case before the US Supreme Court about how far a company can say what it
likes in order to retain staff and subsequently deliver less because of the
small print the employees did not see. It is not directly relevant to IBM
UK pensions because of legal system differences but it bears on Armonk's
attitude to UK pensions. A
second link has examples of the justice(?) US pensioners receive.
US Supreme Court has ruled in the case mentioned above. Even
a summary is lengthy but insofar as there was a "winner", scheme members
have won. The Court repeated established opinion (held both in the UK and
US) that where there is a recorded deal (as in the case of trust deeds) then
that deal should not be changed by the courts, even if what the scheme members
were told was very different from what the documented small print says.
However, the Court opened up the prospect of compensation for the scheme members
where they were misinformed. Significantly, the Court rejected the
view that in order to receive compensation the individual scheme members would
have to demonstrate that the misinformation led them to take some losing action.
verdict has been reached in the The Prudential Staff case which AMIPP has told
you about. The verdict is not good news for scheme members or trustees.
The particulars of the case were about Prudential leading the staff to believe
one thing about discretionary increases and then doing a different thing.
There are negligible prospects of IBM ever providing discretionary increases so
that part of the verdict is irrelevant to IBM. The negative part is in the
While acknowledging the employer had a
duty to maintain trust and confidence in the employer/employee (and past
employee) relationship, the judge held that breach of the duty required conduct
of "some seriousness"
and the test was "a severe one". Thus this judge was more towards the
master-slave end of the spectrum of views of the relationship, as opposed to the
The judge also commented that the
employer was not obliged to engage in genuine negotiation with the trustees
before making its decision. This makes things difficult for trustees
because the many aspects of a pension scheme can lead to several agreements -
the trustees are in a subservient role if these agreements are not viewed as a
whole. Perhaps this indicates that our trustees were naive to enter into
any agreements with the Corporation that were ultimately based on trust and they
should instead have viewed the Corporation as an adversary in the matter of
delivering final salary benefits. Whatever this would have led to, it is
likely the results would have been specific and made available to us, and thus
not dependent on the views of a particular judge.
A small amusement - the Prudential scheme
actuary was Mr Fudge.
We are told
IBM has settled out of court a victimisation claim. The
settlement terms are undisclosed; we are told the claimant is very happy
with the outcome. This represents a success for Now Legal, the
solicitors that are also handling the hundreds of claims about unfair
dismissal and age discrimination, but the circumstances are different so
this result has little bearing on the other cases.
You may not be
pleased by the level at which the UK government has set the floor for
pension increases, but at least it is well defined. The German
regulations leave more room for interpretation. Courts there have
found that IBM strayed beyond the bounds of legality, in seeking to make
lower increases. Unfortunately, the legal system requires the
retirees to each individually bring a case about this. AMIPP has
been told that despite all the cases that have been brought being decided
against IBM, IBM is not willing to recognise its mistake and adjust
pensions for all the retirees. (You can find more by Google-ing "ibm
renten anpassung" and "ibm renten arbeitsgericht".)
Bribery in Asia has not much to do with IBM UK pensions but it is
relevant to what is implied when IBM settles out of court. 22/3/11
Pension Trusts operate under trust law.
This is effectively a set of precedents for interpreting the
acts and regulations.
The Pensions Ombudsman is part of the legal
process. The process of investigation and determination is
described in the Complaints
section. The effectiveness in practical terms is discussed in
Can the Ombudsman be Effective
describes the limitations of what can be learned from an Ombudsman's
determination. Some of the questions we hope for indications on
are described here. Most of our newsletters
contain a comment on some legal aspect.
The Ombudsman has to reflect current law.
The consumer protection for occupational pensioners may need
strengthening. If this happens it will stem from the Pickering
Review (see newsletter 9) or a
similar later review.
Here is a link to a case that might be seen
as supporting IBM's 2006 decision to
change the C-Plan from a final salary scheme to a