Posted by Alan Palmer on 17 January 2001 at 13:03:29:
Apart from a couple of points which only affect me, this is my letter of 17 Jan
Dear Mr. Rogers,
With reference to my letter of 28 Dec 2000:-
I have just reread Management Briefing 63 of 17/12/82 and MIL 557 of 20/12/82. They raise further points in support of my position about C Plan capping.
Some main points are:-
- E. R. Nixon states" I want you to encourage your staff to.....recognise........excellent opportunity......invest in more secure and rewarding future"
- "..improvement in the formula (as compared to the N Plan)...2.2% per annum ...highly competitive..enables more employees to achieve the statutory maximum pension"
- "company's contribution will rise...from 15% to ..18%"
- In Transitional Arrangements A (If join at start) "..full prior service...credited...whole cost borne by IBM.."
- In Transitional Arrangements B "(if current C Plan members do not join C Plan at start) pension based on a combination of prior N Plan service and....C Plan"
- In Summary of Key Features A Retirement Age "...retirement between 53 and 60...subject to an actuarial reduction on the service related pension" NOTE :- no mention of the C Plan Maximum affecting the amount.
- In the table comparing plans (note the plural) Re plan maximum:- "C Plan male at 46 years service N Plan 38 years". Re early retirement pension maximum:-" C Plan variable depending on age and service at retirement... N Plan as C plus Not exceeding statutory maximum" NOTE:- The actual C Plan maximum formula was not given anywhere in the Dec 82 communication (including the foil set). I believe it was May 83 before that was promulgated.
- Q&A Q19 "...under 30... why should I join...?" Answer "Never too early...should be building your future security now...."
The above led me and all other IBMers I knew then who started around age 21 to believe that not only was the C Plan 2.2% great but the more years one had to transfer the better it was to transfer at plan start date (hence the £100M cost to IBM). We had been told, by the Dec 82 letters, that we would get an increase in pension roughly equivalent to the difference between the N Plan rate of 1.25-1.75% and the C Plan rate of 2.2% per year. Over ten years' worth in my case.
In practice, I and many others, even without the kind of rule operation changes many of us have sought, would, I believe, have a higher pension if the C Plan option had been taken 4 or 5 years after it started. In addition, we would have saved 4 or 5 years contributions at 5%. The reason I believe the pension would have been higher on that basis is as follows:-
The C Plan maximum is calculated using actual service/possible service to age 60. As the formula uses actual service rather than years in the C Plan ( all examples in pension communications which show 40 years actual service to age 60 prove that to be true), the C Plan maximum would be the same if those like me in terms of age at pension and joining had stayed out of the C Plan for about 4 years. That means the C Plan part of a pension would be the same as we are capped.
There are many joining age/ leaving age scenarios where not "all prior N Plan contributions" actually count towards the final pension. Some
pensions, including my own I think, would be higher if the C Plan had been joined at the January after it started rather than
right at the beginning.
Note: paragraph corrected by Webmaster - see follow on
I feel that the December 82 documents were misleading and the May 93 "clarification" did not point out the loss incurred by joining early. I find it impossible to believe that this cannot be corrected for the small number of us so affected. Please tell me you will put this right.
I am copying this to Dave Newman as the Trustee might want to put forward a position on this.