In recent years, trusts have concerned themselves more with Governance - their procedures for organising what they do.  Part of the debate nationally is about payments to trustees.  On this page we relate the general picture to our particular trust.

Some directors sit on the Trust Board as part of their recognised IBM responsibilities.  Thus the Human Resources director of IBM UK, and the Finance Director, have always been appointed to the Trust Board.  The appointments of IBM executives from Europe and the US can reasonably be regarded in the same light - a duty inherited from their IBM jobs.  For these people it seems natural that any financial reward for trustee work should come through their IBM jobs.

The "independent" trustees - who are neither past nor present IBM employees - will normally have other jobs (or at least expertise) in the pensions industry.   One would expect these people to be paid; it is part of how they earn a living.

The situation of the chairman (who is usually not an "independent" and usually not the Finance Director of the company) and of the Member Nominated Directors is more contentious.  These people are more like volunteers, in the sense that any financial reward would be unlikely to be fundamental to their finances. Nevertheless there is work involved (and extra work for the chairman) - some reward beyond expenses seems natural.  Government instigated reports such as the Pickering and Myners reports have recommended this.

This is fairly straightforward for retiree MNDs (and previously MEDs)- it is obvious that, whatever the mechanics of paying are, the payment is for being an MND and nobody is paying for results.  That is not so obvious for employee MNDs.   The Pensions Act 1995 required employee MEDs to be paid for their time and training in trustee duties.  But that notion of paid time makes little sense in an IBM environment that emphasises results in meeting objectives, rather than hourly rates.  Until recently, employee MEDs were rewarded through their IBM salary.  This has obvious difficulties in that the immediate line manager cannot be expected to assess MED performance.  (And MEDs felt, in practice, that their trustee efforts were not adequately allowed for.)

Recently, the decision has been made to pay employee MNDs separately for their trustee work.  (The separation is somewhat undermined by a strange decision to report the trustee activities to the employee's immediate line manager.  There is nothing that the line manager is expected to do (or could reasonably do) with this information.  The only reasonable interpretation of this reporting is that it is IBM's way of reminding the employee of IBM's larger role in his/her finances.)

Any candidate employee MND will need to have a firm agreement with his manager in advance - is the £5K additional, or compensation for the hit his/her IBM prospects will take from the extra work?  If the manager is allowing for the extra time not devoted to the department's cause, will the MND objective automatically get the highest rating?  (If not, how will the manager rate the trustee work?)

The decision to separately pay employee MNDs is strongly opposed by some, who argue that it compromises, at least in appearance, the independence of the MNDs from IBM influence.  There is a discussion of this on the AMIPP forum.   (Gavin Wilson resigned as an MED on this issue but eventually decided to withdraw the resignation.  This is the second time Gavin has resigned transiently.  As his 2005 election address said, resignation is a blunt instrument.)

The appearence of IBM influence is strengthened by the fact that all decisions on who should be paid, and how much, are made by IBM.  The IBM UK Pensions Trust Ltd is a company, and all its shares are owned by IBM. (Robert Maxwell used such an arrangement as an excuse for raiding pension funds - "I own the trust and the trust owns the fund assets" - but he was wrong in law.)  So although the Trust Board can discuss who should be paid, it cannot decide.

Amounts of payment are also a contentious issue.  The recent increase for retiree MNDs from £4K to £5K pa represents £5.4% pa increases compounded.  In the light of increases for policeman and IBM employees, does that seem fair?   "Market Rates" might be a consideration, but are we asked to believe that no competent chairman could be found who did not require a massive increase to the £25k pa already paid?

One might also ask what part performance has paid in these rewards.  The fund is at a better level than it was, but credit for that should go to the new regulations - the trust allowed a deficit of £1 billion to arise before they were required to have a recovery plan.  The final salary scheme members now have a much worse scheme - more costly in employee contributions and much reduced in benefits.  From an IBM point of view IBM's cost saving may justify reward - the changes were made without the Trust exploring (as far as members have been told) the alternatives offered by the powers the deeds give the Trustee.  But from a scheme members' point of view...?

Back to: Home