allowance for discretionary increases in his assumptions when valuing the assets and liabilities of the Plan and, consequently, "surplus" monies are in excess of that allowance. For the above reasons the Trustee does not uphold your complaint.

The next stage

From other evidence, it is clear that at the time of my retirement, the IBM Trustees knew about the change in pensions policy and deeds, but did not inform me of this when I made my decision regarding the use of my A-Plan funds.

I have now submitted my complaint to both OPAS and the Pensions Ombudsman's Office.

A reply from John Spencer in OPAS describes what will happen next.

There are two complaints, those of Mitchell and Cawley, that the Pensions Ombudsman's office intend to examine together. These complaints cover a wide range of issues, central to which is the use of the final salary surplus of the C Plan to fund the employer contributions of the M Plan. It has been agreed that IBM complainants, having completed the internal dispute resolution procedure, can appeal directly to the Pensions Ombudsman. That is, OPAS involvement is not required before the Ombudsman will consider the case. There are however other IBM complaints in the pipeline. I have asked the Pension Ombudsman's office how these other complaints will be treated. The expression they use is 'travelling with': that is, they will not be investigated until after the determination on Mitchell/Cawley is made. John Spencer

Alan Murphy

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