Active and retired members of the IBM UK Pensions Plans will have received a pamphlet entitled "Member-Elected Directors" and dated August 2005.  Since we, as current MEDs, did not see the text of this pamphlet until it was distributed we think it appropriate to clarify some of what it says and to provide our perspective on what being an effective MED requires.  We write as if to somebody contemplating being a candidate.  For all material that is not specific to IBM,  the Pensions Regulator's guide for trustees covers the same ground as the pamphlet, in a better way.

You will have noticed the heavy and repeated emphasis in the pamphlet on trustee-director responsibilities.  This may have given you an impression of a mountain of pension formalities to be learned.  In practice, for somebody with a lifetime-learning attitude, it is not a big deal.  The Pensions Management Institute certificate mentioned in the pamphlet is taught with a three-day residential course plus a half-day reprise on the day of the (multiple choice) examination.   It would be hard for anyone of IBM calibre to fail and in any case the exam can be taken again indefinitely. (There are several opportunities per year and the questions are always much the same.)

We see the part of the requirements for  "Trustee Knowledge and Understanding" under the 2004 Act, about pension schemes generally, as much the same as the PMI certificate.  As the Regulator says "the learning which is required should be measured in days not weeks".  Of course this level of learning will not make you an expert on pensions law or the deeds, and the devil is in the detail, but this level will allow you to analyse detail as necessary.  (The regulations can all be found on the web.  The deeds are only available as paper.  For specific facts, we recommend you talk to some colleague or past trustee who has studied the area.) There is a lot more than the minimum required knowledge that could be useful and you will probably choose to learn some of that so as to have confidence in making your contributions to the directors' deliberations.

Reference to the Trustee Training Program might give the impression that this has an extensive fixed syllabus.  In practice the "induction session" has nothing essentially confidential in it and could have been given (with advantage) to potential candidates before they put themselves on the ballot.  Subsequent training is at your choice - we have never experienced any problem in getting the trust to pay for external courses and conferences that we felt appropriate to our education.  The trust will also pay your subscriptions to periodicals that are specialised to pensions.  ("Occupational Pensions" has a good ratio of information to gossip.)   As a trustee, you will need to consider advice from professionals.  Your self-education should bring you to the point where you can, as the Regulator puts it, "understand and, if necessary, challenge advice you receive from your professional advisers about how the scheme is run".  In the case of investment advice, this challenging is not difficult - the professionals involved expect it.  In the case of legal advice there will rarely be cause to challenge because the law is a factual matter (that can be checked since all the regulations are on the web) and any professional advice that is opinion will tend to be non-committal.  Actuarial advice is a problem.  The numbers that actuaries produce come from the spreadsheets and computer programs that they run.  But the algorithms involved are only explained at the coarsest level and there are no training courses that shed further light.  The computer programs are not available for you to run yourself.  Although you may get "what if" data, the "what if"s are not for you to choose. (Government sponsored reviews have criticised this "black magic" interface to actuaries so the position may have improved in your time.)   

You should read the Regulator's guidance on the theoretical possibility of individual fines for trustees.  The pamphlet should have pointed out that IBM provides an indemnity for each trustee so in most circumstances even if the Trust was to be found culpable there would be no financial loss for you - IBM would pay.  The deeds say "The Trustee shall not be liable for any acts or omissions not due to its own wilful neglect or default, and the Principal Employer shall keep the Trustee indemnified against the consequences of the exercise of all the Trustee's powers and discretions"  (and also says something about the pension fund paying if IBM UK goes away).  "Trustee" in that rule includes all the trustee-directors.  The pamphlet refers to acting "fairly and equitably".  Those are not different things - both terms equate to "justly" in the widest possible sense.  (See "just" in the dictionary.)

 Employees should note that while they will be given "time-off" for trustee work [as the law requires] this does not mean they will be given any credit for it, or that expectations of results in their career work by their managers will be lowered.  Part time employees should note that "time-off" has no relevance for them - they will not be paid extra for their trustee work on top of the work they contracted for.  

It is worth commenting on the duty to protect confidential information received as a trustee director.  This is not a duty in law to the extent that keeping the Regulator informed (for example) is a matter of law - the confidentiality duty is more in the manner of a "gentleman's agreement".  We don't believe that David Heath (a current trustee) broke the law when he explained to the employees how he voted on the matter of increased employee contributions.  Nevertheless, it is vital, as the pamphlet explains, to maintain confidentiality and only share information with those you are sure will be similarly discreet.  This can make you appear unhelpful when talking to scheme members but it is a necessary trade-off.  The "gentlemen's agreement" is strained when IBM does not "ensure the flow of information from the Company".   MEDs who are retired will find that they have no access to the pensions part of the employee intranet.  This makes it more difficult for them to reflect the views of all the scheme members because they do not know the totality of what some members have been told.  You can, of course, talk to members about pensions generally and about anything specific to IBM which has been made public.  One thing to be careful about is avoiding giving financial advice.  (Even if not a trustee you would have to be careful about that - giving financial advice requires a licence.) So you need to make sure that anybody you provide views to understands that you are not advising, just making them aware of aspects they might want to consider for themselves.

The meetings of all the trustee-directors (plus advisers and some folk from Pension Services) occur five or six times a year.  Over the years they have developed a largely fixed format  (approving minutes, presentations on upcoming legislation, reports from the chairman and pension services etc.) into which one-off items (like approval of scheme changes) are inserted.  The overall multi-meeting plan is in a "Business Plan" which (together with copies of the deeds etc.) makes up a document of about two edge-inches.  The material for a particular meeting comes a few days before the meeting and is usually less than one edge-inch.   These Trustee Management Meetings last about three hours and will seem rushed to you at first because others know the procedures and you don't.

The pamphlet hardly mentions the sub-committees but these will be around half of the meetings that you go to, and half of the material you have to analyse.   You cannot choose which sub-committees you are part of, although your views will be taken into account, because the MEDs need to be spread around.  The Investment Committee brings the responsibility for a £4 billion fund but only a weak connection to the scheme members - to the extent you fail the burden falls on IBM to provide funding, rather than on the members directly.  The Dispute Resolution and Benefits Allocation committees are the opposite - they don't have much impact on the overall cost of the scheme but have big impacts on particular scheme members.  The BAC in particular addresses the sorts of questions that Family Courts would address  (marriage breakdown, reasonable expectations) because the deeds require it to.  But, in contrast to court procedures,  the potential beneficiaries don't get to decide what information comes before the BAC or to challenge it - they just get to know the outcome of the BAC's deliberation.  Being effectively judge and jury for things that will have a huge effect on a particular beneficiary is a heavy responsibility.

The biggest frustrations from being an MED stem from the gap between the objectives of the trust and the objectives of IBM.   The government intends MEDs to be effective - the Minister who introduced them (it was Peter Lilley) said they would give scheme members more influence in the running of their schemes.  The trustee naturally has the same desire.  But IBM is US led.  There are no MEDs in the US, and US business practice does not see the need for them.  IBM's objectives are no more likely to include effective MEDs than they are to include effective trade union officials.  The history of resignation and decisions not to re-stand exhibited by our MEDs is a measure of the frustrations stemming from the gap between trustee objectives and IBM objectives, with IBM holding most of the trump cards.

Summary

Don't volunteer in the expectation of doing great things for the members.  "Success" may amount to no more than small improvements and avoiding worse degradations.

Don't volunteer for the kudos of your colleagues - by and large you won't be able to discuss with them the things they want to know.

Don't volunteer because you are a whizz at picking winners on the stock market - the trust delegates that job.

Don't volunteer for the pay.  A retiree will get some even for doing little more than nodding agreement when asked to, but that would be a selfish approach.

Don't volunteer for career advancement.  There might conceivably be some in always agreeing the IBM line but there are the other risks - more unrewarded work and doing the right thing while being judged by your the bosses as rocking the boat.

Don't avoid volunteering because you thought you would never have to take an exam again.   The PMI exam won't prove difficult.

Do volunteer if you believe that MEDs should be influential, and you can provide the effort to promulgate members' views and to challenge what seems to be to their disadvantage.

Gavin Wilson, Dave Mitchell, Brian Marks - August 2005