Posted by Rod Ward on 20 October 2000 at 14:53:17:
I have just written (via e-mail) to OPAS as follows:
Dear Mr. Spencer,
I understand you are dealing with some recent complaints against the actions of the Trustees of the IBM Pension scheme (for example OPAS ref 26121). I would like to add my name to those complaining. I am sure that many of the points I raise below are similar to those already raised with you.
I joined IBM in November 1967 and have been a member of the Defined Benefit Pension Scheme during that time, transferring from the 'N' plan to the current 'C' plan when it was introduced in 1983. I am planning to retire within the next 2-3 years and am obviously anxious to ensure that my pension and any increases are properly funded. In particular I wish to make the following points.
When I joined IBM, 100% of my salary was pensionable. During my employment, and more so recently, IBM has changed the benefits package to include larger portions which are not pensionable. For example, I and many other senior employees receive a car allowance, and most employees receive a variable pay element (bonus), neither of which are pensionable. In my case these add up to about 18% of my base salary, which implies a similar erosion of my pension based on Final Pensionable Salary, compared with my original expectations. I have been assured by IBM that this situation is legal and "normal", and that I should fund the shortfall myself with AVCs or similar. While I have no grounds to refute the IBM statement, it makes any other erosion of the pension even more critical.
Like many companies IBM has introduced a Defined Contribution (M) plan for new employees. The Defined Benefit (C) plan is now closed to new entries. I noticed this year that the committed IBM Company contribution to this M plan has been funded by transferring money (12.1 million pounds) from the surplus of the C plan fund. I have since discovered that similar (if smaller) transfers have taken place in the 2 previous years. I wrote to Kevin Waller, the IBM Pensions Service Manager, questioning this transfer, who replied as follows:
"The M Plan and the C Plan are sections of the same overall pension trust from a legal standpoint. In determining the level of company contribution the Trustee sought appropriate legal and actuarial advice on this matter. Further, it is the company (not the pension trustee) who, on the advice of the scheme actuary, determine the level of company contributions to the pension plan."
Since the M plan and C plan have totally different members, different funding arrangements, and different benefits, they have to be treated as separate funds for accounting and auditing purposes, even if they are legally part of the same trust. If they are part of the same fund, then IBM has failed to make its committed M plan payment during the last 3 years; if they are separate funds then IBM (or the Trustee on their behalf) has no right to move such money between the funds.
The Trustee Directors did not inform the members of the C plan that the newly created M plan was to be funded from surplus funds in the C plan. As C Plan members have no beneficial interest in the M Plan they should have been consulted or at least advised of this action.
Neither did the Trustee Directors notify members of the C Plan that an Amendment to the Trust Deed was implemented on 24th February 2000 removing the obligation on IBM to make the statutory contributions to the M Plan.
The C plan surplus, which is in large part funded by the C plan members themselves, should be used to the benefit of the C plan members, as described in various pension leaflets during the last 20 years. The rules of the C plan allow for "ex-gratia" increases in pensions but these have lagged behind inflation by about 20% since 1983.
The above points lead me to believe that the Chairman and the Trustee Directors of the IBM UK Pension Trust have not complied with their legal obligations regarding disclosures to members nor are they sufficiently representing the rights of C plan members to IBM.
I believe that the Trustees should be directed:
to reinstate back to the C plan accounts, any monies transferred from the C plan to the M plan
to ensure that all plan accounts (C, N, A, T, M etc) in the trust are henceforth treated and accounted as separate entities with no cross transfers, unless (and I don't see how) such a transfer can be shown to be to the benefit of members of both accounts.
to ensure that IBM UK contributes it's statuary contribution to the M plan from its inception
to use current and future surplus in the C plan for the equitable benefit of C plan members and pensioners, taking due regard of actuarial and investment forcasts. This could take the form of ex-gratia increases to pensions in line with (or slightly above) inflation.
Please could you let me know of any other actions I should take. I understand I should sign a form. My address for normal mail is: Address Supplied