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How does the IBM Pension Trust compare with others?
Some General Notes
Many pension funds have a surplus. One estimate puts the surplus
in the IBM fund at 1 billion dollars. Some examples of How other
Trusts are using their pension fund surplus are shown below.
We have extracted some relevant information from press reports
and pension periodicals. This will be updated to include new
information as it becomes available.
The majority of C-Plan members will still be under the illusion
that:
"IBM aims to compete favourably with the practice of other
leading companies" (quote from an IBM MIL - Management
Information Letter)
Back in the 1980's it would have been commonplace to expect IBM's
position in the league table to be in the top ten. However times
have now changed and the current position for IBM in this same
league table (al beit) different companies, is now in the bottom 10,
out of a 156 schemes.
Out of the 150 final salary related schemes involved in a recent
survey (ref: "Occupational Pensions"):
- 129 guarantee to provide an increase in pensions in respect to
service prior to April 1997.
- Of these 111 schemes do make guarantees by reference to RPI.
- 20 of which give the full RPI increase
- 68 pay the RPI up to a max of 5%.
IBM's position on this is to state that they are meeting their
commitments of discretionary increases. HOWEVER despite
representation by member elected trustees we can get NO GUARANTEE of
this increase, despite a £700 billion surplus. This surplus if
applied to the C-Plan, from where it was derived, would fund the
full RPI to infinity.
Out of 156 schemes:
- ONLY 21 schemes provide discretionary increases on pre April
1997 service.
- 17 of these awarded increases in 1999 from .87% to 5%.
- IBM managed 2.4% against 3.2% for post 1997.
During
1998 the story is much the same, for pre-1997 service IBM awarded
2.1% but for post-1997 service it was 3.6%.
Throughout this period IBM has taken a pensions holiday.
A fuller account is available in A Decade of
Decline.
Also see A Decade of
Decline (2).
"How does your pension match up to the best?"
Here are some quotes from the Daily Mail - 9th June 1993 -
yes that is 1993, not 1998 !!
They are based on information fromm the then latest "National
Association of Pension Funds Survey".
- Three out of every four company pension schemes guarantee
increases every year.
- Nearly half of all funds guarantee an increase in line with
the cost of living or 5%, whichever is lower.Companies with this
guarantee include BAT Boots, BP, Guinness and BT.
- Even in 1993 Shell were guaranteeing RPI up to 7% and Glaxo
RPI up to 12%.
How other Trusts are using the Surplus
Here a a few examples of what other Company Pension Trusts have,
or are doing, with their pension funds surplus:
Last year M&S increased the spouses pension from 50% to the
maximum allowed by law of 66.6%. In a list of 489 occupational
pension schemes, 88 of them now award two-thirds pension to spouses.
Thorn (whose pension fund already awards 5%LPI to all 32,000
members), have proposed splitting the current surplus 50/50
between members and company. The company takes £50M gross (£30M
net), each member receives an immediate 5% benefit increase and, in
addition members will be a guaranteed future increases of
7%LPI (that is RPI up to a maximum of 7%). The proposal has been
sent to all members for their consideration.
Comment: It was nice of Thorn to at least ask its members
what they thought about it first!
However, even this 50/50 split is considered by some to be a
'Raid' - see "£50m
raid by Nomura on Thorn pensions"
Here are some quotes from the Shell Contributory Pension Fund
newsletter, dated October 2000.
- "The good news ..... earlier this year.... we gave a special
pensions increase".
- "pensions on the up..... This year the Company decided to use
its discretion to award an increase of 3.0% to all pensions in
payment. A further 0.2% was awarded to bring last year's increase
up to 3%. This 3.2% increase maintains the SCPF's excellent record
on pension increases"
- "It is also time to review the communications that the Company
has with pensioners and a special questionnaire is enclosed with
this report. .... We want to know what you think."
- "The Shell Pensioners Association (SPA) helps former employees
to keep in touch. It now has 15,500 members and 23 branches."
Its seems that Shell think more highly of their pensioners - a
special increase, a questionnaire and an Association.
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