The Association of Members of
IBM UK Pension Plans (AMIPP)

This page updated 21st April 2003

Decade of Decline (4)

Update April 2003:  The Government Actuary collects data on Occupational Pensions every five years but processing and publishing seems to have low priority.  The 1995 data got published in 2001.  The year 2000 results have just been published.

One factor of interest to us is Pensions-In-Payment (PIP) policy.  Detail figures are given for the distribution of increases, for schemes of different sizes.  The average, for large schemes like IBM's, went:

             1996             1997             1998             1999             2000
Actual PIP Increase           3.0%            2.7%             3.6%              2.3%             2.4%
RPI  Increase           3.25%            2.43%             3.31%              3.12%             1.58%

The compounded effects are PIP up 14.8% and RPI up 14.4%.  This essentially confirms other sources like Watson Wyatt - companies typically had a PIP policy of maintaining the value of pensions in line with the RPI.  

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In Decade of Decline (3) and prior articles the affects of IBM's Pensions-In-Payment (PIP) policy, relative to the policies of other companies, are recorded.  This was done using the Watson Wyatt data for private sector pensions in general, and the annual surveys published by the periodical "Occupational Pensions" for particular companies.

The Watson Wyatt figures up to 2002 are now known and they show that on average pensions were protected from erosion by inflation.  In fact a typical pension slightly increased in value.  This year's "Occupational Pensions" annual survey tells the same story - it is titled "No sign yet that inflation-proofing is under pressure".

Although IBM has told members that its PIP policy would be competitive, in practice the policy has not protected against erosion, and the value of pension from pre-1997 service is dropping. The gap between it and a pension subject to the typical PIP is increasing.   We now have 12 years of data.  Because each of the annual surveys covers some different companies it gets harder each year to find companies that are covered in all the annual reports.  So no new calculations against multiple companies have been made for the twelve year period.

One particular figure is of interest.  If you retired in 1990 and ICL's PIP policy had been applied since, as opposed to IBM's practice, your pension would now be 16% higher.

There are one or two other interesting fragments of information in the 2002 annual survey:

The "IBM IT Solutions PS" is covered.  This has 74 members and guarantees Limited Price Indexation on pension earned for all years of service.

A footnote for the C-Plan (known in the survey as the "IBM Pension Plan"), says the PIP policy is "Aims at 70% of RPI".  The periodical gets its information by sending out questionnaires so presumably this is the policy the Trust specifies to the public.

Of the 123 schemes, the IBM Trust retains its unique position as the only one that does not have a month of the year relevant to annual review of the pensions.

Because of the irregular intervals at which IBM reviews pensions, PIP policy over a period is more meaningful than the figures in particular surveys.  In the latest survey IBM's zero increase was matched by two small firms, Armstrong World Industries and Josiah Wedgwood & Sons.  For the previous survey IBM's 1.2% was better than two firms, Eli Lilly & Co and McGain Foods (GB).

No firm comes close to IBM's overall "Worst PIP Policy" record.