IBM Retirees in South Africa are to have "catch-up" increases to remove the degradation in the value of their pensions since retirement. See http://www.gpsu.co.uk/cplan/zanl12.html

Although the IBM retirees in South Africa have been very active, they might well not have got this redress if their government had not been active. Other articles in the South Africa section of the website describe new laws which split "surplus" into an Employer Surplus Account and a Member Surplus Account.

One of the recent articles added to the section emphasises the distinction between "illegal" and "wrong". Immoral or Illegal? The same subject has been discussed occasionally on our message board, with some feeling that IBM's behaviour has been wrong but not illegal, some that it is both, some that it is neither. A recent thread begins with Class/Group Action

The distinction matters to us because of the distinct roles of the Pensions Ombudsman and of the government. Going to the law often rights wrongs but we cannot conclude that going to the law always rights wrongs.

Consider another, different, example from South Africa. Suppose you had been in South Africa in the 1970s and started a legal action resisting apartheid; the law would have upheld apartheid. If there had been Ombudsmen as part of the legal system, as our UK Ombudsmen are now, they would have upheld apartheid. It is nowadays widely agreed that people were wronged by apartheid, although it may not have been so obvious at the time. The job of an Ombudsman, or any judge in the legal system, is to give an opinion on legality, not on right or wrong.

Apartheid laws caused wrongs because they gave too much power to white supremacy. Some people believe our current laws give too much power to corporate supremacy.

In our case, many believe IBM has wronged us. If you induce somebody to provide you with something on the understanding that you will do something for them later, and then you unnecessarily fail to follow through, then you have wronged them. Almost all of us must believe that, because trust is a necessary component of sensibly living together. What applies person to person also applies for corporation to employees.

The legal process which starts at the Ombudsman will determine, as far as possible, whether IBM did anything illegal. The Ombudsman's Office will be looking at Trust Law, which is acknowledged to lack specifics. They will be looking at incomplete documentation of this case, containing phrases that are conflicting or open to different interpretations. They will be looking at events up to decades ago, with limited access to what really happened. Any determinations will reflect what they assess judges higher in the legal system would decide on the same basis. We should be very glad that the mechanism exists to get such a highly professional opinion (and for free), but it will not necessarily right any wrong. That is where government's ability to set the law is vital, as the South African IBMers' experience shows.

The UK government has changes to pensions law in the pipeline. The abolition of the Minimum Funding Requirement is government policy and what replaces it is being considered. Ten months ago there was a report (Myners) on investment policies. For some time the Inland Revenue has been looking for ways to simplify the administration of pension schemes. Our government has announced a review, led by a non-government figure, Alan Pickering, to make recommendations incorporating the things that have already been looked at, but not limited to them.

No doubt there are cynics who believe that the government only announces such reviews when it knows what the recommendations will be, but we should assume this is an opportunity to have some influence. You can make your views known by email to the Consultation Team or by writing to the Consultation Team, Simplification Review, Department for Work and Pensions, The Adelphi, 1-11 John Adam Street, London WC2N 6HT.

To help them, the recipients of the input have suggested you start your input by saying what category it comes in. Your particular comments may relate to the MFR or fund administration but many comments will be about "Consumer Protection". Alan Pickering uses the term "consumers" of occupational pensions to cover retirees, deferreds, and actives.

This is not meant as an opportunity to restate the complaints about IBM. Your comments could address the limitations in the law that made the IBM situation possible, most obviously the permanent minority status of member nominated trustees, which allows them to be rendered ineffective and the consumer view unheard. Or you could comment that events in the pensions field generally over the past years convince you that consumer protection is inadequate, while leaving the specifics of how to improve it to the Pickering committee. The deadline for submissions is the end of January. Unless you specify otherwise, your comments will be in the public domain. The recommendations will come out in mid-2002.

This is unfortunate timing for us, since we will have a better idea of what the law lacks when the Ombudsman has reported, but it could be a long time before another occasion when we are actually invited to give our views.

One of the things the Pickering Review will take into account is another government driven activity - the Myners Report. This is mainly about investment policies. The government wants trustees to be more adventurous, and hence support a more entrepreneurial UK. Two factors acting against this were the Minimum Funding Requirement (a solvency test for pension schemes) and an accounting requirement (called FRS17) that is being introduced to make companies show the state of the pensions funds on the company accounts. FRS17 will make the companies want less volatile funds, even at the expense of lower returns on investment. The Myners Report was published on Mar 6th 2001 and was reported in the newspapers. You should have received a letter recently, from the trust, saying that they are thinking about the implications.

You can read the Myners Report at http://www.treasury.gov.uk/mediastore/otherfiles/31.pdf (201 pages) A significant bit for retirees is the suggestion that it should be easier for companies to use a pension fund like a private bank - putting money in to accumulate in the benign taxation and then taking it out cheaply:

".the Law Commission should be asked to review whether greater clarity over ownership of the surplus can be achieved through legal change; and the tax rate on the withdrawal of surplus should be reduced. The present rate of 40% is anachronistically high."

It seems the Law Commission never formally started a project but maybe the topic is on the Pickering agenda. Potentially, it is another notch on the ratchet of corporate control of pensions schemes.

The news from the States contrasts with that from South Africa. Mr Gerstner's take from IBM since arriving in 1993 has probably passed the billion dollar mark, if one includes the cost of his pension (a million a year) and his contract as a consultant to IBM after leaving. Certainly his take from stock options alone in 2001 exceeded a hundred million dollars. For other stories of rewards see http://www.allianceibm.org/stories.htm

Finally some non-news. We have no further indications on when the first Ombudsman determinations will be published. We are unable to add value to the actuarial reports because the trust manager has said that answering our questions (including the one about the £31M miscellaneous item) would be a waste of time and money.