- The data on inflation as it bears on retirees.  The RPI annual change reached 4.8% and is now 4.4%, heights not seen since 1991.  Very roughly, the combination of this with the Trust's current algorithm for pension increases leads to pension in payment decreasing in value by 2% a year, as opposed to the 1% a year that prevailed under the previous algorithm.  However, this assumes that the RPI is a good measure of the cost of what retirees buy.  Studies specific to older people's spending show that the damage is actually greater.  Here are some July 2007 figures.  And more figures.

- The government's rolling review of the legislation.  The news is mostly could-have-been-worse.  The consultation document showed only a "reluctance" to damage pensions already earned.  The report to the Minister proposes that "any changes to current regulation will be made only in respect of service going forward".

Pensions in deferment are currently revalued upward with inflation each year, up to a cut-off of 5%.  The consultation document mooted changing the 5% to 2.5%.  No change is recommended in the Report for existing deferred pensions.  For pension earned in the future and deferred in the future, the Report does not recommend the cut but it does say "We would understand if Government took the view that, when looking at the package as a whole, a reduction in the cap from 5% to 2.5% was one of the measures needed....".   So there is cause for those who might leave IBM before retirement to be concerned.

Any hopes that retirees might have of a surplus in the trust fund leading to better pension increases (which used to be a common occurrence) are extinguished by the report.  Despite the fragile nature of surpluses, the report aims to make it easy for companies to remove the surplus as cash.  ("The existing explicit statutory requirement that the trustees must be satisfied that any surplus return is in the members’ interests before giving their agreement should be repealed.")

Removing some of the protection for active members is recommended.  Members of the C-Plan will know that the pension they are earning carries with it mandatory increases when it is in payment, up to a cut-off of 2.5%.   For earlier service this was 5%, but the trust&IBM chose to degrade it to 2.5% as soon as they legally could.  Members of the I-Plan will know that the cut-off on what they were earning was not reduced.  This was because although the regulations allowed it, the I-Plan deeds did not.  The report says "We propose that legislation be enacted that will provide an override to restrictions on the amendment power where those restrictions would prevent schemes from changing their rules to allow benefit changes for future service where such changes are made possible by changes in legislation. We would extend this override to situations in which schemes have been unable to implement the Pensions Act 2004 changes to LPI"  If the government accepts this recommendation, active I-Planners can expect to be earning a less valuable pension for the same future service.

- The Trust and IBM's silence on the effect of age discrimination laws.

There is nothing to report here.  It remains true that some practices give an impression of age discrimination.  Two employees can find themselves doing similar jobs under similar salary structures and with significantly different pension earnings.  There will be a strong correlation showing that the younger employee gets the poorer deal.  But we have not heard whether the trust thinks this is OK because of exemptions from age discrimination law, or because the discrimination is justifiable, or whether the trust feels no reason to consider the matter because no individual has the statistical evidence on which to complain.

- The Trust's silence on MED arrangements.

There is now a proposal from the Trust.  We have explained previously that it has been known since 2000 that new arrangements would be needed.  The Regulator has been consulting on the Code of Practice since July 2005.  You might feel that the Trust could have made proposals to appoint MND's for calendar year 2008.  They are actually proposing appointments starting near the start of the financial year 2008-2009.

For detailed comment, start at the elections item. ( This link is also in the left column of the AMIPP home page).  The good points of the plan are:

Age discrimination has been removed.   The Trust wanted this change for the 2006 election, but IBM refused to allow it.  As a result, a significant proportion of retirees (including the chairman of AMIPP) could not stand at the 2006 election.

The Regulator has stood firm on what the Code of Practice says is the maximum reasonable delay in appointing MNDs.  (Although the chairman of our Trust would have preferred he did not.)

There is no disqualification for a retiree trustee taking work with an employer who might be regarded as a competitor to IBM UK.  (Other reasons for disqualification are listed.)

The division of candidates has been simplified to an election of two employees and two retirees, to obtain an initial four MNDs.  (The simplification is welcome, although no quotas at all could be better.  No reason is given for the quotas, or for the omission of a quota for employees in the money purchase M-Plan.)

Because of these improvements, the new plans will be welcomed by scheme members.  There is, however, a risk that our trustees will (illogically) deduce from the broad welcome that the plan is faultless.  (If you bought a brand new car you might welcome its delivery, but you would still want any flaws you found corrected.)

The Trust wants to hear your views.  The email address is pensions@uk.ibm.com.   If you do write, AMIPP would like a copy sent to  . (This is an image, to avoid the attention of robot programs that search webs for email addresses; you will have type the address into an email.). 

You might feel, especially if you are a deferred member, that neglecting deferreds is not fair or proportionate.   No reason is given for the exclusion of deferreds.   The exclusion is clearly unfair, since deferreds have a strong interest in the management of the scheme, usually over a long period.   Possibly the inclusion of deferreds has been regarded as disproportionate to the task - it would certainly add noticeably to the effort in running the election.  But a scheme of IBM's size could well afford it.  The neglect of deterreds is somewhat sex discriminatory; as a report to the Minister says "[women] are more likely to earn pension benefits early in their careers and then leave the workforce for periods of time to undertake caring responsibilities."

It is bad for every scheme member that the Trust plans to give itself the power to override the election voting when replacement or extra MNDs are required, by appointing "temporary Trustee directors".  This is not necessary - one of the strong points of the Single Transferable Voting system is that the data can be reused to elect replacement or additional trustees as the need arises, from the original field of candidates.  Since the Trust chooses not to tell you this, and gives no criteria by which it would exercise discretion, you might deduce that the intent of this part of the proposals is to temporarily weaken the effect of the government's intention to improve the representation of scheme member views on trust boards.

The government plans, by 2009, to increase the proportion of trustees who are MNDs from 1/3 to 1/2.  The legislation allowing the Minister to do this is already law.  As with any of the government's plans, it might not happen, but it is likely that it will.   The Trust is proposing to give itself a power, if additional MNDs are needed, to select those MNDs from the minor placings in the original election, irrespective of what the Single Transferable Voting calculation of the "next in line" determines.

The idea of a trust board dominated by IBM appointees selecting a new trustee other than the trustee the electorate wanted is not a desirable feature. 

It is worth recalling that the scheme members gave their approval to the "opt-out" arrangements in 1996 and then had to live with the consequences until 2007.  In principle the new arrangements can be improved every four years but experience suggests that if flaws are to be corrected, that should be done from the outset.  If you want suggest improvements, now is the time to do so.

Legal News:

There is one bit of legal news, bad for scheme members.  As you know from our home page, AMIPP has always been concerned with the question "whether a company can do and say whatever it likes when it wants to recruit, retain or retire employees and then do something different subsequently."  In a particular case, an employee was repeatedly given information on which he made decisions.  It later transpired that the trust deeds contradicted what he was told.  The Ombudsman decided "it would be unjust to permit [the company] or the Trustees to go back on the representations that were made".  The company appealed to the High Court and the High Court supported the Ombudsman.  The High Court judge said "When one has recourse to the entire agreement cases that is supportive of my view that the Appellants should not be able to avoid the consequences of what appear to be clear and unambiguous statements (and were intended so to be) merely by reference to the need to read a Trust Deed".  The company then went to the Court of Appeal and the judge there found for them.  The information given to the employee was in documents that had a disclaimer  that the deeds overrode the document if there was disagreement.  The Appeal Court judge said that the deed, as a formal legal document, prevailed over the information given to the employee.  (The legal reference is Steria Ltd and others v Hutchison and others: [2006] EWCA Civ 1551)

The only prudent advice that can be deduced from all this is "Don't believe what Human Resources or Pension Services tell you, check it out with the deeds".  But that is hardly practical advice for our scheme members, when the deeds come in some 13 parts with nothing to help merge them, and are written in counter-intuitive legalese.

Scheme members will have received a letter from Pension Services asking them to provide or refresh their "Life Assurance After Retirement Beneficiary Nomination" form.  Those who have done so will have been told about lump sum benefits payable.  (Balance of five year's pension, plus at most a £1000 of what other trusts call funeral expenses.)   What the letters don't say is that the form refers to "any benefits" and will be taken into account when considering discretions about what pension any "dependents" may receive.  The value of these pensions can be way higher than the benefits mentioned above.  The deeds require the trustees to make decisions about such matters as whether a marriage has irretrievably failed, a matter on which you might think they were poorly informed and inexperienced.  (And their decision will be made without you being represented).  The short message from all this is that it is important to maintain your form, and even more important if your domestic arrangements are unusual.