Newsletter 23

A request: If you are an "E-mail Buddy", please print this newsletter and give it to your buddy.

The public situation with respect to the complaints and the Ombudsman is largely unchanged. We can make no prediction about when there will be a determination.

Those newly registered with AMIPP can catchup with the past using the News section, which links to previous newsletters and to many web pages and gives the dates the pages were created. To assist everyone, we have now also put those dates in the headers of the pages. This can be important. For example before 11 June 2003 it was easy for a company to jettison an underfunded scheme and leave the members well short of their promised pensions. (There is now a compensation scheme for the victims but it is an inadequate one.). Regulations have ensured that since 11 June 2003 it has been impractical or very expensive for solvent companies to drop obligations. So our 2002 page Underfunding, closure, and termination. has to be read in a 2002 context.

In early September the message forum suffered a spate of vulgar abuse and attempted impersonations. As well as the purging of those messages, a mechanism was introduced to require people using the forum to acquire a "PIN" by identifying themselves to our Membership Secretary (and the information stays only with him). We were fortunate that the Webmaster and the Membership Secretary were willing and able to put such a mechanism in place at short notice, along the lines that had been discussed previously on the forum.

The mechanism has been a success in preventing undesirable posting, but AMIPP is concerned that it might also have deterred some desirable postings. For an experimental period the PIN has now been made optional - those who want the added credibility and protection from impersonation can use a PIN, while those who just want to tell us something or ask a question in the simplest way do not need a PIN.

Our newsletters have reported on the Green Paper about pensions, and the Pensions Bill, which represent the Labour Party view of pensions. In newsletters 19 and 22 we reported on the views and a pamphlet from David Willetts, presenting the Conservative party's view. The Conservatives used one of their days in the Commons to debate pensions - you can read what was said. The LibDems have recently issued their policy paper . Some comparison of views can be found in a report of a meeting where representatives of the three parties were on a panel. The most distinguishing feature of LibDem policy is the introduction of a state "Citizen's Pension" based on years of residency rather than years of work, the additional benefits being phased in for those aged over 75 first. (New Zealand already operates a Citizen's Pension) "Age Concern" has been doing some polling on the voting intentions of the elderly. Worth a read to see where you place yourself amongst Goodtime Grafters, Measured Traditionalists, Worn-out Worriers, Healthy Wealthies, Home Comforts, and Life Lovers.

National Pensioners Convention (NPC) has issued its manifesto. The NPC is an over-arching organisation for the many associations affiliated to it, those associations being essentially concerned with the state pension rather than occupational pensions. This is not a manifesto in the sense of NPC fielding candidates at elections (so it doesn't have to be costed), but NPC is a large organisation that influences politicians.

The Pensions Bill continues its progress through Parliament, heading for Royal Assent next month. It remains as overview legislation with many missing details - the government suggests there will be more than 100 pieces of later legislation (called Statutory Instruments) to construct the full effect. During the summer recess it continued to be worked on in the Lords, in the Department of Work and Pensions, and behind the scenes by Labour and the TUC. The Lords and DWP concentrated on the balance needed to give the new regulatory body sufficient (but not undue) powers to deal with bad practices by companies (particularly foreign owned ones) in trying to park their pensions liabilities on to the Pension Protection Fund. Labour and the TUC agreed to change the regulation that requires 1/3 of trustees to be member nominated, making it 1/2 instead of 1/3. This will be a noticeable change to the IBM UK setup, not necessarily to the members' advantage - there is discussion on the message forum. Commentators have read party conference speeches as hinting that compulsory contributions to pension schemes by employer and employees (as in Australia) were an unpublished agreement. This topic was deferred from the current Pensions Bill by setting up a commission to examine the issues. Here is one analysis of popular opinion.

An example of the issue that the Lords and DWP are working on is provided by Dexion. (Remember "Dexion Slotted Angle" a Meccano for grownups?) Dexion became a subsidiary of Dexion Group, a European multinational. Dexion in the UK went bankrupt. The rest of the group stayed in business (and the UK selling arm later re-emerged as a management buyout). The UK Dexion employees lost most of the prospective pensions they had earned. The key question is whether the new Act should be curbing this sort of corporate privilege, or only providing the safety net of a replacement pension when the problem occurs.

There is another part of the Bill still being worked on. We have explained elsewhere that there is a clause in the current regulations, known as Section 67, which requires an individual's consent for scheme changes which might disadvantage them; in other words there can be no "losers" of already earned benefit. In the new Bill this regulation is replaced by something weaker; the requirement is that the change does no damage according to actuarial calculation. This is good, in that it allows simplification of schemes, perhaps converting some specific benefit earned under an obsolete plan into an increment of service under the current plan, for instance. But the new rule doesn't guarantee there are no individual losers. Actuarial calculation doesn't take account of individual marriages so the calculation might say that an alternative with larger spouse's pension and a smaller initial principal's pension was equivalent to an alternative with a smaller spouse's pension and a larger initial principal's pension. But a particular individual might not see the alternatives as equivalent, and they would not be able to stop the scheme change. The issue is whether this is just a matter of getting everyone to understand there could be losers, or whether the Bill needs amendment to lessen the prospect of losers.

In newsletter 22 we described how the government had set up a compensation fund, to be provided with £400M from the taxpayer over a long period, for claims from current victims of the situation that the Pensions Protection Fund will, when law, protect against. A potential new set of victims, working for a UK subsidiary of the US firm Federal Mogul, which is in administration, has emerged. If this UK pension scheme wound up it would be £875M short of what it needed. This case has the potential for adding 40,000 more to the 60,000 that were predicted to fall under the government compensation scheme, and to change it from being inadequately funded to being massively underfunded. David Willetts has recently revived an idea previously due to Frank Field that "unclaimed assets" should be given to the compensation fund, and made it Conservative policy. There are apparently £15 billion of such assets, with nobody knowing who owns them. (Guardian, Oct 7 2004)

Perhaps the Federal Mogul story had a bearing on why so many people were spooked by newspaper speculation that IBM was considering changing the C-Plan, and sought answers from IBM and the pensions administrators. Other factors might have been the choice to describe IBM's theoretical power to windup in this year's Members' Report (when the power is the same as it was in all the previous years when it was not described), the unwillingness to tell why Kevin Waller's move from pensions administration to Human Resources was called for, the knowledge of a "large" but unspecified deficit in the fund, or simply the general lack of trust and confidence that has arisen over the years from IBM and the Trust's actions and secrecy. The background and IBM's party line response are here. The response is largely incorrect or irrelevant, so will have done more harm than good.

AMIPP objectives include "Playing the fullest part possible in restoring the members' trust and confidence in the intentions of IBM UK and the Trust board". We have repeated a previous conclusion that has very strong founding in fact - "Although IBM has the power to wind-up (and the Trustee has that power also), the scheme will not be wound up while IBM stays solvent and financially astute."

AMIPP has no knowledge of plans for changes to the C-Plan but it would be surprising if changes to the plan were not being considered, in the same way as other companies constantly reconsider their schemes, both in response to regulation changes and desires for cheapening. In general, the trustees have strong powers to protect pension benefits already earned, and weak powers with respect to benefits not yet earned. If IBM chooses to cut salaries (or to increase employee contributions or cut accrual rates which would be similar in effect) then the trustees have little influence. The trade unions and/or Works Council would be the place to look for consultation about that, insofar as IBM co-operates with them.