Reports from the London Retirees Club AGM (30th January)

1. By Tom Heneghan
2. By Dave Mitchell
3. By Brian Marks

A letter by Tomas Heneghan

Yesterday I attended the AGM of the London Branch of the IBM Retired Employees Club at which David Newman and Kevin Waller were present, both to give a report on the position of the IBM Pension Plan and to answer questions thereon. Barrie Morgans had been invited to attend but declined. He has now refused invitations from two London meetings and one South Hants meeting.

I also have a copy of a letter sent by David Newman to John Spencer of OPAS wherein he answers some of the questions previously asked by John Spencer as a result of our communications with and complaints to OPAS.

I find the answers given by these gentlemen both at the meeting and in the letter to OPAS so disturbing that I have decided to give you this update to my opinion on our position as retirees viz a viz the Pension Plan.

On 9th December 1991 Barrie Morley as Pension Trust Director and because of the publicity at that time regarding the Mirror Group Pension Fund wrote to Members of the IBM Pension Plan to stress that there were no grounds for concern by members of the Plan and the first point made in the letter was and I quote:
"Ownership of the Fund assets rests with the Trust, independant from IBM."

It is now obvious from replies to retirees at the London AGM that The Company, The Chairman of the Pension Plan and its Trustee Directors no longer believe this to be true. One or two Trustee Directors may be troubled by this fact but they are powerless to act on behalf of the individual members. David and Kevin were at great pains to point out that it was The Company who made the decisions regarding the distribution of Pension Plan Funds over and above the employees rights under the Trust Deed at time of retiral.

In his letter to OPAS David Newman made two serious admissions. He admited that The Trustee was aware in 1997 that when the Money Purchase Section of the IBM Pension Plan was set up that The Company had no intention of making contributions to that Section but that it would take protracted contribution holidays. Note the use of the term SECTION for the first time. It was admitted by David and Kevin at the meeting that the term had never been used by IBM prior to 1997 in any communication with employees or management. This is hardly surprising since I have either the originals or copies of most internal pension communications and there never was any reference to The Pension Plan being made up of Sections.

He further admitted that the Tustee had requested The Company to guarantee pension increases in return for they , The Trustees, agreeing to the above. The Company refused to make such a guarantee. The Company further pressurised The Trustee by taking an initial stance that the the statutory increases to retirees required by the 1995 Pensions Act would be covered by an increase in the member contribution rate or by reducing the future accrual rate of benefits to members if they ,The Trustee, did not agree to The Company's requests. The Trustee therefore agreed to the protrated contribution holidays and to the implementation of the M Plan and proceded with the lawyers to draw up the 1997 Deed of Amendment to change the Trust Deed. I find it amazing that it is only now, four years later, that we as members are being made aware of this.

In fact the lawyers screwed up in wording the amendment as it still talked of employer's contributions to the M Plan. The Trustee therefore had a further Deed of Amendment produced in February 2000 to remove the words "employer" and the contributions now come from an undisclosed source i.e. The C Plan Surplus.

Another important point, about which some of you may not be aware, is that both in the letter to OPAS and at the meeting it was pointed out by the fund managers that the discretionary increases in pensions are already pre-funded before calculating The Surplus in the Main Pension Fund. This almost certainly means that since we have only had one twelve monthly increase since I retired in 1991 that there is a further surplus in the pre-fund. It also gives The Tustee the excuse for claiming that funding the M Plan out of The Surplus does not affect potential increases to retirees.

The conclusion from all of this is that The Comany, The Chairman, The Trustee Directors and the professional management of the Pension Plan believe that the surplus of £600/£700 million belongs to the company and that we as Pension Plan members have no rights to any part of it. In reply to my question as to whether The Trustee Directors could make a decision to make an ex-gratia payment to retirees in line with the current contribution holidays taken by The Company both David and Kevin shook there heads vigorously. The company has in effect removed £42.7 million from the surplus into the M Plan employee funds and an equivalent sum would give an average ex-gratia payment in excess of £5000 to the 8000 retirees in pension whilst having no appreciable effect on the surplus. Since many C Plan members are still in employment with IBM and have a financial interest in the fund surplus their current year's contributions could be treated as AVC contributions and the ex-gratia payments to retirees scaled down accordingly. I am certain that in particular many widows and long term retirees who are suffering as a result of the current devaluation of their pensions would find such an ex-gratia payment most welcome.

Three official complaints have been or are being made under the Internal Dispute Resolution Procedures to David Newman as Pensions Trust Manager, with the support of OPAS and will hopefully be followed up by The Ombudsman. From the attitude at the London meeting however, where David made it obvious that he believes that the Trustees have acted honourably and within their legal rights I do not expect any change in The Company's attitude.

We as ex-employees of The Old IBM have acted as we were trained under Business Conduct Guidlines but I doubt whether these exist in The New IBM and consequently I believe that the gloves are off as they say and I hope to have some meetings with my fellow retirees in the South to decide on what actions we take in addition to the formal Ombudsman approach. The time has passed for using The Retiree Clubs as it is not fair to the hard working committees of these clubs and it was suggested to me yesterday that we need a National C Plan Members Action Group using our successful web site as a communication vehicle.

I look forward to hearing from anyone with ideas and I will keep you all posted on what develops at this end of the country.

Best regards
Tom

By Dave Mitchell

Highlights of Pensions Session - David Newman and Kevin Waller

Overview of 2000 (Kevin Waller)

• Volatile stock market led to a -2% return (typical of large funds)
• Over 5 years, the average is still 12%
• growth in membership to 34000 members:
• 8000 pensioners
• 8000 deferred pensioners
• 18000 employees (10000 in M Plan and 8000 in C Plan)
• Dispensed approximately £100 M in pensions
• 2nd election of Member-Elected Directors who took up posts in April
• Pension increase in October of 2.3%

Equitable Life (Kevin Waller)

• £100M of members money still in it, current plan is to leave it there (though no more has gone in since July 2000 - AVCs switched to Friends Provident)
• retirees have no connection with Equitable Life (annuity bought at time of retirement)
• Pension Trust will be checking that those with Equitable Life GAR would not have done better to leave money with Equitable Life (i.e. bought an Equitable Life annuity)

The Surplus Issue (Kevin Waller and David Newman)

• Approximately £42.7M has been transferred so far (i.e. £18.7M in 2000)
• The quid pro quo that the Trustees got in return for agreeing to the deed amendment was that IBM would absorb the cost of the LPI guarantee for post-97 service
• According to David Newman, the Trustee cannot make awards (annual increases or ex-gratia payments) without IBM's agreement
• Both Kevin Waller and David Newman denied that the surplus was anything like £700M (even though the 97 actuarial figure was 587M). The valuation currently underway will be known to the Trustee in May 2001
• David Newman repeatedly stated that from his observation all the trustees are all diligent and honest, and properly balance conflicts of interest.
• He agreed that IBM is in bottom 10% of the Pensions league and says the Trustee has made sure IBM is aware of this (but he did point out that the C plan is based on 50ths not 60ths unlike most plans).
• He repeatedly stated that it's the company that decides and has the final decisions about increases etc.
• Derek Haslam pointed out that over 10 years IBM pensions have decreased by 10% in real terms and asked why hasn't the Trustee done anything?
• David Newman stated that the surplus transfer does not affect the company's profits.
• David Newman says he couldn't reveal details of what the Trustee has asked IBM for. According to him the Trustee believes it is best (and in the interests of members) to keep its discussions private.

By Brian Marks

About 180 people, double last year's attendance, attended the AGM of the London Retirees Club. [Exact numbers will be in the official minutes.] Each person will have taken away memories of a subset of what happened there and their own slant. This is mine. The Webmaster would welcome your comments. I have used square brackets to enclose bits that are more commentary than reporting.

The routine matters of previous minutes, officer election, reporting etc went smoothly and quickly.

The key people on the platform for the pensions discussion were:

• KW - Kevin Waller, Pensions Trust Administration Manager [who has a long record of time in the North Harbour pensions department].
• DN - Dave Newman, KW's manager, the Pensions Trust Manager [ 2 years in the job].

Cyril Thomas (the chairman) had received an overwhelming number of questions to be put so he had made a valiant effort at structuring the discussion around some typical questions that were in a handout. This was only partially successful since:

• KW & DN could only talk about pension trust matters as opposed to IBM company matters. This was used in ruling some questions as inappropriate for the occasion. [ However, it did not prevent DN from making some remark about IBM cashflow and profit. I don't think anybody in the audience could make sense of this remark but if you did, please tell us.]

• The number of questions from the floor, the eagerness to ask them, and the disputing of some replies, pulled the discussion off the outline.

• KW and DN could only talk indirectly about the trust board behaviour. Barrie Morgans, who chairs that board, was invited but was unable to attend. This inability was known about two months ago but no arrangements for a substitute from the board [such as Jim Lamb] were made. Since a similar thing happened last year there was some feeling that the retirees were being treated disrespectfully.

Because of all that, some questions in the handout did not get addressed, and several questions not in the handout did. In general the responses from KW, which were mainly facts and figures, were gratefully received. DN had the more difficult job of presenting [spinning] the pension department ['all your concerns are groundless'] line and met opposition. (The "New IBM" and "New Labour" analogy was made by somebody :-)

My recollection of particular topics:

• On Equitable: The IBM trust made the decision on behalf of some people not to take advantage of Guaranteed Annuity Rates. This only applies to events before 1st Feb 1992. The approx 800 people involved will have their records checked to see if they were disadvantaged. The check is expected to show that only a few were. You will not be told automatically if you are one of the 800 but if you ask individually you will be told [and presumably given the calculation that relates to you.]

• In addition to the 800 people, we all have an interest in the investments held with Equitable. The C-plan + M-plan total is approx £100M. No lower bound on what that value may fall to can be given because of the infamous "hole" in Equitable's finances.

• Investment performance in year 2000 was -2% [This and the Equitable hole seem to me to be good reasons for keeping C-plan reserves up rather than transferring them out but that point was not made.]

• The latest figure for what has already been moved from the C-plan is £42.7M. [This makes the year by year sequence 2.7M, 9.2M, 12.1M, 18.7M,... This sequence, extended over your lifetime, represents the weakening of the C-plan as it affects you.] A forthcoming actuarial exercise will give good estimates for the next few years. Eventually the per-year numbers are expected to go down because there won't be reserves left to remove. There was some discussion of what the series sum might reach. I understood KW and DN to say they thought it was most unlikely to reach £700M but it might.

• On increases, the figure in the handout "we are now 98th of the top 100 companies" for pensions in payment, was not disputed. (KW has acknowledged "Worst 2%" for topping up.) DN admitted to "worst 10%". [It wasn't clear whether he did not know where the figure was in the range 1-10, knew it was 10, or knew it was less than 10. Or maybe it was 'at least as bad as worst 10% on any possible criterion'.]

• The transition from one of the best to one of the worst during their retirement was felt by many attendees to be cause for action. There was some talk of unions and then of passing a resolution requesting RPI/5% increases. While the resolution was being drafted a discussion (not involving the audience) decided such a collective action was inappropriate for an organisation that was meant to be for social & leisure purposes.

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