In Reply to: Re: The effect of capping!!!! posted by Dave Mitchell on 14 February 2006 at 16:47:32:
Hi Bryan,
I agree with the thrust of your post. Some comments:
Re funding, the question is "Fully funded to do what?". I believe previous funding calculations by the actuary assumed 70%*RPI for pensions in payment increases. I assume the "fully funded" statement now applies to the reduced liabilities after the implementation of the new less generous increases.
Re the fund moving toward "living off capital" - ie moving towards runoff. We need to remember that as of today IBM can use DB funds to pay it's DC plan contributions. To my mind it is unacceptable that the Trustee acquiesced to this current set of changes without shutting down this clearly unfair situation (which at least 2 of our MEDs have unsuccessfully challenged via the Ombudsman), and which was introduced by IBM in an underhand way ("clever" rewording of the Trust Deeds when M-Plan was introduced, so it is not a separate Plan but another part of the same Plan). While this hole under the waterline exists, a fully funded DB plan, moving into runoff, provides no comfort re what happens to increases after 15 years, or indeed the potential for further nasty surprises before then.
Maurice